-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LOHIj3rQ5+7+YbZ9p1j2b4YaeHwflQKiccAHjcFMuYI/slEH7I2T3pedZAxdBtTj B053UBPiOWuENp8fjcZmgA== 0000950152-97-006236.txt : 19970827 0000950152-97-006236.hdr.sgml : 19970827 ACCESSION NUMBER: 0000950152-97-006236 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 29 FILED AS OF DATE: 19970826 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLASSTECH INC CENTRAL INDEX KEY: 0000857565 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL PROCESS FURNACES & OVENS [3567] IRS NUMBER: 133440225 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34391 FILM NUMBER: 97670073 BUSINESS ADDRESS: STREET 1: AMPOINT INDUSTRIAL PARK STREET 2: 995 FOURTH STREET CITY: PERRYSBURG STATE: OH ZIP: 43551 BUSINESS PHONE: 4196619500 MAIL ADDRESS: STREET 1: AMPOINT INDUSTRIAL PARK STREET 2: 995 FOURTH STREET CITY: OERRYBURG STATE: OH ZIP: 43551 S-4 1 GLASSTECH, INC. S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ GLASSTECH, INC. (Exact name of Registrant as specified in its charter) DELAWARE 3567 13-3440225 (State or Other jurisdiction of (Primary Standard (I.R.S. Employer incorporation or organization) Industrial Classification Code Identification No.) Number)
------------------------ AMPOINT INDUSTRIAL PARK 995 FOURTH STREET PERRYSBURG, OHIO 43551 (419) 661-9500 (Address, including ZIP code, and telephone number, including area code, of Registrant's principal executive offices) KENNETH H. WETMORE, ESQ. GENERAL COUNSEL GLASSTECH, INC. AMPOINT INDUSTRIAL PARK 995 FOURTH STREET PERRYSBURG, OHIO 43551 (419) 661-9500 (Name, address, including ZIP code, and telephone number, including area code, of agent for service) With a copy to R. STEVEN KESTNER, ESQ. BAKER & HOSTETLER LLP 3200 NATIONAL CITY CENTER 1900 EAST NINTH STREET CLEVELAND, OHIO 44114 (216) 621-0200 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of the Registration Statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] CALCULATION OF REGISTRATION FEE
============================================================================================================== PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE - -------------------------------------------------------------------------------------------------------------- Series B 12 3/4% Senior Notes Due 2004..... $70,000,000 100% $70,000,000 $21,213 - -------------------------------------------------------------------------------------------------------------- TOTAL $70,000,000 100% $70,000,000 $21,213 ==============================================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED AUGUST 26, 1997 PROSPECTUS (GLASSTECH LOGO) GLASSTECH, INC. OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS SERIES B 12 3/4% SENIOR NOTES DUE 2004 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 12 3/4% SENIOR NOTES DUE 2004, OF WHICH $70,000,000 PRINCIPAL AMOUNT IS OUTSTANDING THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. ------------------------ Glasstech, Inc., a Delaware corporation (the "Company"), hereby offers (the "Exchange Offer"), upon the terms and conditions set forth in this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its Series B 12 3/4% Senior Notes due 2004 (the "New Notes"), registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part, for each $1,000 principal amount of its outstanding 12 3/4% Senior Notes due 2004 (the "Old Notes"), of which $70,000,000 principal amount is outstanding. The form and terms of the New Notes are the same as the form and terms of the Old Notes (which they replace), except that the New Notes will bear a Series B designation and will have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain certain provisions relating to an increase in the interest rate which were included in the terms of the Old Notes in certain circumstances relating to the timing of the Exchange Offer. The New Notes will evidence the same debt as the Old Notes (which they replace) and will be issued under and be entitled to the benefits of the Indenture, dated as of July 2, 1997 between Glasstech Sub Co., a Delaware corporation ("Sub Co."), and United States Trust Company of New York, as trustee (the "Trustee"), as supplemented by the Supplemental Indenture, dated July 2, 1997 between the Company and the Trustee (collectively, the "Indenture"). The Old Notes and the New Notes are sometimes referred to herein collectively as the "Notes." See "The Exchange Offer" and "Description of the Notes." The Company will accept for exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time on , 1997, unless extended by the Company in its sole discretion (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain customary conditions. (Continued on next page) ------------------------ SEE "RISK FACTORS" ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE NEW NOTES. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The date of this Prospectus is , 1997. 3 (Continued from cover) Interest on the New Notes will be payable in cash semi-annually on each January 1 and July 1, commencing January 1, 1998. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. In addition, the Company, at its option, may redeem in the aggregate up to $17.5 million, or 25%, of the original principal amount of the Notes at any time and from time to time prior to July 1, 2000 at 112.75% of the aggregate principal amount so redeemed, plus accrued and unpaid interest to the redemption date, with the Net Proceeds (as defined herein) of one or more Qualified Equity Offerings (as defined herein) of the Company or Glasstech Holding Co., a Delaware corporation and sole stockholder of the Company ("Holding") to the extent such proceeds were contributed to the Company as common equity, provided that at least $52.5 million of the principal amount of the Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that any such redemption occurs within 90 days following the closing of any such Qualified Equity Offering. See "Description of the Notes -- Optional Redemption." Upon a Change of Control (as defined herein), each holder of the Notes will be entitled to require the Company to repurchase such holder's Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the repurchase date. See "Description of the Notes -- Change of Control Offer." In addition, the Company is obligated in certain instances to make an offer to repurchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase with the net cash proceeds of certain asset sales. See "Description of the Notes -- Certain Covenants -- Limitation on Certain Asset Sales." The New Notes will be general senior unsecured obligations of the Company, ranking pari passu in right of payment with all other existing and future senior indebtedness of the Company and senior in right of payment to any subordinated indebtedness of the Company. The New Notes will be effectively subordinated in right of payment to all secured indebtedness of the Company, including indebtedness under the Revolving Credit Facility (as defined herein). Upon completion of the Initial Offering (as defined herein), the Company had $10.0 million available under the Revolving Credit Facility and no senior indebtedness outstanding, including indebtedness under the Revolving Credit Facility, other than the Old Notes. See "Risk Factors -- High Level of Indebtedness and Leverage," "Use of Proceeds" and "Capitalization." The Old Notes were sold on July 2, 1997 (the "Issue Date") to CIBC Wood Gundy Securities Corp. (the "Initial Purchaser") in a transaction not registered under the Securities Act in reliance upon an exemption under the Securities Act as part of a sale of 70,000 units (the "Units"), consisting of the sale of the Old Notes by Sub Co., an acquisition vehicle used by Holding to acquire the Company pursuant to a merger, in an aggregate principal amount of $70.0 million and the sale of 70,000 warrants (the "Warrants") by Holding, then the sole stockholder of Sub Co., to purchase 877.21 shares of Class A Common Stock (as defined herein) of Holding. These transactions are collectively hereinafter referred to as the "Initial Offering." The Initial Purchaser subsequently placed the Units with qualified institutional buyers in reliance upon Rule 144A under the Securities Act. The Warrants were immediately detachable from the Old Notes. Accordingly, the Units, Warrants and Old Notes may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The New Notes are being offered hereunder solely in exchange for the Old Notes in order to satisfy the obligations of the Company under the Registration Rights Agreement (as defined herein) entered into by the Company in connection with the Initial Offering. Neither the Company nor Holding has any obligation under to Registration Rights Agreement or any other agreement to exchange the Warrants or register the Warrants under the Securities Act. See "The Exchange Offer." Based upon no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the New Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such ii 4 New Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such New Notes. See "The Exchange Offer -- Resale of the New Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." Holders of Old Notes not tendered and accepted in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and benefits and will be subject to the limitations applicable thereto under the Indenture and with respect to transfer under the Securities Act. The Company will pay all the expenses incurred by it incident to the Exchange Offer. See "The Exchange Offer." There has not previously been any public market for the Old Notes or the New Notes. The Company does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the New Notes will develop. See "Risk Factors -- Absence of a Public Market." Moreover, to the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. The New Notes will be available initially only in book-entry form and the Company expects that the New Notes issued pursuant to the Exchange Offer will be issued in the form of a Global Note (as defined herein), which will be deposited with, or on behalf of, The Depository Trust Company ("DTC") and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Note representing the New Notes will be shown on, and transfers thereof will be effected through, records maintained by DTC and its participants. After the initial issuance of the Global Note, New Notes in certificated form will be issued in exchange for the Global Note only under the limited circumstances set forth in the Indenture. See "Description of the Notes -- Book-Entry, Delivery and Form." There will be no cash proceeds payable to the Company from the issuance of the New Notes pursuant to the Exchange Offer and no underwriter is being used in connection with the Exchange Offer. Initially, the Old Notes were issued by Sub Co., a corporation formed for the sole purpose of effecting the acquisition of the Company by the Key Equity Group (as defined herein). The net proceeds from the Initial Offering, together with an equity contribution of $15.0 million to Sub Co. by Holding, a corporation wholly-owned by the Key Equity Group, were used by Sub Co. to acquire all the outstanding capital stock of the Company. The acquisition was effected pursuant to the terms of a merger agreement among Holding, Sub Co. and the Company, as amended (the "Merger Agreement"). On July 2, 1997 the Initial Offering was consummated and Sub Co. was merged with and into the Company, with the Company becoming the surviving corporation and obligor on the Old Notes. iii 5 AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 (the "Exchange Offer Registration Statement," which definition shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the New Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Exchange Offer Registration Statement, including the exhibits thereto, can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. As a result of the filing of the Exchange Offer Registration Statement with the Commission, the Company will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will be required to file periodic reports and other information with the Commission. The obligation of the Company to file periodic reports and other information with the Commission will be suspended if the Notes are held of record by fewer than 300 holders as of the beginning of any fiscal year of the Company other than the fiscal year in which the Exchange Offer Registration Statement is declared effective. The Company has agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any of the Notes remain outstanding, it will furnish to the holders of the Notes and file with the Commission (unless the Commission will not accept such a filing) (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including for each a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's independent auditors and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. FORWARD-LOOKING STATEMENTS This Prospectus contains and incorporates by reference certain statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act. Those statements include, among other things, the discussions of the Company's business strategy and expectations concerning the Company's market position, future operations, margins, profitability, liquidity and capital resources. Investors are cautioned that reliance on any forward-looking statement involves risks and uncertainties, and that although the Company believes that the assumptions on which the forward-looking statements contained herein are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be incorrect. The uncertainties in this regard include, but are not limited to, those identified in the risk factors discussed herein. See "Risk Factors." In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company's plans and objectives will be achieved. iv 6 [Page intentionally left blank] 7 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, the "Company" or "Glasstech" refers to Glasstech, Inc. and its subsidiaries, "Holding" refers to Glasstech Holding Co. and "Sub Co." refers to Glasstech Sub Co., unless the context otherwise requires. THE COMPANY The Company is a market and technological leader in the design and assembly of state-of-the-art glass bending and tempering (i.e., strengthening) systems used by glass manufacturers and processors in the conversion of flat glass into safety glass. The Company sells its systems worldwide, primarily to automotive glass manufacturers and processors (the "Automotive Market"), and also to architectural glass manufacturers and processors (the "Architectural Market"). The Company's systems are designed to meet customers' safety glass production requirements for complexity, accuracy and optical quality while simultaneously enhancing system productivity, flexibility and cost efficiency. For the Automotive Market, the Company has developed bending and tempering systems that meet automobile manufacturers' safety glass specifications for current and future production models. Management believes that the Company has a leading share of and is the only significant independent supplier in the market for technologically advanced systems used to bend and temper automotive glass into complex shapes. For the Architectural Market, the Company's energy-efficient processing systems are capable of producing high-quality bent or flat glass at output rates tailored to meet customer-specific production requirements. As a result of the long useful life and growing worldwide installed base of its systems, the Company is able to complement its sale of complete systems ("Original Equipment") with the sale of aftermarket products and services consisting of retrofits, tooling (i.e., molds used to shape automotive glass) and replacement parts. The Company's products feature proprietary technologies that have been developed over the last 25 years and are protected by more than 700 patents and patent application filings worldwide. For the fiscal year ended June 30, 1997, the Company generated revenue and Adjusted EBITDA (as defined in Note (e) to the Summary Historical and Pro Forma Consolidated Financial and Other Data) of $76.4 million and $16.8 million, respectively. Original Equipment revenue totaled $50.2 million, or 65.7%, of the Company's total revenue for the same period. The balance of the Company's revenue was generated through aftermarket sales including retrofits, tooling and replacement part sales intended to maintain or enhance the Company's installed base of systems. A Glasstech system performs a series of processes that bend and strengthen flat glass in the production of safety glass products such as car windows. In each system, flat glass supplied by glass manufacturers is conveyed horizontally on ceramic rollers through a high temperature furnace, a bending module and a quench module (which completes the tempering process by rapidly cooling the heated glass). Microprocessor-based controls regulate temperature, speed and glass location throughout the entire process. In addition, the Company develops its own proprietary software to control the integrated system. The modular design of a Glasstech system readily enables the Company to offer customized systems that meet specific technical requirements of its customers. Such a design also creates equipment retrofit and upgrade opportunities for the Company. The Company works closely with its customers as they identify capacity and functionality requirements for a new system and then throughout the usual ten to twelve month order, installation and acceptance cycle to ensure satisfaction with their completed system. Systems designed for the Automotive Market, which are used to form and temper glass for automotive back, side and roof windows, as well as to form and anneal glass used for windshields, range in price from approximately $2.5 million to $7.0 million. Systems designed for the Architectural Market process curved and flat tempered glass which are used for skylights, insulating glass, patio doors, furniture and appliances. These systems range in price from approximately $0.5 million to $3.0 million. The Company has an installed base of more than 375 systems located in over 40 countries on six continents. Sales in the United States, Europe and Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the Company's total sales in fiscal 1997. The Company's customers include virtually all major glass manufacturers and processors including: Chrysler Corporation, Ford Motor Company, Guardian 1 8 Industries Corp. and PPG Industries, Inc. in the United States; Compagnie de Saint-Gobain and Pilkington plc in Europe; Asahi Glass Company, Central Glass Company and Nippon Sheet Glass Company in Japan; Hankuk Glass Industry Company and Keumkang Ltd. in Korea; and Shatterprufe (Pty) Limited in South Africa. Management believes that the Company's future growth in the Automotive Market will be driven by customer demand for more advanced safety glass bending capabilities, the sale of systems that will supply new automobile factories under construction worldwide and the opportunity to sell systems to glass manufacturers and processors who desire to "outsource" (i.e., purchase glass processing systems rather than develop them internally). Management further believes that future sales in the Architectural Market will be derived, in part, from the adoption of stringent building codes worldwide that mandate the use of tempered glass and the increased use of coated glass for products such as energy-efficient windows. The Company was founded in 1971 to manufacture flat glass tempering systems for the Architectural Market. Building on its success in that market, in 1977 the Company delivered its first bending and tempering system used to produce simple glass shapes for the Automotive Market. Through continued product development programs and technological enhancements, the Company manufactured its first bending and tempering system for complex glass shapes for the Automotive Market in 1985. This system enables the Company's customers to bend and form glass while it is still inside the furnace, which results in enhanced quality, higher yields (i.e., reduced breakage and fewer defects) and more precision in the final shape of the safety glass product. The introduction of a new system by the Company expands its total product offering because new products typically complement, rather than replace, existing products. Recent new product introductions by the Company include a bending system used to form curved architectural glass (fiscal 1990), a tight radius cylindrical bending system for furniture and display case applications (fiscal 1992), a constant radius bending system for automotive side and roof windows (fiscal 1994), a windshield bending and annealing system (fiscal 1995) and a forced convection heating system intended for more energy-efficient glass production (fiscal 1996). See "Business -- Products." Management believes that the Company's competitive advantage in the production of high-quality glass bending and tempering systems, as well as its market leadership, is the result of its: (i) development of patented, state-of-the-art, cost-efficient technology; (ii) installed base of more than 375 systems in over 40 countries; (iii) experienced technical staff, which works closely with customers in the development and design of new systems; (iv) longstanding relationships (often of 20 years or more) with its major automotive and architectural customers; (v) knowledgeable sales force, many of whom have technical degrees; and (vi) ability to develop new products within reasonably short lead times. In addition, the Company believes that its management team, which has an average of more than 20 years of experience in the glass industry, continues to be instrumental in further strengthening the Company's leading market and technological position. BUSINESS AND OPERATING STRATEGY The Company's strategy is to strengthen its leadership position as a provider of technologically advanced and cost-efficient glass bending and tempering systems by: (i) capitalizing on current trends in the Automotive Market; (ii) leveraging its long-term relationships with major customers; (iii) offering customers a market-driven product development effort; (iv) maintaining its position as a high-quality, low-cost manufacturer; (v) providing extensive aftermarket products and services; and (vi) continuing to capitalize on international growth opportunities. - Capitalizing on Current Trends in the Automotive Market. Management believes that the Company is well positioned to capitalize on current trends in the Automotive Market including: (i) customer demand for improved productivity from its safety glass processing equipment; (ii) the emergence of advanced automotive designs which feature complex-shaped glass in vehicle windows and an increase in the average glass content per vehicle; (iii) customer demand for greater optical quality in safety glass products; (iv) shorter lead times for each car design modification or new model introduction; and (v) the replacement of older bending systems initially installed by the Company's competitors or developed in-house by its customers. 2 9 - Leveraging Long-Term Relationships with Major Customers. Management believes that the Company's strong relationships with major glass manufacturers and processors have developed in large part due to the following factors: (i) the continuity of the Company's customer relationships, many of which have existed since the Company's inception; (ii) the Company's awareness of and involvement in its customers' capital budgeting and planning processes; and (iii) the Company's commitment to provide the ongoing technical service required to properly maintain a Glasstech system. Based upon its strong relationships, the Company is better able to predict future demand for its systems and aftermarket products, as well as to proactively design and implement creative solutions to meet its customers' evolving safety glass requirements. - Offering Customers a Market-Driven Product Development Effort. The Company's technological leadership is a result of its commitment to research and development ("R&D"). The objective of the Company's R&D effort is to develop new products and to improve existing products to meet present and future market demands. The Company has spent an average of $4.5 million annually on R&D in fiscal years 1995 through 1997 and has 47 employees (17% of total employees) in its R&D department. Recent product introductions and improvements include bending and tempering systems that provide tighter part tolerances, higher output capability, shorter tooling changeover periods, faster cycle times, improved optical quality, greater depth of bend and an ability to produce shapes with greater complexity. In addition, the Company is developing modeling software which is intended to enable both automotive designers and glass processors to analyze the shape and optical quality of various safety glass configurations without actually constructing costly prototypes. - Maintaining Position as a High-Quality, Low-Cost Manufacturer. The Company is dedicated to producing high-quality, cost-efficient systems that minimize its customers' safety glass production costs. As an example of its commitment to quality, the Company recently received its ISO-9001 certification, which is an internationally recognized quality standards certification. By continually striving to reduce its customers' cost of producing safety glass, the Company increases its opportunities to sell its systems to those glass manufacturers and processors who might otherwise develop such systems in-house. To improve its own operating results, the Company has significantly reduced its operating costs by: (i) improving its production process by modularizing and standardizing product engineering; (ii) using advanced computer-aided design systems; and (iii) improving employee training programs. The Company's success in developing new high-quality, cost-efficient systems and in implementing cost reductions internally has contributed to an increase in Adjusted EBITDA from approximately $8.7 million in fiscal 1995 to $16.8 million in fiscal 1997. During the same period, Adjusted EBITDA margins have improved from 16.2% to 22.0%. - Providing Extensive Aftermarket Products and Services. The Company's aftermarket products and services, which include retrofits, automotive tooling, replacement parts and customer service programs, provide an ongoing source of revenue and cash flow that complement the Company's sale of Original Equipment. Retrofits consist of extensions, upgrades and improvements to existing systems, while replacement parts consist of both proprietary and nonproprietary components. Aftermarket revenue was $26.2 million for fiscal 1997, or approximately 34.3% of the Company's total revenue. Management believes that aftermarket sales will remain a significant component of the Company's revenue as the Company's installed base of systems continues to expand. - Continuing to Capitalize on International Growth Opportunities. The Company's service organization continuously interacts with customers in more than 40 countries. Sales to the United States, Europe and Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the Company's total fiscal 1997 sales. The Company's geographically diverse customer base positions it to capitalize on the increasing globalization and development of markets in areas such as Asia-Pacific (including China), Eastern Europe and Russia. Such diversification also mitigates the impact of regional economic downturns and a reliance on any one market. Management believes that the Company will continue to sell new systems to its existing customers in both established and developing markets. 3 10 THE TRANSACTIONS Holding and Sub Co. were newly organized Delaware corporations formed to effect the acquisition of the Company by Key Equity Capital Corporation ("KECC"), certain of KECC's affiliates and certain members of management of the Company (collectively, the "Key Equity Group"). The acquisition was consummated on July 2, 1997 pursuant to an Agreement and Plan of Merger, dated as of June 5, 1997, among Holding, Sub Co. and the Company, as amended (the "Merger Agreement"). Under the terms of the Merger Agreement, Sub Co. was merged into the Company, and the Company continued as the surviving corporation (the "Merger"). The aggregate consideration for the Merger was $76.2 million (the "Purchase Price"), subject to certain adjustments. To finance and complete the Merger (including the payment of related fees and expenses): (i) the Key Equity Group purchased, for $15.0 million, all of the outstanding shares of capital stock of Holding; (ii) Holding purchased, for $15.0 million, all of the outstanding shares of capital stock of Sub Co. (the "Equity Contribution"); (iii) Sub Co. consummated the Initial Offering; and (iv) upon completion of the Merger, the Company, as the surviving entity, became the obligor on the Old Notes. The foregoing transactions, together with the Initial Offering, the establishment of the Revolving Credit Facility (as defined herein), the application of the proceeds from the Initial Offering and the Equity Contribution and the payment of related transaction fees and expenses are collectively referred to herein as the "Transactions." Prior to the consummation of the Merger, the Company redeemed its existing indebtedness at a premium, paid certain Transaction-related expenses and remitted any remaining unrestricted cash in excess of $2.0 million to its stockholders. In connection with the Merger, the Company entered into a new $10.0 million revolving credit facility (the "Revolving Credit Facility"), which is secured by substantially all of the assets of the Company. The Company has not drawn on the Revolving Credit Facility in connection with the Transactions. 4 11 THE INITIAL OFFERING OLD NOTES Pursuant to a Securities Purchase Agreement dated as of July 2, 1997 (the "Purchase Agreement"), Sub Co. sold the Old Notes in an aggregate principal amount of $70.0 million to the Initial Purchaser on July 2, 1997 as part of the sale of 70,000 Units, which included the sale of the Old Notes by Sub Co. and the sale of 70,000 Warrants by Holding to purchase an aggregate of 877.21 shares of Class A Common Stock of Holding. The Initial Purchaser subsequently resold the Old Notes purchased from the Company to qualified institutional buyers pursuant to Rule 144A under the Securities Act. Pursuant to the Merger, the Company became the obligor on the Old Notes. REGISTRATION RIGHTS AGREEMENT Pursuant to the Purchase Agreement, Sub Co. and the Initial Purchaser entered into a Registration Rights Agreement, dated as of July 2, 1997 (the "Registration Rights Agreement"), which granted holders of the Old Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange and registration rights which terminate after consummation of the Exchange Offer. No offer to exchange the Warrants is being made in this Prospectus and neither the Company (as the successor to Sub Co. pursuant to the Merger) nor Holding is obligated to register or exchange the Warrants pursuant to the Registration Rights Agreement or any other agreement. THE EXCHANGE OFFER Securities Offered............ $70,000,000 aggregate principal amount of Series B 12 3/4% Senior Notes due 2004 of the Company. The Exchange Offer............ $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, $70,000,000 aggregate principal amount of Old Notes are outstanding. The Company will issue the New Notes to holders on or promptly after the Expiration Date. Based upon interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Notes. Each holder accepting the Exchange Offer is required to represent to the Company in the Letter of Transmittal that, among other things, the New Notes will be acquired by the holder in the ordinary course of business and the holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Notes. Any Participating Broker-Dealer that acquired Old Notes for its own account as a result of market-making activities or other trading activities may be a statutory underwriter. Each Participating Broker-Dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of 5 12 Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resale of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." Any holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the New Notes will not be able to rely on the position of the staff of the Commission set forth in no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Failure to comply with such requirements may result in such holder incurring liability under the Securities Act for which the holder is not indemnified by the Company. Minimum Condition............. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. Expiration Date............... 5:00 p.m., New York City time, on , 1997 unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Accrued Interest on the New Notes and the Old Notes....... Each New Note will bear interest from its issuance date. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the issuance date of the New Notes. Such interest will be paid with the first interest payment on the New Notes. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. Conditions to the Exchange Offer......................... The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer -- Conditions." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Procedures for Tendering Old Notes......................... Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, or an Agent's Message (as defined herein) in connection with a book-entry transfer, together with the Old Notes and other required documentation to the Exchange Agent (as defined herein) at the address set forth herein. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder, that neither the holder nor any such 6 13 other person (i) has any arrangement or understanding with any person to participate in the distribution of such New Notes, (ii) is engaging or intends to engage in the distribution of such New Notes, or (iii) is an affiliate as defined under Rule 405 of the Securities Act, of the Company. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer" and "The Exchange Offer -- Procedures for Tendering." Untendered Old Notes.......... Following the consummation of the Exchange Offer, holders of Old Notes eligible to participate but who do not tender their Old Notes will not have any further exchange rights and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. Consequences of Failure to Exchange...................... The Old Notes that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Notes may be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption under the Securities Act, (iii) outside the United States to a non-U.S. person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer -- Consequences of Failure to Exchange." Shelf Registration Statement..................... In the event that changes in the law or the applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 210 days of the date of the original issuance of the Old Notes, the Company will (i) as promptly as possible, file a shelf registration statement (the "Shelf Registration Statement") covering resales of the Old Notes, (ii) use its respective best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (iii) use its best efforts to keep the Shelf Registration Statement effective until three years after its effective date. A holder of the Old Notes that sells such Old Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such holder (including certain indemnification obligations). Special Procedures for Beneficial Owners............. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. The Company will keep the 7 14 Exchange Offer open for not less than thirty days in order to provide for the transfer of registered ownership. Guaranteed Delivery Procedures.................. Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures." Withdrawal Rights............. Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Acceptance of Old Notes and Delivery of New Notes....... The Company will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Federal Income Tax Consequences................ The exchange of Old Notes for New Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss or any interest income as a result of such exchange. Use of Proceeds............... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent................ United States Trust Company of New York. THE NEW NOTES General....................... The form and terms of the New Notes are the same as the form and terms of the Old Notes (which they replace) except that (i) the New Notes bear a Series B designation, (ii) the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (iii) the holders of New Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Old Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. See "The Exchange Offer -- Purpose and Effect of the Exchange Offer." The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of the Notes." The Old Notes and the New Notes are referred to collectively herein as the "Notes." Issuer........................ Glasstech, Inc. Notes Offered................. $70,000,000 principal amount of Series B 12 3/4% Senior Notes due 2004. Maturity Date................. July 1, 2004. 8 15 Interest Payment Dates........ Interest will accrue on the New Notes from the date of issuance and will be payable semi-annually on each January 1 and July 1, commencing January 1, 1998. Ranking....................... The New Notes will be general senior unsecured obligations of the Company, ranking pari passu in right of payment with all other existing and future senior indebtedness of the Company and senior in right of payment to any subordinated indebtedness of the Company. The New Notes will be effectively subordinated in right of payment to all senior secured indebtedness of the Company, including indebtedness under the Revolving Credit Facility. The Revolving Credit Facility provides for a total revolving credit commitment of $10.0 million, subject to certain conditions, and initial borrowing availability of up to $8.0 million. The Company has no senior indebtedness outstanding, including indebtedness under the Revolving Credit Facility, other than the Notes. Guarantees by Future Subsidiaries................ The New Notes will be unconditionally guaranteed, on a senior unsecured basis, as to the payment of principal, premium, if any, and interest, jointly and severally (the "Guarantees"), by all future direct and indirect domestic Restricted Subsidiaries (as defined herein) of the Company having either assets or stockholders' equity in excess of $10,000 (the "Guarantors"). As of the date of this Prospectus, no Guarantees were in effect. Each Guarantee will be effectively subordinated to all secured indebtedness of such Guarantor. See "Description of the Notes -- Certain Covenants -- Limitation on Creation of Subsidiaries" and "Description of the Notes -- Future Guarantees." Optional Redemption........... The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002, at the redemption prices set forth herein plus accrued interest to the date of redemption. In addition, the Company, at its option, may redeem in the aggregate up to $17.5 million, or 25%, of the original principal amount of the Notes at any time and from time to time prior to July 1, 2000 at a redemption price equal to 112.75% of the principal amount thereof plus accrued and unpaid interest to the redemption date with the Net Proceeds of one or more Qualified Equity Offerings of the Company or Holding to the extent such proceeds were contributed to the Company as common equity; provided, that at least $52.5 million aggregate principal amount of Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that any such redemption occurs within 90 days following the closing of any such Qualified Equity Offering. Change of Control............. In the event of a Change of Control, holders of the Notes will have the right to require the Company to repurchase their Notes at 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the repurchase date. See "Description of the Notes -- Change of Control Offer." Asset Sale Proceeds........... The Company will be obligated in certain instances to make offers to repurchase the Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase with the net cash proceeds of certain asset sales. See "Description of the Notes -- Certain Covenants -- Limitation on Certain Asset Sales." 9 16 Certain Covenants............. The indenture contains covenants for the benefit of the holders of the Notes that, among other things, restrict the ability of the Company and any Restricted Subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends and make distributions; (iii) issue stock of subsidiaries; (iv) make certain investments; (v) repurchase stock; (vi) create liens; (vii) enter into transactions with affiliates; (viii) enter into sale and leaseback transactions; (ix) create dividend or other payment restrictions affecting Restricted Subsidiaries; (x) merge or consolidate the Company; and (xi) transfer and sell assets. These covenants are subject to a number of important exceptions. See "Description of the Notes -- Certain Covenants." Registration Rights........... Pursuant to the Registration Rights Agreement, the Company agreed to use its best efforts to file within 60 days, and cause to become effective within 150 days of the closing date of the Initial Offering, an Exchange Offer Registration Statement with respect to an offer to exchange the Old Notes for the New Notes of the Company with terms substantially identical to the Old Notes (except the New Notes will not be subject to transfer restrictions). In addition, under certain circumstances, the Company may be required to file a Shelf Registration Statement. Among other provisions, in the event that (i) the Registration Statement or Shelf Registration Statement has not been filed with the Commission within 60 days after the Issue Date; (ii) the Registration Statement or Shelf Registration Statement is not declared effective within 150 days after the Issue Date; or (iii) the Exchange Offer is not consummated within 60 days after the Registration Statement is declared effective (each such event referred to in clauses (i) through (iii) above is a "Registration Default"), the sole remedy available to holders of the Old Notes will be the immediate assessment of additional interest ("Additional Interest") as follows: the per annum interest rate on the Old Notes will increase by 0.50%, and the per annum interest rate will increase by an additional 0.25% for each subsequent 90-day period during which the Registration Default remains uncured, up to a maximum additional interest rate of 2.0% per year in excess of the interest rate set forth on the cover page hereof. All Additional Interest will be payable to holders of the Old Notes in cash on each January 1 and July 1, commencing with the first such date occurring after any such Additional Interest commences to accrue, and continuing until such Registration Default is cured. After the date on which such Registration Default is cured, the interest rate on the Old Notes will revert to the interest rate originally borne by the Old Notes. See "Exchange Offer." RISK FACTORS Before tendering their Old Notes for New Notes offered hereby, holders of the Old Notes should consider carefully the information set forth under the caption "Risk Factors," and all other information set forth in this Prospectus. 10 17 SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA The following table sets forth summary historical consolidated financial and other data of the Company for the three years ended June 30, 1997 which have been derived from the Company's audited consolidated financial statements. The summary pro forma consolidated data give effect to the consummation of the Transactions, including the Initial Offering and the application of the net proceeds therefrom, as if they had occurred at the beginning of the pro forma period. The summary pro forma and adjusted consolidated balance sheet data as of June 30, 1997 have been prepared as if the Transactions had occurred as of June 30, 1997. In May 1993, the Company filed for protection under Chapter 11 ("Chapter 11") of the United States Bankruptcy Code, as amended (the "Bankruptcy Code"). Upon emergence from Chapter 11 on January 4, 1995, the Company adopted "fresh start" financial reporting, thereby reflecting the Company's assets and liabilities at their fair market value and eliminating the accumulated deficit as of January 3, 1995. The information presented on the following pages should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and notes thereto included elsewhere herein. 11 18 SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA (DOLLARS IN THOUSANDS)
PREDECESSOR COMPANY ----------- REORGANIZED COMPANY PERIOD FROM ------------------------------------------- JULY 1, PERIOD FROM 1994 JANUARY 4, 1995 THROUGH THROUGH YEAR ENDED YEAR ENDED JANUARY 3, JUNE 30, JUNE 30, JUNE 30, 1995 1995 1996 1997 ----------- --------------- ---------- ---------- STATEMENT OF OPERATIONS DATA: Net revenue................................................ $ 25,948 $27,854 $ 62,771 $ 76,433 Cost of goods sold......................................... 16,576 17,036 39,024 45,603 ------- -------- ------- ------- Gross profit........................................... 9,372 10,818 23,747 30,830 Selling, general and administrative expenses............... 3,430 5,105 10,723 12,866 Research and development expenses.......................... 2,082 2,302 4,557 4,594 Amortization expense....................................... 2,512 1,203 2,407 2,306 ------- -------- ------- ------- Operating profit....................................... 1,348 2,208 6,060 11,064 Interest expense........................................... -- (2,077) (4,200) (4,200) Other income (expense) -- net.............................. 35 784 1,540 2,263 ------- -------- ------- ------- Income before items below.............................. 1,383 915 3,400 9,127 Reorganization items(a).................................... (1,164) -- -- -- Income taxes not payable in cash(b)........................ -- (445) (1,418) (2,551) Federal income taxes, current.............................. -- -- (105) (78) Extraordinary gain(c)...................................... 214,773 -- -- -- Cumulative effect on prior years of change in method of accounting for non-pension post-retirement benefits...... (1,906) -- -- -- ------- -------- ------- ------- Net income............................................. $ 213,086 $ 470 $ 1,877 $ 6,498 ======= ======== ======= ======= OTHER DATA: EBITDA(d).................................................. $ 4,625 $ 4,109 $ 9,781 $ 14,829 Depreciation and amortization.............................. 3,277 1,901 3,721 3,765 Capital expenditures....................................... 480 680 2,152 990 Backlog.................................................... 31,941 25,931 38,910 30,307 PRO FORMA AND ADJUSTED DATA: Adjusted EBITDA(e)......................................... $ 16,808 Pro forma cash interest expense............................ 8,925 Ratio of Adjusted EBITDA to pro forma cash interest expense.................................................. 1.88x Ratio of total debt to Adjusted EBITDA..................... 4.16x Ratio of net debt to Adjusted EBITDA....................... 3.76x
AS OF JUNE 30, 1997 -------------------------- ACTUAL PRO FORMA ---------- ------------- BALANCE SHEET DATA (AT PERIOD END): Working capital (deficiency)(f)..... $ 39,518 $ (2,011) Total assets........................ 99,364 105,733 Total debt(g)....................... 42,000 70,000 Net debt(g)(h)...................... (9,805) 63,273 Shareholders' equity(i)............. 29,232 15,750
(See footnotes on following page) 12 19 NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA (DOLLARS IN THOUSANDS) (a) Reorganization (as defined herein) items relate to the period in which the Company was operating under the protection of Chapter 11 of the Bankruptcy Code. (b) Income taxes not payable in cash represent the tax effect of certain tax attributes existing prior to the Reorganization and are recorded as a reduction to reorganization value in excess of amounts allocable to identifiable assets as required by SOP 90-7. (c) An extraordinary gain of $214,773 was recognized on January 3, 1995 because the consideration for the discharge of pre-petition liabilities was less than the carrying value of the recorded liabilities discharged. (d) "EBITDA" for any period means operating profit plus depreciation and amortization. EBITDA is determined after the deduction of directors' fees, consulting fees and related expenses (the "Directors' Fees") of $0, $203, $995 and $1,289 for the periods ended January 3, 1995, June 30, 1995, June 30, 1996 and June 30, 1997, respectively. Upon completion of the Transactions, these fees were replaced by a post-Merger KECC advisory fee of $200 per year. Management understands that EBITDA is an indicator customarily used by investors to gauge a company's ability to service its interest and principal obligations. EBITDA should not be considered in isolation from, as a substitute for or as being more meaningful than net income, cash flows from operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with generally accepted accounting principles, and it should not be construed as an indication of the Company's operating performance or as a measure of liquidity. EBITDA, as presented herein, may be calculated differently by other companies and, as such, EBITDA amounts presented herein may not be comparable to other similarly titled measures of other companies. (e) "Adjusted EBITDA" for any period means EBITDA adjusted to reflect: (i) the add-back of Directors' Fees paid during such period, offset by a post-Merger KECC advisory fee of $200 per year; and (ii) for the reporting periods ended June 30, 1997, the add-back of an $890 one-time accrual relating to the replacement of certain components in forced convection heaters due to an error in material specifications. For the year ended June 30, 1997, Adjusted EBITDA reflects a net reduction in Directors' Fees of $1,089 and the add-back of the $890 one-time expense accrual. (f) Working capital is defined as total current assets less total current liabilities, which includes a current liability of $10.7 million of billings in excess of costs and estimated earnings on uncompleted contracts ("Unearned Revenue"). Unearned Revenue represents progress payments received or due on contracts in advance of the recognition of the revenue on such contracts. (g) Total debt and net debt reflect the principal amount of indebtedness due under the Notes. (h) Net debt is equal to total debt less cash and cash equivalents, which, on a pro forma basis, includes restricted cash that was reclassified as unrestricted cash upon the establishment of the Revolving Credit Facility. (i) Shareholders' equity includes $750 attributable to the value of the Warrants. 13 20 RISK FACTORS Holders of the Old Notes should carefully consider the following factors, in addition to the other information set forth in this Prospectus, before making an investment in the New Notes offered hereby. Certain of the statements in this Prospectus are forward-looking in nature and, accordingly, are subject to many risks and uncertainties. The actual results that the Company achieves may differ materially from any forward-looking statements in this Prospectus. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and those contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as those discussed elsewhere in this Prospectus. HIGH LEVEL OF INDEBTEDNESS AND LEVERAGE Upon consummation of the Transactions, the Company became highly leveraged. At July 2, 1997, after consummation of the Transactions, the Company's total indebtedness (including current maturities) and shareholders' equity was $69.2 million and $15.8 million, respectively. The Company, subject to certain conditions, also has the ability to borrow up to $10.0 million pursuant to the Revolving Credit Facility. Management believes that the Company's cash flow from operations, together with borrowings available under the Revolving Credit Facility, will be adequate to meet its anticipated requirements for working capital, capital expenditures, interest payments and scheduled principal payments over the next twelve months. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The Company's ability to make scheduled payments of the principal of, or interest on, or to refinance its indebtedness (including the Notes) depends, however, on its future performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond its control. The Company's high level of indebtedness will have several important effects on its future operations, including the following: (i) the financial covenants and other restrictions contained in the Revolving Credit Facility and the Indenture require the Company to meet certain financial tests and restrict its ability to, among other things, borrow additional funds, make certain investments and acquire or dispose of assets; and (ii) because of the Company's debt service requirements, funds available for working capital, R&D, capital expenditures, acquisitions and general corporate purposes may be limited. The Company's leveraged position may increase its vulnerability to competitive pressures, the cyclical nature of the automobile and architectural industries and general economic conditions, all of which may influence the market demand for the Company's products. In addition, although management believes that capital expenditures above maintenance levels can be deferred to address cash flow or other constraints, such initiatives cannot be deferred for extended periods without an adverse effect on revenue, cash flow and operating results, which may be material. The Company's continued growth depends, in part, on its ability to adequately invest in the development of new technologies, and, therefore, to the extent it is unable to do so with internally generated cash, the Company's inability to finance such projects with borrowed funds could have a material adverse effect on its future operations. RESTRICTIONS UNDER DEBT AGREEMENTS The Indenture contains covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries to incur additional indebtedness, incur liens, pay dividends and make certain other restricted payments, make certain investments, consummate certain asset sales, enter into certain transactions with affiliates, issue subsidiary stock, create dividend or other payment restrictions affecting Restricted Subsidiaries, consolidate or merge with any other person or transfer all or substantially all of the assets of the Company. See "Description of the Notes -- Certain Covenants." In addition, the Revolving Credit Facility contains restrictive covenants which, generally, are more restrictive than those contained in the Indenture and limit the ability of the Company and its subsidiaries to prepay their indebtedness (including the Notes). The Revolving Credit Facility requires the Company to maintain specified consolidated financial ratios and satisfy certain consolidated financial tests. The Company's ability to meet those ratios and tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those ratios and tests. A breach of any of the covenants under the 14 21 Revolving Credit Facility or the Indenture could result in a default under other outstanding indebtedness, including the Revolving Credit Facility and the Indenture. If an event of default occurs under the Revolving Credit Facility, the lender could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. If the Company is unable to repay those amounts, the lender could proceed against the collateral granted to it to secure such indebtedness. Any such action taken by the lender under the Revolving Credit Facility would likely result in an acceleration of the indebtedness represented by the Notes. The Revolving Credit Facility is secured by substantially all of the assets of the Company. See "Description of the Notes" and "Description of the Revolving Credit Facility." FLUCTUATIONS IN CASH FLOW The Company's cash flow is subject to fluctuation from quarter to quarter or year to year due to a number of factors, including the number and timing of new system orders from customers and the timing of customer progress payments during the build-and-install cycle for a new system. Such progress payments are generally due upon contract signing, system shipment and final system acceptance by the customer. See "Business -- Marketing and Sales." Variations in the number and timing of system orders, changes to installation schedules that lead to the deferral of progress payments or unanticipated increases in production costs or other costs could have a material adverse effect on the Company's ability to meet its debt obligations as they become due. In addition, the period during which the Company recognizes revenue for a new system may not be the period during which payment is actually received from the customer, and thus EBITDA and other financial indicators generally relied on by investors to evaluate a company's ability to service its debt may not, in the case of the Company, reflect actual cash received during a given period. See "Management's Discussion and Analysis of Financial Conditions and Operating Results." CYCLICALITY OF AUTOMOBILE INDUSTRY; SUSCEPTIBILITY TO ECONOMIC CONDITIONS The Company's business depends primarily on capital expenditures by manufacturers of automotive safety glass products, which, in turn, rely on purchases of their glass products by automobile manufacturers. The automobile industry is and historically has been a cyclical industry. Currently, the automobile industry is relatively strong as is the demand for high-quality, complex glass shapes. Although the Company is currently experiencing demand for its Original Equipment systems and aftermarket products and services, there can be no assurance that such demand will continue in the future. The cyclicality of the automobile industry, among other factors, including fluctuations in market demand based on general economic conditions in the United States or internationally, may cause prospective customers to postpone decisions regarding major capital expenditures, including purchases of the Company's systems or aftermarket products and services. Most of the factors that might influence customers and prospective customers to reduce their capital budgets under these circumstances are beyond the Company's control. During prior recessionary periods, the Company's operating performance has been materially adversely affected, and there can be no assurance that any future economic downturn would not materially and adversely affect the Company's business, financial condition and operating results. In addition, there can be no assurance that the Company's customers will continue to require new glass bending capabilities or increased capacity, thereby reducing demand for the Company's products. PATENT AND PROPRIETARY RIGHTS; RISK OF LITIGATION The Company relies on patent, trademark, copyright and trade secret laws, employee and third-party non-disclosure agreements and other methods to protect its proprietary rights. The Company holds more than 100 patents in the United States and more than 350 patents outside the United States (which primarily extend the patent protection acquired in the United States to its foreign markets) and has more than 250 patent application filings worldwide that cover certain aspects of its technology. Typically, several patents cover various controls, bending processes or general aspects of the equipment. While management does not believe that the loss of any one patent would have a material adverse effect on the Company's business, it believes the Company's aggregate patent position provides it with an important competitive advantage. There can be no assurance that any pending or future patent applications will be granted, that any current or future patents will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive 15 22 advantages to the Company. There can also be no assurance that the Company's trade secrets or nondisclosure agreements will provide meaningful protection of the Company's proprietary information. Furthermore, there can be no assurance that others will not independently develop similar technologies or duplicate any technology developed by the Company or that the Company's technology will not infringe upon patents or other rights owned by others. The Company does not own all the patent rights with respect to certain technology relating to the forced convection heater which it recently developed in conjunction with the Gas Research Institute, a nonprofit trade association of gas companies ("GRI"). See "Business -- Patents and Proprietary Rights." The Company's inability to maintain a competitive advantage based on proprietary rights would have a material adverse effect on the Company's business, financial condition and results of operations. Although the Company is not currently the subject of any patent or proprietary rights infringement litigation, there can be no assurance that third parties will not assert infringement claims against the Company in the future with respect to current or future products. In addition, one of the Company's European architectural patents has been opposed by two of the Company's competitors, and management believes that one of its customers may be infringing on certain U.S. and foreign counterpart patents. There can be no assurance that the outcome of either of these matters, or any other opposition of or infringement upon the Company's proprietary rights, will support the Company's patent position. In addition, the Company may be subject to additional risks as it enters into transactions in countries where intellectual property laws are not well developed or are poorly enforced. Legal protection of the Company's rights may be ineffective in such countries. Any claims or litigation, with or without merit, could be costly and could result in a diversion of management's attention. Adverse determinations of such claims or litigation could also have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Patents and Proprietary Rights." CONTINUANCE OF TECHNOLOGICAL ADVANTAGE The Company's success will depend in part upon its ability to improve existing products and services, and to develop and introduce new products and services to meet changing customer requirements. Such product enhancements require the incorporation of sophisticated technology and computer software. The application of such technologies and software to the Company's products has grown increasingly complex. There can be no assurance that the Company will successfully complete the development of new products in a timely fashion or that the Company's current or future products will satisfy the needs of the worldwide safety glass market. In addition, certain of the Company's customers require that products be customized to address the unique characteristics of their businesses. The Company's commitment to customization could burden its resources or delay the delivery or installation of products. Such results could adversely affect the Company's relationship with its customers, which could adversely affect its business, financial condition or results of operations. 1993 BANKRUPTCY FILING In May 1993, the Company filed for protection under Chapter 11 of the Bankruptcy Code, largely as a result of the Company's inability to meet its obligations with respect to $269.5 million of indebtedness outstanding as of May 1993, $193.0 million of which was incurred in connection with a leveraged buyout in 1989. The Company emerged from Chapter 11 in January of 1995. See "Business -- History." RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS Sales to customers in countries other than the United States accounted for 63.7%, 70.1% and 70.9% of net revenue in fiscal 1995, 1996 and 1997, respectively. Management anticipates that international sales will continue to account for a substantial portion of the Company's revenue in the future. Sales and operating activities outside of the United States are subject to certain inherent risks, including fluctuations in the value of the United States dollar relative to foreign currencies, tariffs, quotas, taxes and other market barriers, political and economic instability, restrictions on the export or import of technology, potentially limited intellectual property protection, difficulties in staffing and managing international operations and potentially adverse tax consequences. There can be no assurance that any of these factors will not have a material adverse 16 23 effect on the Company's business, financial condition or results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." RELIANCE ON LIMITED CUSTOMER BASE The Company's customer base in the Automotive Market and the Architectural Market is comprised of a limited number of firms that produce or use safety glass. For example, in fiscal years 1995, 1996, and 1997 Asahi Glass Company, Chrysler Corporation, Nippon Sheet Glass Company and Pilkington plc collectively accounted for 40.5%, 40.8% and 50.6% of the Company's revenue, respectively. In addition, (i) in fiscal 1995, Asahi Glass Company and Pilkington plc each accounted for more than 10.0% of the Company's revenue, (ii) in fiscal 1996, Pilkington plc accounted for more than 10.0% of the Company's revenue and (iii) in fiscal 1997 Asahi Glass Company, Chrysler Corporation, Nippon Sheet Glass Company and Pilkington plc each accounted for more than 10% of the Company's revenue. Accordingly, a significant portion of the Company's revenue in any particular period is attributable to sales to a limited number of customers. The Company's largest customers change from period to period as projects are completed and new projects are initiated. Management expects that sales of the Company's products to relatively few customers will continue to account for a high percentage of its revenue in the foreseeable future. If completed contracts are not replaced on a timely basis by new orders from the same or other customers, the Company's revenue and related cash flow could be materially adversely affected. The loss of a significant customer, a reduction in orders from any significant customer or the cancellation of a significant order from a customer, including reductions or cancellations due to customer departures from recent buying patterns, financial difficulties of a customer or market, or economic or competitive conditions in the glass manufacturing industry could materially adversely affect the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business -- Marketing and Sales." COMPETITION The Company faces competition primarily from the in-house engineering departments of its customers in the Automotive Market and from one major independent producer in the Architectural Market. There can be no assurance that: (i) the Company's Automotive Market customers will not increase their in-house design and assembly of glass bending and tempering systems or will not try to market systems developed in-house to other customers of the Company; (ii) the Company's existing competitors in the Architectural Market will not develop superior technology; or (iii) new competitors will not enter the Company's markets. Any of these factors, alone or in the aggregate, could have a material adverse effect on the Company's business, financial condition or results of operations. See "Business -- Competition." EMERGENCE OF A SUBSTITUTE FOR AUTOMOTIVE SAFETY GLASS Automobile manufacturers and certain automobile component suppliers such as plastic manufacturers are constantly evaluating methods to reduce the weight and cost of automobiles, including the substitution of automotive safety glass with some form of plastic. While to date there has been no cost-effective substitute developed which would have the required durability, optical quality and fracture patterns found in safety glass, there can be no assurance that such a product, if developed and introduced in the automotive safety glass market, would not have a material adverse effect on the Company's business, financial condition or operating results. DEPENDENCE ON THIRD-PARTY SUPPLIERS AND MANUFACTURERS The Company purchases substantially all of its materials and component parts incorporated into its products from third-party suppliers and manufacturers. Management believes that there are numerous available sources of supply for such required materials. While the Company attempts to maintain alternative sources for materials, the Company's businesses are subject to the risk of price fluctuations and periodic delays in the delivery of materials. Failure by certain suppliers to continue to supply the Company with materials on commercially reasonable terms, or at all, could have a material adverse effect on the Company's business, financial condition and operating results. In addition, the Company is, to some degree, dependent upon the 17 24 ability of such manufacturers, among other things, to meet stringent performance and quality specifications and to conform to delivery schedules. Failure by such third-party manufacturers to comply with these and other requirements could have a material adverse effect on the Company's ability to deliver its products on a timely basis. ENVIRONMENTAL REGULATION The operations and properties of the Company are subject to a wide variety of federal, state and local laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain materials, substances and wastes, the remediation of contaminated soil and groundwater, and the health and safety of employees (collectively, the "Environmental Laws"). Since Environmental Laws frequently are revised and supplemented, with a trend toward greater stringency, expenditures for compliance and liabilities under Environmental Laws are difficult to estimate and may exceed anticipated costs. Based upon its experience to date, management believes that compliance with existing Environmental Laws will not have a material adverse effect on the Company's business, financial condition or results of operations. However, future events, such as the discovery of new information, changes in existing Environmental Laws or their interpretation and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. See "Business -- Environmental Matters." OWNERSHIP OF HOLDING AND THE COMPANY Upon consummation of the Transactions, the Key Equity Group became the owner of all of the outstanding capital stock of Holding, which owns all of the voting stock of the Company. By virtue of such stock ownership, such persons have the power to direct the affairs of Holding and the Company and to determine the outcome of all matters required to be submitted to stockholders of Holding and the Company for approval, including the election of Holding's and the Company's directors and any amendment to the certificate of incorporation of Holding and the Company. The interests of the members of the Key Equity Group as equity holders may differ from the interests of holders of the Notes. See "Certain Transactions" and "Ownership and Control." CHANGE OF CONTROL Upon a Change of Control, the Company will be required to offer to repurchase all of the outstanding Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase. There can be no assurance that the Company will have sufficient funds available to finance a Change of Control Offer. In addition, upon a Change of Control, the Indenture would require the Company, before repurchase of the Notes, to (i) repay in full all obligations under or in respect of the Revolving Credit Facility or offer to repay in full all obligations under or in respect of the Revolving Credit Facility or (ii) obtain the requisite consent under the Revolving Credit Facility to permit the repurchase of the Notes as described above. See "Description of the Notes -- Change of Control Offer." The Company's inability to repay its obligations or to obtain the requisite consent under the Revolving Credit Facility, and to repurchase all of the tendered Notes, would constitute an event of default under the Indenture. FRAUDULENT CONVEYANCE The incurrence by the Company of indebtedness such as the Notes may be subject to review under relevant state and federal fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of the Company. Under these laws, if a court were to find that, after giving effect to the sale of the Notes and the application of the net proceeds therefrom, either (i) the Company incurred such indebtedness with the intent of hindering, delaying or defrauding creditors or contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others; or (ii) the Company received less than reasonably equivalent value or consideration for incurring such indebtedness and (a) was insolvent or rendered insolvent by reason of such transaction, (b) was engaged in a business or transaction for which the assets remaining with the Company constituted unreasonably small capital or (c) intended to incur, 18 25 or believed that it would incur, debts beyond its ability to pay such debts as they matured, such court may subordinate such indebtedness to presently existing and future indebtedness of the Company, avoid the issuance of such indebtedness and direct the repayment of any amounts paid thereunder to the Company's creditors or take other action detrimental to the holders of such indebtedness. The measure of insolvency for purposes of determining whether a transfer is avoidable as a fraudulent transfer varies depending upon the law of the jurisdiction which is being applied. Generally, however, a debtor would be considered insolvent if the sum of all its liabilities, including contingent liabilities, were greater than the value of all its property at a fair valuation, or if the present fair saleable value of the debtor's assets were less than the amount required to repay its probable liabilities on its debts, including contingent liabilities, as they become absolute and matured. It was a condition to consummation of the Initial Offering that the Company receive a solvency opinion, delivered by Houlihan Lokey Howard & Zukin, Inc., mutually acceptable to the Company and the Initial Purchaser. The Company believes that the indebtedness represented by the Old Notes was incurred for proper purposes and in good faith and, at the time the Old Notes were issued and the New Notes are issued, the Company was and will be, as the case may be: (i) neither insolvent nor rendered insolvent thereby; (ii) in possession of sufficient capital to operate its business effectively; and (iii) incurring debts within its ability to pay as the same mature or become due. See "Management's Discussions and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." There can be no assurance, however, that a court passing on these issues would make the same determination. DEPENDENCE ON SENIOR MANAGEMENT The Company's business depends upon the efforts, abilities and expertise of its executive officers and other key employees. The Company has entered into five-year employment contracts with several senior members of management in an effort to ensure the continuance of the existing management team. The agreements generally contain certain noncompete provisions. If the Company were to lose the services of certain of these executive officers or key employees, the Company's operating results could be adversely affected, perhaps materially. See "Management -- Employment Agreements and Arrangements." EFFECTIVE SUBORDINATION OF THE NOTES The Notes are general senior unsecured obligations of the Company and are effectively subordinated in right of payment to all secured indebtedness of the Company, including indebtedness under the Revolving Credit Facility, which provides for a total revolving credit commitment of $10.0 million, subject to certain conditions. The Company has no borrowings outstanding under the Revolving Credit Facility. The Indenture will limit, but not prohibit, the ability of the Company and its Restricted Subsidiaries to incur additional secured indebtedness. ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER The Old Notes were issued to, and the Company believes the Old Notes are currently owned by, a relatively small number of beneficial owners. Prior to the Exchange Offer, there has not been any public market for the Old Notes. The Old Notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for New Notes by holders who are entitled to participate in the Exchange Offer. The holders of Old Notes (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who are not eligible to participate in the Exchange Offer are entitled to certain registration rights, and the Company is required to file a Shelf Registration Statement with respect to such Old Notes. The New Notes will constitute a new issue of securities with no established trading market. The Company does not intend to list the New Notes on any national securities exchange or seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial Purchaser has advised the Company that it currently intends to make a market in the New Notes, but it is not obligated to do so and may discontinue such market making at any time. In addition, such market making activity will be subject to the limits 19 26 imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer and the pendency of the Shelf Registration Statement. Accordingly, no assurance can be given that an active public or other market will develop for the New Notes or as to the liquidity of the trading market for the New Notes. If a trading market does not develop or is not maintained, holders of the New Notes may experience difficulty in reselling the New Notes or may be unable to sell them at all. If a market for the New Notes develops, any such market may be discontinued at any time. If a public trading market develops for the New Notes, future trading prices of such securities will depend on many factors including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the New Notes may trade at a discount from their principal amount. CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES Holders of the Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes, as set forth in the legend thereon, as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act and applicable state securities laws, or pursuant to an exemption therefrom. The Company does not intend to register the Old Notes under the Securities Act. In addition, any holder of Old Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. To the extent Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "The Exchange Offer." 20 27 THE TRANSACTIONS The Company, Holding and Sub Co. each entered into certain transactions (defined herein as the "Transactions"), including ones with each other, that, upon their consummation, resulted in the ownership by Holding, which is in turn wholly-owned by the Key Equity Group, of all of the capital stock of the Company. The Transactions relating to such sale include: (i) the Merger; (ii) the Initial Offering; (iii) the Equity Contribution; and (iv) the establishment of the Revolving Credit Facility. The Transactions were consummated on July 2, 1997. THE MERGER On June 5, 1997, the Company, Holding and Sub Co. entered into the Merger Agreement, pursuant to which, on July 2, 1997, Sub Co. was merged into the Company (defined herein as the "Merger") and the Company continued as the surviving entity and became a wholly-owned subsidiary of Holding. Upon consummation of the Merger: (i) each outstanding share of capital stock of the Company was converted into the right to receive its proportionate share of $76.2 million in cash to be paid to the existing stockholders of the Company by Sub Co., subject to certain adjustments; (ii) each share of capital stock of Sub Co. was converted into one share of capital stock of the Company; and (iii) each share of capital stock of the Company outstanding immediately prior to the Merger was cancelled. The Company agreed that, prior to the consummation of the Merger, it would use its unrestricted cash to repay $42.0 million aggregate principal amount of Senior Notes due 2001 and pay accrued interest and a prepayment penalty on such notes of $6.3 million, as well as certain Transaction-related expenses. The Purchase Price of $76.2 million was adjusted to reflect changes in the net working capital of the Company. At the closing of the Merger, approximately $3.5 million of the Purchase Price was deposited into certain escrow accounts (the "Escrow Accounts") to secure any payment for losses incurred as a result of any breach of certain representations and warranties made in the Merger Agreement and to adjust the final Purchase Price in accordance with the Merger Agreement. The Purchase Price was financed through the Initial Offering and the Equity Contribution. See "Use of Proceeds." THE INITIAL OFFERING The proceeds from the Initial Offering, together with the proceeds from the Equity Contribution, were used to acquire all of the outstanding shares of capital stock of the Company from its existing stockholders pursuant to the terms of the Merger Agreement and to pay fees and expenses relating to the Transactions. Warrants were issued by Holding and became immediately detachable. Upon consummation of the Merger, the Company, as the surviving corporation, became the obligor on the Old Notes to the same extent that Sub Co. was liable under the Old Notes prior to the Merger. THE EQUITY CONTRIBUTION As part of or prior to the consummation of the Merger and the Initial Offering, the Key Equity Group purchased, for $15.0 million, all of the outstanding shares of capital stock of Holding, a Delaware corporation formed for the sole purpose of effecting the Merger and holding its investment in the Company. Holding then purchased for $15.0 million all of the outstanding shares of common stock of Sub Co., a Delaware corporation formed for the sole purpose of effecting the Merger. The proceeds of the Equity Contribution, together with the proceeds of the Initial Offering, were used to acquire all of the outstanding shares of capital stock of the Company from its existing stockholders pursuant to the terms of the Merger Agreement and to pay fees and expenses relating to the Transactions. REVOLVING CREDIT FACILITY To assist the Company in meeting its ongoing working capital requirements upon the consummation of the Merger and the Initial Offering, the Company arranged for a Revolving Credit Facility with an aggregate borrowing capacity of $10.0 million. No borrowings have been drawn under the Revolving Credit Facility. Advances on the Revolving Credit Facility are secured by substantially all of the assets of the Company. See "Description of the Revolving Credit Facility." 21 28 USE OF PROCEEDS The proceeds from the Initial Offering, together with the proceeds from the Equity Contributions, were used to (i) pay the Purchase Price pursuant to the Merger Agreement ($76.2 million), (ii) pay certain fees and expenses ($4.5 million) and (iii) fund working capital of the Company ($4.3 million). CAPITALIZATION The following table sets forth the actual capitalization of the Company as of June 30, 1997 and pro forma as adjusted to give effect to the Transactions as if each had occurred on June 30, 1997 (dollars in thousands). The table should be read in conjunction with the consolidated financial statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
JUNE 30, 1997 ------------------- ACTUAL PRO FORMA ------- --------- Cash and cash equivalents(a).............................................. $51,805 $ 6,727 ======= ======= Total long-term debt, including current portion(b): Notes offered pursuant to the Initial Offering and the Exchange Offer(c)............................................................. -- 69,250 10% Senior Notes due 2001(d)............................................ 42,000 -- ------- ------- Total long-term debt................................................. 42,000 69,250 Shareholders' equity(e): Common stock............................................................ 10 10 Additional paid-in capital(f)........................................... 20,377 15,740 Retained earnings....................................................... 8,845 -- ------- ------- Shareholders' equity................................................. 29,232 15,750 ------- ------- Total capitalization................................................. $71,232 $85,000 ======= =======
- --------------- (a) Prior to the consummation of the Merger, the Company redeemed its existing indebtedness at a premium and paid certain Transaction-related expenses. (b) The Company established a Revolving Credit Facility that permits the Company to draw amounts of up to $10.0 million. No funds were drawn on the Revolving Credit Facility upon consummation of the Merger. The Revolving Credit Facility is secured by substantially all of the assets of the Company. See "Description of the Revolving Credit Facility." (c) Reflects the issuance of $70.0 million aggregate principal amount of Notes, net of $750,000 relating to the value attributable to the Warrants. (d) Reflects $42.0 million aggregate principal amount of 10% Senior Notes due 2001 issued in connection with the Reorganization and retired pursuant to the consummation of the Transactions. (e) Reflects the recording of the Equity Contribution of $15.0 million, $750,000 attributable to the value of the Warrants and the elimination of historical shareholders' equity as a result of the Transactions. (f) Includes $750,000 relating to the value attributable to the Warrants. 22 29 UNAUDITED PRO FORMA FINANCIAL DATA The following unaudited pro forma consolidated balance sheet of the Company gives effect to the Transactions and the pro forma adjustments described in the notes thereto as if the Transactions had occurred on June 30, 1997. The unaudited pro forma consolidated statements of earnings of the Company for the year ended June 30, 1997 give effect to the Transactions and the pro forma adjustments described in the notes thereto as if the Transactions had occurred on July 1, 1996. The pro forma financial data is for informational purposes only and may not necessarily be indicative of the results of operations and financial position of the Company in the future or what the results of operations or financial position of the Company would have been had the Transactions occurred on the dates indicated. The pro forma data is based on a Purchase Price of $76.2 million, as adjusted in accordance with the terms of the Merger Agreement. The adjustments primarily affect the amount of pro forma cash and the pro forma goodwill and goodwill amortization. The unaudited pro forma consolidated statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Prospectus. 23 30 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
AS OF JUNE 30, 1997 ------------------------------------------ HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- ASSETS Cash and cash equivalents................................ $ 51,805 $ (45,078)(a) $ 6,727 Restricted cash.......................................... 1,529 (1,529)(a) -- Accounts receivable: Contracts: Uncompleted, including unbilled amounts of $2,188... 3,652 -- 3,652 Completed, less allowance of $101 for doubtful accounts.......................................... 1,676 -- 1,676 Trade, less allowance of $40 for doubtful accounts..... 1,530 -- 1,530 ------- -------- -------- Total accounts receivable...................... 6,858 -- 6,858 Inventory................................................ 4,265 -- 4,265 Prepaid expenses......................................... 481 -- 481 ------- -------- -------- Total current assets........................... 64,938 (46,607) 18,331 Property, plant and equipment, net....................... 8,390 -- 8,390 Other assets: Goodwill............................................... -- 56,339 (b) 56,339 Patents, less accumulated amortization of $4,317....... 18,283 -- 18,283 Reorganization value in excess of amounts allocable to identifiable assets, less accumulated amortization of $1,599........................................... 7,583 (7,583)(c) -- Deferred financing costs............................... 170 4,220 (d) 4,390 ------- -------- -------- Total other assets............................. 26,036 52,976 79,012 ------- -------- -------- Total assets................................... $ 99,364 $ 6,369 $ 105,733 ======= ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable......................................... $ 3,413 $ -- $ 3,413 Billings in excess of costs and estimated earnings on uncompleted contracts.................................. 10,720 -- 10,720 Accrued liabilities...................................... 11,287 (5,078)(e) 6,209 ------- -------- -------- Total current liabilities...................... 25,420 (5,078) 20,342 Long-term debt........................................... 42,000 27,250 (f) 69,250 Non-pension post-retirement benefit obligation........... 2,712 (2,321)(g) 391 Shareholders' equity: Common stock........................................... 10 -- 10 Additional paid-in capital............................. 20,377 (4,637)(h) 15,740 Retained earnings...................................... 8,845 (8,845)(i) -- ------- -------- -------- Shareholders' equity........................... 29,232 (13,482) 15,750 ------- -------- -------- Total liabilities and shareholders' equity..... $ 99,364 $ 6,369 $ 105,733 ======= ======== ========
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet 24 31 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS) (a) Prior to the consummation of the Merger, the Company reduced its existing cash balance by redeeming its existing indebtedness at a premium, paying certain Transaction-related expenses and remitting any remaining unrestricted cash in excess of $2,000 to existing stockholders. The following reflects the net decrease in cash and cash equivalents as a result of the pre-closing payments and the Transactions: Pre-closing adjustments: Repayment of existing long-term debt......................................... $(42,000) Payment of interest and prepayment penalty on existing long-term debt(1)..... (6,312) Payment of employee bonuses and certain Transaction-related expenses......... (6,627) Payment to existing stockholders(2).......................................... (989) Proceeds from the exercise of stock options and stock warrants............... 6,236 -------- Total pre-closing adjustments.............................................. (49,692) Transaction adjustments: Excess proceeds from the Initial Offering and the Equity Contribution........ 3,085 Reclassification of restricted cash to cash.................................. 1,529 -------- Total Transaction adjustments.............................................. 4,614 -------- Total...................................................................... $(45,078) ========
- --------------- (1) Includes a 10% prepayment penalty of $4,200 and accrued interest of $2,112. (2) Existing stockholders were required to leave $2,000 in unrestricted cash in the Company at closing. (b) Reflects goodwill of $56,339 representing the excess of the Purchase Price over the net assets acquired. (c) Reflects the elimination of reorganization value in excess of amounts allocable to identifiable assets of $7,583. (d) Reflects an increase in deferred financing costs as a result of the Initial Offering of $4,220. (e) Reflects the payment of certain incentive compensation, interest costs and Transaction-related expenses that were accrued prior to June 30, 1997. See Note (a) above. (f) Reflects the net increase in long-term debt resulting from the Transactions as follows: Notes........................................................................ $ 70,000 Value attributable to the Warrants........................................... (750) Repayment of existing long-term debt......................................... (42,000) -------- Total...................................................................... $ 27,250 ======== See Note (a) above.
(g) Reflects purchase price accounting adjustment to state non-pension post-retirement benefit obligation at fair value. (h) Reflects the net decrease in additional paid-in capital as follows: Exercise of stock options and stock warrants................................. $ 6,236 Payment to existing stockholders............................................. (989) Elimination of historical additional paid-in capital......................... (20,377) Elimination of additional paid-in capital relating to issuance of stock options and warrants........................................................ (6,236) Elimination of additional paid-in capital relating to the payment to existing stockholders................................................................ 989 Recording of additional paid-in capital from the Equity Contribution......... 14,990 Recording of value attributable to the Warrants.............................. 750 -------- Total...................................................................... $ (4,637) ========
(i) Reflects the elimination of historical retained earnings as a result of the Transactions. 25 32 UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS)
YEAR ENDED JUNE 30, 1997 -------------------------------------- HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Net revenue.................................................. $ 76,433 $ -- $76,433 Cost of goods sold........................................... 45,603 -- 45,603 ------- ------- ------- Gross profit............................................... 30,830 -- 30,830 Selling, general and administrative expenses................. 12,866 (1,433)(a) 11,433 Research and development expenses............................ 4,594 -- 4,594 Amortization expense......................................... 2,306 2,238 (b) 4,544 ------- ------- ------- Operating profit........................................... 11,064 (805) 10,259 Interest expense............................................. (4,200) (4,832)(c) (9,032) Amortization of deferred financing costs..................... -- (627)(d) (627) Other income (expense) -- net................................ 2,263 (1967)(e) 296 ------- ------- ------- Income (loss) before income taxes.......................... 9,127 (8,231) 896 Income taxes not payable in cash............................. (2,551) 1,492 (f) (1,059) Federal income taxes, current................................ (78)(g) 113 35 ------- ------- ------- Net income (loss).......................................... $ 6,498 $(6,626) $ (128) ======= ======= ======= OTHER DATA: Ratio of earnings to fixed charges(h)........................ 3.12x -- 1.09x Depreciation and amortization................................ $ 3,765 $ 2,238 $ 6,003 EBITDA(i).................................................... 14,829 1,433 16,262 Adjusted EBITDA(j)........................................... $ 16,808 $ 344 $17,152
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of Earnings 26 33 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS)
YEAR ENDED JUNE 30, 1997 ------------- (a) Reflects the elimination of certain Transaction-related professional fees and other costs and historical Directors' Fees, offset by a new annual advisory fee payable to KECC: Elimination of certain Transaction-related professional fees................ $ (460) Elimination of historical Directors' Fees................................... (1,289) Addition of a new annual KECC advisory fee.................................. 200 Reduction in net periodic post-retirement benefit cost resulting from a purchase price accounting adjustment........................................ $ 116 -------- Total................................................................ $ (1,433) ======== (b) Reflects the elimination of historical amortization of the reorganization value in excess of identifiable costs and the addition of amortization of goodwill resulting from the Merger as follows: Elimination of historical amortization of reorganization value in excess of identifiable costs.......................................................... $ (579) Addition of goodwill amortization (20 years straight line).................. 2,817 -------- Total................................................................ $ 2,238 ======== (c) Reflects the adjustment to interest expense as follows: Elimination of historical interest expense.................................. $ 4,200 Interest expense on the Notes(1)............................................ (9,032) -------- Total................................................................ $ (4,832) ======== --------------- (1) Reflecting cash interest expense on $70,000 at an interest rate of 12.75% and amortization of original issue discount relating to the value attributable to the Warrants. (d) Reflects the amortization of capitalized costs arising from the Transactions (7 years straight line). (e) Reflects the adjustment to interest income as follows: $(2,303) Elimination of historical interest income................................... 336 Interest income on pro forma cash balance(1)................................ -------- $(1,967) Total................................................................ ========
--------------- (1) Assuming an interest income rate of 5.0%. (f) Reflects adjustments to the Company's income taxes not payable in cash based upon the Company's effective income tax rate for the period presented. (g) Reflects estimated alternative minimum taxes ("AMT") payable for the period. (h) For purposes of this computation, earnings are defined as earnings or losses before extraordinary items and fixed charges. Fixed charges are the sum of: (i) interest expense, including the amortization of original issue discount relating to the value attributable to the Warrants; (ii) amortization of deferred financing costs; and (iii) that portion of rental expense that is the functional equivalent to interest expense.
27 34 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS (CONTINUED) (DOLLARS IN THOUSANDS) (i) "EBITDA" means operating profit plus depreciation and amortization. EBITDA is determined after the deduction of Directors' Fees of $1,289 for the year ended June 30, 1997. Upon the completion of the Transactions, these fees were replaced by a post-Merger KECC advisory fee of $200 per year. Management understands that EBITDA is an indicator customarily used by investors to gauge a company's ability to service its interest and principal obligations. EBITDA should not be considered in isolation from, as a substitute for or as being more meaningful than net income, cash flows from operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with generally accepted accounting principles, and it should not be construed as an indication of the Company's operating performance or as a measure of liquidity. EBITDA, as presented herein, may be calculated differently by other companies and, as such, EBITDA amounts presented herein may not be comparable to other similarly titled measures of other companies. (j) "Adjusted EBITDA" means EBITDA adjusted to reflect: (i) an add-back of Directors' Fees paid during fiscal 1997, offset by a post-Merger KECC advisory fee of $200 per year; and (ii) the add-back of an $890 one-time accrual relating to the replacement of certain components in forced convection heaters due to an error in material specifications.
28 35 SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA (DOLLARS IN THOUSANDS) The following table sets forth selected historical consolidated financial and other data of the Company for the five years ended June 30, 1997 which have been derived from the Company's audited consolidated financial statements. The information presented below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and notes thereto included elsewhere herein.
PREDECESSOR COMPANY REORGANIZED COMPANY ----------------------------------------- ------------------------------------------------- PERIOD FROM PERIOD FROM YEAR ENDED JUNE 30, JULY 1, 1994 JAN. 4, 1995 ----------------------- THROUGH THROUGH YEAR ENDED YEAR ENDED 1993 1994 JAN. 3, 1995 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1997 --------- --------- ------------- ------------- ------------- ------------- STATEMENT OF OPERATIONS DATA: Net revenue..................... $ 55,194 $ 51,975 $ 25,948 $27,854 $62,771 $76,433 Cost of goods sold.............. 41,879 33,329 16,576 17,036 39,024 45,603 --------- --------- --------- -------- -------- -------- Gross profit.................. 13,315 18,646 9,372 10,818 23,747 30,830 Selling, general and administrative expenses....... 8,093 7,001 3,430 5,105 10,723 12,866 Research and development expenses...................... 4,933 4,520 2,082 2,302 4,557 4,594 Amortization expense............ 9,276 5,434 2,512 1,203 2,407 2,306 --------- --------- --------- -------- -------- -------- Operating profit (loss)....... (8,987) 1,691 1,348 2,208 6,060 11,064 Interest expense................ (26,556) -- -- (2,077) (4,200) (4,200) Other income (expense) -- net... (53,192) (16) 35 784 1,540 2,263 --------- --------- --------- -------- -------- -------- Income before items below..... (88,735) 1,675 1,383 915 3,400 9,127 Reorganization items(a)......... (275) (271) (1,164) -- -- (2,551) Income taxes not payable in cash(b)....................... 386 -- -- (445) (1,418) Federal income taxes, current... -- -- -- -- (105) (78) Extraordinary gain(c)........... -- -- 214,773 -- -- -- Cumulative effect on prior years of change in method of accounting for non-pension post-retirement benefits...... -- -- (1,906) -- -- -- --------- --------- --------- -------- -------- -------- Net income (loss)............. $ (88,624) $ 1,404 $ 213,086 $ 470 $ 1,877 $ 6,498 ========= ========= ========= ======== ======== ======== OTHER DATA: EBITDA(d)....................... $ 2,177 $ 8,736 $ 4,625 $ 4,109 $ 9,781 $14,829 Depreciation and amortization... 11,164 7,045 3,277 1,901 3,721 3,765 Capital expenditures............ 141 484 480 680 2,152 990 Backlog......................... 18,890 21,249 31,941 25,931 38,910 30,307 Ratio of earnings to fixed charges(e).................... -- 15.00x 5.40x 1.40x 1.80x 3.12x Deficiency of earnings to cover fixed charges................. $ 89,010 -- -- -- -- -- CASH FLOW PROVIDED BY (USED IN): Operating activities............ $ 4,426 $ 8,319 $ 13,803 $(1,389) $22,521 $ 8,973 Investing activities............ (72) (468) (479) 90 (1,663) (978) Financing activities............ -- -- (6,200) (3,797) 125 (5) BALANCE SHEET DATA (AT END OF PERIOD): Working capital................. $ 21,174 $ 29,062 $ 18,649 $21,725 $27,599 $39,518 Total assets.................... 81,574 85,983 87,952 83,808 95,977 99,364 Total debt...................... 269,504 269,411 42,000 42,000 42,000 42,000 Shareholders' equity (capital deficiency)................... (194,316) (192,912) 20,174 20,644 22,652 29,232
(See footnotes on following page) 29 36 NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA (DOLLARS IN THOUSANDS) (a) Reorganization items relate to the period in which the Company was operating under the protection of Chapter 11 of the Bankruptcy Code. (b) Income taxes not payable in cash represent the tax effect of certain tax attributes existing prior to the Reorganization and are recorded as a reduction to reorganization value in excess of amounts allocable to identifiable assets as required by SOP 90-7. (c) An extraordinary gain of $214,773 was recognized on January 3, 1995 because the consideration for the discharge of pre-petition liabilities was less than the carrying value of the recorded liabilities discharged. (d) EBITDA for any period means operating profit plus depreciation and amortization. EBITDA is determined after deduction of Directors' Fees of $0, $0, $0, $203, $995 and $1,289 for the periods ended June 30, 1993, June 30, 1994, January 3, 1995, June 30, 1995, June 30, 1996 and June 30, 1997, respectively. Upon completion of the Transactions, these fees were replaced by a post-Merger KECC advisory fee of $200 per year. Management understands that EBITDA is an indicator customarily used by investors to gauge a company's ability to service its interest and principal obligations. EBITDA should not be considered in isolation from, as a substitute for or as being more meaningful than net income, cash flows from operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with generally accepted accounting principles, and should not be construed as an indication of the Company's operating performance or as a measure of liquidity. EBITDA, as presented herein, may be calculated differently by other companies and, as such, EBITDA amounts presented herein may not be comparable to other similarly titled measures of other companies. (e) For purposes of this computation, earnings are defined as earnings or loss before extraordinary items and fixed charges. Fixed charges are the sum of (i) interest expense; (ii) amortization of deferred financing costs; and (iii) that portion of rental expense that is the functional equivalent to interest expense. 30 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is a market and technological leader in the design and assembly of state-of-the-art glass bending and tempering (or strengthening) systems used in the production of safety glass. The Company sells its systems worldwide primarily to the Automotive Market and the Architectural Market. The Company complements its sale of complete systems (Original Equipment) with the sale of aftermarket products and services consisting of retrofits, tooling and replacement parts. The Company has generated a continuing stream of aftermarket revenue due to the long life and growing installed base of more than 375 systems worldwide. For fiscal year 1997, the Company generated revenue and EBITDA of $76.4 million and $14.8 million, respectively. Original Equipment revenue totaled $50.2 million or 65.7% of the Company's total revenue, with $26.2 million or 34.3% of total revenue generated by aftermarket sales in connection with the maintenance and enhancement of the Company's installed base of systems. In May of 1993, the Company filed for protection under Chapter 11 largely as a result of its inability to meet its obligations with respect to approximately $269.5 million of indebtedness outstanding as of May 1993, $193.0 million of which was incurred in connection with a leveraged buyout in 1989. See "Business -- History." Upon emergence from bankruptcy on January 4, 1995 with new shareholders, a reorganized senior management team, a business strategy focused on a more profitable product mix and cost containment and significantly reduced debt service obligations, the Company adopted "fresh start" financial reporting that reflected the financial impact of the Reorganization. The Company's assets and liabilities were adjusted to reflect their estimated fair value and the accumulated deficit as of January 3, 1995 was eliminated. As a result of the Reorganization, the results of operations, financial condition and cash flow of the Company for dates and periods subsequent to January 3, 1995 are not necessarily comparable to those prior to January 4, 1995. The following table sets forth the amounts and the percentage of revenue of certain revenue and expense items for the periods indicated. The pre-Reorganization six-month period ended January 3, 1995 and the post-Reorganization six-month period ended June 30, 1995 have been combined for purposes of this discussion (dollars in millions).
YEAR ENDED JUNE 30, ---------------------------------------------------- 1995 1996 1997 -------------- -------------- -------------- Net revenue(a): Original Equipment................................... $33.0 61.3% $34.2 54.5% $50.2 65.7% Aftermarket.......................................... 20.8 38.7 28.6 45.5 26.2 34.3 ----- ----- ----- ----- ----- ----- Total net revenue.................................. 53.8 100.0 62.8 100.0 76.4 100.0 Cost of goods sold(a).................................. 33.6 62.5 39.0 62.1 45.6 59.7 ----- ----- ----- ----- ----- ----- Gross profit........................................... 20.2 37.5 23.8 37.9 30.8 40.3 SG&A expense........................................... 8.5 15.8 10.7 17.1 12.9 16.8 R&D expense............................................ 4.4 8.2 4.6 7.3 4.6 6.0 Amortization expense................................... 3.7 6.8 2.4 3.8 2.3 3.0 ----- ----- ----- ----- ----- ----- Operating profit..................................... $ 3.6 6.7% $ 6.1 9.7% $11.0 14.5% ===== ===== ===== ===== ===== =====
- --------------- (a) Contract revenue and cost of goods sold are recognized on a percentage of completion basis measured by the percentage of costs incurred to the estimated total costs of each contract. RESULTS OF OPERATIONS Fiscal Year 1997 Compared with Fiscal Year 1996 Net revenue for fiscal 1997 increased $13.6 million, or 21.7%, to $76.4 million from $62.8 million for fiscal 1996. Original Equipment revenue increased $16.0 million, or 46.8%, to $50.2 million for fiscal 1997 compared to $34.2 million for fiscal 1996. The increase in Original Equipment revenue was primarily the result of increased contract signings and demand for the Company's products, particularly automotive systems. Aftermarket revenue decreased $2.4 million, or 8.4%, to $26.2 million for fiscal 1997 from $28.6 million for 31 38 fiscal 1996. The decrease in aftermarket revenue was due to a decline in automotive retrofit tooling revenue partially offset by an increase in replacement parts revenue. A significant portion of the Company's revenue is generated from customers outside of the United States. For fiscal 1997, Original Equipment revenue from foreign customers was $37.1 million (73.9% of total Original Equipment revenue) as compared to $24.9 million (72.8% of total Original Equipment revenue) for fiscal 1996. The percentage of aftermarket revenue from foreign customers decreased to 65.1% of total aftermarket revenue for fiscal 1997 compared to 66.9% for fiscal 1996. Gross profit increased $7.0 million, after the effect of a one-time expense of $0.9 million to replace certain components in forced convection heaters, to $30.8 million, or a gross margin percentage of 40.3%, for fiscal 1997 compared to $23.8 million, or a gross margin of 37.9%, for fiscal 1996. The increase in gross profit was due to increased revenue for 1997. The increase in the gross margin is the result of a more profitable product mix (reflecting a shift toward increased sales to the Automotive Market) for fiscal 1997 as compared to fiscal 1996. Selling, general and administrative expenses increased $2.2 million, or 20.6%, to $12.9 million for fiscal 1997 from $10.7 million for fiscal 1996. This increase was primarily the result of increases in incentive compensation costs due to increased earnings and Directors' Fees. Research and development expenses were $4.6 million for fiscal 1997 and fiscal 1996. Amortization expense for fiscal 1997 was $2.3 million compared to $2.4 million for fiscal 1996. Operating profit increased $4.9 million, or 80.3%, to $11.0 million for fiscal 1997 from $6.1 million for fiscal 1996. Operating profit as a percentage of revenue was 14.5% for fiscal 1997 as compared to 9.7% for fiscal 1996 due to increased revenue and a more profitable product mix. Interest expense for fiscal 1997 and fiscal 1996 was $4.2 million. Other income, net, which is comprised primarily of interest income, increased $0.7 million, or 46.9%, to $2.3 million for fiscal 1997 from $1.6 million for fiscal 1996. This increase was the result of an $8.0 million, or 18.2%, increase in the average cash balance for fiscal 1997 as compared to fiscal 1996. Since the Reorganization, the Company's effective tax rate has been greater than the statutory tax rate as a result of the amortization expense relating to the Reorganization that is not deductible for income tax purposes. The Company's effective tax rate decreased to 28.8% for fiscal 1997 compared to 44.8% for fiscal 1996 as a result of the reduction in the valuation allowance of deferred taxes and significantly higher pretax income, without an increase in the nondeductible amortization expenses. Income taxes not payable in cash relate to pre-Reorganization temporary differences, primarily related to patent amortization, and utilization of pre-Reorganization net operating loss carryforwards. Income taxes not payable in cash increased $1.1 million to $2.5 million for fiscal 1997 from $1.4 million for fiscal 1996 due primarily to increased earnings in fiscal 1997. See the notes to the consolidated financial statements included herein for a further discussion of income taxes. Net income increased $4.6 million, after the effect of a one-time expense of $0.9 million to replace certain components in forced convection heaters, to $6.5 million for fiscal 1997 compared to $1.9 million for fiscal 1996. This increase in net income was due primarily to increased operating profit. Fiscal Year 1996 Compared with Fiscal Year 1995 Net revenue for fiscal 1996 increased $9.0 million, or 16.7%, to $62.8 million from $53.8 million for fiscal 1995. Original Equipment revenue increased $1.2 million, or 3.7%, to $34.2 million for fiscal 1996 compared to $33.0 million for the same period in fiscal 1995. The increase in Original Equipment revenue was primarily the result of increased contract signings and demand for the Company's products, particularly architectural systems. Aftermarket revenue increased $7.8 million, or 37.3%, to $28.6 million for fiscal 1996 from $20.8 million for fiscal 1995 due in part to automotive retrofits for Glasstech systems and a strong demand for automotive aftermarket products. 32 39 Original Equipment revenue from foreign customers for fiscal 1996 was $24.9 million (72.8% of total Original Equipment revenue) as compared to $23.6 million (71.5% of total Original Equipment revenue) for fiscal 1995. The percentage of aftermarket revenue from foreign customers increased to 66.9% of total aftermarket revenue for fiscal 1996 compared to 51.5% for fiscal 1995. Gross profit increased $3.6 million to $23.8 million, or a gross margin of 37.9%, for fiscal 1996 compared to $20.2 million, or a gross margin of 37.5%, for fiscal 1995. The increase in gross profit was due to increased Original Equipment and aftermarket revenue. Selling, general and administrative expenses increased $2.2 million, or 25.6%, to $10.7 million for fiscal 1996 from $8.5 million in fiscal 1995. This increase was primarily the result of increases in incentive compensation costs and Directors' Fees, neither of which were incurred in the period from July 1, 1994 through January 3, 1995, and professional fees. Research and development expenses increased $0.2 million, or 3.9%, to $4.6 million for fiscal 1996 from $4.4 million for fiscal 1995. This increase was primarily the result of an increase in general development project activities. Amortization expense decreased $1.3 million, or 35.2%, to $2.4 million for fiscal 1996 compared to $3.7 million for fiscal 1995. The decrease in amortization expense resulted from the fair value adjustments made to patents and other intangibles at January 3, 1995 in conjunction with fresh start reporting. Operating profit increased $2.5 million, or 69.4%, to $6.1 million for fiscal 1996 compared to $3.6 million for fiscal 1995. This increase resulted from higher Original Equipment and aftermarket revenue and lower amortization expenses as previously discussed. Interest expense increased $2.1 million to $4.2 million for fiscal 1996 from $2.1 million for fiscal 1995 as a result of debt service obligations beginning on January 3, 1995. Other income, net, which is comprised primarily of interest income, increased $0.8 million to $1.6 million for fiscal 1996 compared to $0.8 million for fiscal 1995. Prior to January 4, 1995, interest income of $0.7 million was netted against certain Reorganization items. The Company's effective tax rate increased to 44.8% for fiscal 1996 compared to 39.3% for combined fiscal 1995. Since the Reorganization, the Company's effective tax rate has been greater than the statutory tax rate as a result of amortization expense relating to the Reorganization that is not deductible for income tax purposes. The lower effective tax rate in fiscal 1995 was a result of the use of net operating loss carryovers in the Reorganization period. See the notes to the consolidated financial statements included herein for a further discussion of income taxes. An extraordinary gain of $214.8 million was recognized at January 3, 1995 because the consideration for the discharge of pre-petition liabilities was less than the carrying value of the recorded liabilities discharged. Upon emerging from bankruptcy, liabilities subject to compromise totaling $269.5 million were discharged for 100% of the Company's common stock, $12.6 million in cash and $42.0 million of new senior debt. Net income for fiscal 1996 was $1.9 million compared to $213.6 million for fiscal 1995. Net income for fiscal 1995 included an extraordinary gain of $214.8 million related to the discharge of pre-petition liabilities, an expense of $1.9 million related to the cumulative effect on prior years of a change in the Company's method of accounting for non-pension post-retirement benefits and expenses related to the Reorganization of $1.2 million. LIQUIDITY AND CAPITAL RESOURCES The Company's primary source of liquidity is from funds provided by operations. Upon consummation of the Transactions, the Company had long-term principal amount of indebtedness of $70.0 million in the form of the Notes and cash of $6.7 million. The Notes do not require any principal payments prior to maturity. Also, in connection with the Transactions, the Company established a $10.0 million Revolving Credit Facility which will be used primarily to fund working capital requirements and secure the issuance of standby letters of credit, which were $1.5 million at June 30, 1997. 33 40 The Company's working capital balance was $27.6 million at June 30, 1996 and $39.5 million at June 30, 1997. The $11.9 million increase in working capital from June 30, 1996 to June 30, 1997 resulted from an increase in cash generated by new system orders. In most instances, progress payments on new system orders are received or invoiced in advance of revenue recognition. When progress payments are received or invoiced in advance of such revenue recognition, the Company increases current liabilities represented by its billings in excess of costs and estimated earnings on uncompleted contracts. When the revenue is earned, the Company recognizes the revenue and reduces the billings in excess of costs and estimated earnings on uncompleted contracts balance. The Company's working capital, primarily cash, was significantly reduced upon consummation of the Transactions. On a pro forma basis at June 30, 1997, the Company would have had working capital deficiency of $2.0 million, which includes $10.7 million of billings in excess of costs and estimated earnings on uncompleted contracts. Net cash provided by operating activities can vary significantly from quarter to quarter or year to year due to the number of new system signings and the amount and timing of new system payments. In particular, due to the timing of receipt of cash progress payments, net cash provided by operating activities for fiscal 1997 was $9.0 million, whereas for fiscal 1996, net cash provided by operating activities was $22.5 million. The increased level of net cash provided by operating activities for fiscal 1996 was principally the result of a significant number of new system orders in the fourth quarter of fiscal 1996. Net cash provided by operating activities in the fourth quarter of fiscal 1996 was $11.5 million. Capital expenditures, including investment in prototype fixed assets, were $1.0 million for fiscal 1997 and $2.2 million for fiscal 1996. Future capital expenditures, excluding prototype assets, will be used to fund the replacement or improvement of operating equipment and facilities at levels approximating $1.5 million per year. In addition, the Company may need to make periodic investments in prototype fixed assets to be used for customer demonstrations and research and development purposes. Existing prototype fixed assets which outlive their usefulness for customer demonstrations or research and development purposes, or both, may be refurbished and sold. As of June 30, 1997, the Company had net operating loss ("NOL") carryforwards for regular and alternative minimum tax purposes of approximately $21.0 million and $17.0 million, respectively, which expire in the years 2009 through 2011. As a result of the change of control effected pursuant to the Merger, future years will be subject to an annual usage limitation. Management believes that internally generated funds, together with amounts available under the Revolving Credit Facility, will be sufficient to satisfy the Company's operating cash requirements and make scheduled interest and principal payments under the Revolving Credit Facility and scheduled interest payments on the Notes. However, the ability of the Company to satisfy its obligations will be primarily dependent upon its future financial and operating performance and upon its ability to renew or refinance borrowings or to raise additional equity capital if necessary. The Company's business is subject to fluctuations due to changes in the world markets for the end products produced by its equipment (largely in the cyclical markets of automobiles and construction), currency fluctuations, geopolitical events and other macroeconomic forces largely beyond the ability of the Company to predict or control. Management is not currently aware of any trends, demands, commitments or uncertainties which will or are reasonably likely to result in a material change in the Company's liquidity. 34 41 BUSINESS OVERVIEW The Company is a market and technological leader in the design and assembly of state-of-the-art glass bending and tempering (i.e., strengthening) systems used by glass manufacturers and processors in the conversion of flat glass into safety glass. The Company sells its systems worldwide, primarily to the Automotive Market and the Architectural Market. The Company's systems are designed to meet customers' safety glass production requirements for complexity, accuracy and optical quality while simultaneously enhancing system productivity, flexibility and cost efficiency. For the Automotive Market, the Company has developed bending and tempering systems that meet automobile manufacturers' safety glass specifications for current and future production models. Management believes that the Company has a leading share of and is the only significant independent supplier in the market for technologically advanced systems used to bend and temper automotive glass into complex shapes. For the Architectural Market, the Company's energy-efficient processing systems are capable of producing high-quality bent or flat glass at output rates tailored to meet customer-specific production requirements. As a result of the long useful life and growing worldwide installed base of its systems, the Company is able to complement its sale of Original Equipment with the sale of aftermarket products and services consisting of retrofits, tooling (i.e., molds used to shape automotive glass) and replacement parts. The Company's products feature proprietary technologies that have been developed over the last 25 years and are protected by more than 700 patents and patent application filings worldwide. For the fiscal year ended June 30, 1997, the Company generated revenue and Adjusted EBITDA of $76.4 million and $16.8 million, respectively. Original Equipment revenue totaled $50.2 million, or 65.7%, of the Company's total revenue for the same period. The balance of the Company's revenue was generated through aftermarket sales including retrofits, tooling and replacement part sales intended to maintain or enhance the Company's installed base of systems. A Glasstech system performs a series of processes that bend and strengthen flat glass in the production of safety glass products such as car windows. In each system, flat glass supplied by glass manufacturers is conveyed horizontally on ceramic rollers through a high temperature furnace, a bending module and a quench module (which completes the tempering process by rapidly cooling the heated glass). Microprocessor-based controls regulate temperature, speed and glass location throughout the entire process. In addition, the Company develops its own proprietary software to control the integrated system. The modular design of a Glasstech system readily enables the Company to offer customized systems that meet specific technical requirements of its customers. Such a design also creates equipment retrofit and upgrade opportunities for the Company. The Company works closely with its customers as they identify capacity and functionality requirements for a new system and then throughout the usual ten to twelve month order, installation and acceptance cycle to ensure satisfaction with their completed system. Systems designed for the Automotive Market, which are used to form and temper glass for automotive back, side and roof windows, as well as to form and anneal glass used for windshields, range in price from approximately $2.5 million to $7.0 million. Systems designed for the Architectural Market process curved and flat tempered glass which are used for skylights, insulating glass, patio doors, furniture and appliances. These systems range in price from approximately $0.5 million to $3.0 million. The Company has an installed base of more than 375 systems located in over 40 countries on six continents. Sales in the United States, Europe and Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the Company's total sales in fiscal 1997. The Company's customers include virtually all major glass manufacturers and processors including: Chrysler Corporation, Ford Motor Company, Guardian Industries Corp. and PPG Industries, Inc. in the United States; Compagnie de Saint-Gobain and Pilkington plc in Europe; Asahi Glass Company, Central Glass Company and Nippon Sheet Glass Company in Japan; Hankuk Glass Industry Company and Keumkang Ltd. in Korea; and Shatterprufe (Pty) Limited in South Africa. Management believes that the Company's future growth in the Automotive Market will be driven by customer demand for more advanced safety glass bending capabilities, the sale of systems that will supply new automobile factories under construction worldwide and the opportunity to sell systems to glass manufacturers and processors who desire to "outsource" (i.e., purchase glass processing systems rather than develop them 35 42 internally). Management further believes that future sales in the Architectural Market will be derived, in part, from the adoption of stringent building codes worldwide that mandate the use of tempered glass and the increased use of coated glass for products such as energy-efficient windows. HISTORY The Company was founded in 1971 to manufacture flat glass tempering systems for the Architectural Market. Building on its success in that market, in 1977 the Company delivered its first bending and tempering system used to produce simple glass shapes for the Automotive Market. Through continued product development programs and technological enhancements, the Company manufactured its first bending and tempering system for complex glass shapes for the Automotive Market in 1985. This system enables the Company's customers to bend and form glass while it is still inside the furnace, which results in enhanced quality, higher yields (i.e., reduced breakage and fewer defects) and more precision in the final shape of the safety glass product. In 1988, the Company was purchased in a leveraged buyout for $89.1 million. The change in automotive styling to more aerodynamic designs (which require more complex glass shapes), led by the introduction of the Ford Taurus, provided the impetus for the Company's growth in the late 1980s, which culminated with the Company generating revenue and EBITDA of $93.5 million and $30.9 million, respectively, in fiscal 1989. Based upon these historically high operating results, the Company was purchased for $242.6 million in a leveraged buyout in 1989. In fiscal 1990, the Company achieved comparable results to 1989. However, beginning in fiscal 1991, the Company's operating results declined significantly due to several factors including: (i) the completion of the significant increase in system orders driven by the introduction of the Taurus by Ford Motor Company (i.e., automotive glass processors required more complex shapes used in the ensuing aerodynamic styling trend led by the Ford Taurus); and (ii) other external factors such as (a) a worldwide economic recession, (b) market interruptions due to geopolitical events such as the fall of communist governments in Russia and Eastern Europe, and (c) the war in the Persian Gulf. As a result of the confluence of these industry and external factors, the Company's EBITDA declined to $5.5 million in fiscal 1991, leading to the Company's inability to meet its significant debt service obligations on the $269.5 million of indebtedness outstanding as of May 1993, $193.0 million of which was incurred in connection with the 1989 leveraged buyout. In fiscal 1992, the Company's EBITDA further declined to $1.7 million as the continuing effects of these industry and external factors required management to focus on the restructuring of its debt obligations rather than on the daily operation of its business. In December 1992, the Company reorganized its senior management, with Mark Christman assuming the position of President. In May 1993, the Company filed for protection under Chapter 11 of the Federal Bankruptcy Code. While under the protection of Chapter 11, the new management team refocused its business strategy by, among other things, focusing on the sale of a more profitable product mix and on the containment of costs. As a result of these efforts, a reorganization of its senior management and a reorganization of the Company's debt under a bankruptcy plan of reorganization, the Company emerged from Chapter 11 in January 1995 (the "Reorganization"). Upon consummation of the Reorganization, the Company's debt holders converted their debt obligations into 100% of the Company's equity, $42.0 million of 10% Senior Notes and the right to receive certain cash payments. The Company's stockholders have agreed to sell their interests in the Company to Holding pursuant to the terms of the Merger Agreement. See "The Transactions." Throughout the early 1990s, the Company continued to introduce new Original Equipment systems, enabling it to maintain its strong market positions in the Automotive Market and the Architectural Market. The Company's significant product introductions include a bending system used to form curved architectural glass (fiscal 1990), a tight radius cylindrical bending system for furniture and display case applications (fiscal 1992), a constant radius bending system for automotive side and roof windows (fiscal 1994), an automotive windshield bending and annealing system (fiscal 1995) and a forced convection heating system intended for more energy-efficient glass production (fiscal 1996). See "Business -- Products." 36 43 Management believes that the Company's competitive advantage in the production of high-quality glass bending and tempering systems, as well as its market leadership, is the result of its: (i) development of patented, state-of-the-art, cost-efficient technology; (ii) installed base of more than 375 systems in over 40 countries; (iii) experienced technical staff, which works closely with customers in the development and design of new systems; (iv) longstanding relationships (often of 20 years or more) with its major automotive and architectural customers; (v) knowledgeable sales force, many of whom have technical degrees; and (vi) ability to develop new products within reasonably short lead times. In addition, the Company believes that its management team, which has an average of more than 20 years of experience in the glass industry, continues to be instrumental in further strengthening the Company's leading market and technological position. The Company's executive offices are located at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551. Its telephone number is (419) 661-9500. BUSINESS AND OPERATING STRATEGY The Company's strategy is to strengthen its leadership position as a provider of technologically advanced and cost-efficient glass bending and tempering systems by: (i) capitalizing on current trends in the Automotive Market; (ii) leveraging its long-term relationships with major customers; (iii) offering customers a market-driven product development effort; (iv) maintaining its position as a high-quality, low-cost manufacturer; (v) providing extensive aftermarket products and services; and (vi) continuing to capitalize on international growth opportunities. - Capitalizing on Current Trends in the Automotive Market. Management believes that the Company is well positioned to capitalize on current trends in the Automotive Market including: (i) customer demand for improved productivity from its safety glass processing equipment; (ii) the emergence of advanced automotive designs which feature complex-shaped glass in vehicle windows and an increase in the average glass content per vehicle; (iii) customer demand for greater optical quality in safety glass products; (iv) shorter lead times for each car design modification or new model introduction; and (v) the replacement of older bending systems initially installed by the Company's competitors or developed in-house by its customers. - Leveraging Long-Term Relationships with Major Customers. Management believes that the Company's strong relationships with major glass manufacturers and processors have developed in large part due to the following factors: (i) the continuity of the Company's customer relationships, many of which have existed since the Company's inception; (ii) the Company's awareness of and involvement in its customers' capital budgeting and planning processes; and (iii) the Company's commitment to provide the ongoing technical service required to properly maintain a Glasstech system. Based upon its strong relationships, the Company is better able to predict future demand for its systems and aftermarket products, as well as to proactively design and implement creative solutions to meet its customers' evolving safety glass requirements. - Offering Customers a Market-Driven Product Development Effort. The Company's technological leadership is a result of its commitment to R&D. The objective of the Company's R&D effort is to develop new products and to improve existing products to meet present and future market demands. The Company has spent an average of $4.5 million annually on R&D in fiscal years 1995 through 1997 and has 47 employees (17% of total employees) in its R&D department. Recent product introductions and improvements include bending and tempering systems that provide tighter part tolerances, higher output capability, shorter tooling changeover periods, faster cycle times, improved optical quality, greater depth of bend and an ability to produce shapes with greater complexity. In addition, the Company is developing modeling software which is intended to enable both automotive designers and glass processors to analyze the shape and optical quality of various safety glass configurations without actually constructing costly prototypes. - Maintaining Position as a High-Quality, Low-Cost Manufacturer. The Company is dedicated to producing high-quality, cost-efficient systems that minimize its customers' safety glass production costs. As an example of its commitment to quality, the Company recently received its ISO-9001 37 44 certification, which is an internationally recognized quality standards certification. By continually striving to reduce its customers' cost of producing safety glass, the Company increases its opportunities to sell its systems to those glass manufacturers and processors that might otherwise develop such systems in-house. To improve its own operating results, the Company has significantly reduced its operating costs by: (i) improving its production process by modularizing and standardizing product engineering; (ii) using advanced computer-aided design systems; and (iii) improving employee training programs. The Company's success in developing new high-quality, cost-efficient systems and in implementing cost reductions internally has contributed to an increase in Adjusted EBITDA from approximately $8.7 million in fiscal 1995 to $16.8 million in fiscal 1997. During the same period, Adjusted EBITDA margins have improved from 16.2% to 22.0%. - Providing Extensive Aftermarket Products and Services. The Company's aftermarket products and services, which include retrofits, automotive tooling, replacement parts and customer service programs, provide an ongoing source of revenue and cash flow that complement the Company's sale of Original Equipment. Retrofits consist of extensions, upgrades and improvements to existing systems, while replacement parts consist of both proprietary and nonproprietary components. Aftermarket revenue was $26.2 million for fiscal 1997, or approximately 34.3% of the Company's total revenue. Management believes that aftermarket sales will remain a significant component of the Company's revenue as the Company's installed base of systems continues to expand. - Continuing to Capitalize on International Growth Opportunities. The Company's service organization continuously interacts with customers in more than 40 countries. Sales to the United States, Europe and Asia-Pacific represented 29.1%, 6.6% and 51.5%, respectively, of the Company's total fiscal 1997 sales. The Company's geographically diverse customer base positions it to capitalize on the increasing globalization and development of markets in areas such as Asia-Pacific (including China), Eastern Europe and Russia. Such diversification also mitigates the impact of regional economic downturns and a reliance on any one market. Management believes that the Company will continue to sell new systems to its existing customers in both established and developing markets. THE MARKET FOR SAFETY GLASS PRODUCTS In the United States, automobile manufacturers purchase most of their safety glass products from independent glass manufacturers and processors, except for Ford Motor Company and Chrysler Corporation, each of which produces a portion of its safety glass requirements in-house. In Europe and Asia-Pacific, the majority of automobile glass manufacturers purchase safety glass products from independent manufacturers and processors. Most of the major glass manufacturers and processors are customers of the Company. Automotive safety glass products are formed into either simple or complex shapes. Simple glass, which is relatively flat and has little curvature, is required to conform to exacting physical dimensions and fracture requirements. Significant bending technology is not required to process this type of glass. Unlike simple glass, complex glass has a high degree of curvature, or "bulge." The more curvature that a piece of glass has, the more likely it is to develop optical distortions unless it is produced to precise specifications. For this reason, it is important that the bending of complex glass be done in a manner that produces consistent, repeatable results subject to minimal process variation. In the Automotive Market, the majority of side, back and roof windows consist of a single piece of tempered glass. The majority of windshields are of laminated construction, which requires the insertion of a plastic layer between two pieces of safety glass. The most common architectural glazing product worldwide is flat tempered glass which is made either with single-glazed or double-glazed (sealed unit) construction. Such glass is used for commercial or domestic building windows, patio doors, shower enclosures, display cases, furniture glass and appliance glass. Flat laminated glass is less frequently used for such products. THE SAFETY GLASS PRODUCTION PROCESS The Company's systems process flat glass produced by glass manufacturers into safety glass. The Company designs and assembles Original Equipment systems that bend and temper automotive glass 38 45 primarily for side, back and roof windows and for commercial and domestic architectural applications. The Company also designs and assembles systems that anneal (rather than temper) glass for use in the production of laminated glass for products such as automotive windshields. The basic fabrication process involves placing a piece of glass horizontally on a conveyor of ceramic rollers which transfers the glass through a furnace where it is heated to the desired temperature. If the glass then requires bending, it generally will be bent into either a simple or complex shape. The glass is then moved into the quench where, depending upon the desired end-product, it is either tempered or annealed. Heating Process. Traditionally, all Glasstech systems heated glass with electric radiant heat ("ERH"). Recently, the Company has introduced gas-fired forced convection heat ("FCH") as an alternative. FCH was developed in conjunction with the Gas Research Institute. FCH is currently available in a flat glass tempering system for sale to the Architectural Market and is expected to be available in a system for sale to the Automotive Market by the end of 1997. FCH offers customers significant advantages over ERH technology. For example, FCH can be more cost-effective than ERH, because gas often is less expensive than electricity. In addition, FCH can heat glass with special coatings faster and more uniformly than ERH, resulting in lower production costs, faster outputs and higher quality glass. In spite of FCH's significant advantages, not all product applications justify the additional capital expense of an FCH furnace. Accordingly, the Company expects to continue to offer systems with ERH. See "-- Patents and Proprietary Rights" and "-- Product Development." Bending Process. Glasstech systems generally bend glass into simple and complex shapes through one of three techniques. The gravity-sag technique creates simple shapes by placing a piece of glass on a ring mold, heating it to its softening point and allowing the shape to form via gravity. The deep bending technique creates complex shapes by placing the glass on a ring mold, heating it and pressing the heated glass against a full surface area mold. The cylindrical bending technique creates simple shapes with a single curve by placing the glass on rollers, heating it and using a set of flexible rollers to curve the glass. Tempering Process. Tempering is the process of strengthening heated glass by cooling it rapidly. Tempered glass is up to five times stronger than untempered glass and, if broken, fractures into small pieces, reducing the risk of injury. Conversely, untempered glass will splinter and produce sharp edges. The process the Company uses to temper safety glass is called "quenching" which involves moving the heated glass into the quench where, through a computer-controlled process, it is cooled with air directed on the surfaces of the glass by an array of nozzles that diffuse air from a large blower or fan. Glass tempered by a Glasstech system meets international fracture standards. Annealing Process. The annealing process is a preparatory step in the process of producing laminated glass, which is used to form most vehicle windshields. The annealing process is similar to the tempering process, except that instead of cooling the glass rapidly, it is cooled slowly to produce a relatively weaker safety glass product. Annealed glass breaks more easily upon impact and, unlike tempered glass, splinters when broken. To complete the lamination process, glass processors and fabricators layer two pieces of annealed glass, which can be produced by one of the Company's Original Equipment systems, around a piece of plastic such that the annealed glass adheres to the plastic when broken. A laminated glass product breaks relatively easily into a spiderweb-like pattern without permitting the object creating the impact to break through the glass, and any glass particles remain adhered to the plastic layer, thereby reducing the risk of injury to the vehicle's occupants. PRODUCTS Original Equipment -- Automotive. Systems designed and assembled for the Automotive Market process flat glass by bending and tempering it to produce automotive side, back and roof windows and by bending and annealing flat glass in the production of laminated glass for windshields. These systems range in price from $2.5 million to $7.0 million. The Company sells four basic systems, which are primarily differentiated by their bending techniques, to automotive glass manufacturers and processors. - Quick-Sag System. Introduced in the late 1970s, the Company's quick-sag system (the "Quick-Sag System") bends and tempers glass for side, back and roof automotive windows. Using the gravity-sag 39 46 technique, the Quick-Sag System produces high-optical-quality glass in simple shapes. Although this is the Company's oldest system, demand for it continues in markets such as China, South America and other developing markets. Such a system may be retrofitted to provide higher output deep bending or cylindrical bending capabilities if required by the Company's customers. - Deep Bending System. The Company's deep bending system (the "Deep Bending System") was first introduced in 1985 in response to customers' demands for more complex safety glass shapes that could not be produced by the gravity-sag technique used in the Quick-Sag System. By using the deep- bending technique, such systems shape glass with enhanced optical quality to precise tolerances with deep and complex bends for automotive side and back windows. Deep Bending Systems are currently available with ERH and will soon be available with FCH heating technology. To form different shapes of complex safety glass, the Deep Bending System requires different sets of tooling, which the Company offers as part of its aftermarket business. - Cylindrical Bending System. Introduced in fiscal 1994 to produce accurate, simple cylindrical bends using flexible rollers (rather than tooling), the cylindrical bending system (the "Cylindrical Bending System") produces side and roof vehicle windows that require a simple cylindrical bend. Prior to the introduction of this system, it generally was not cost-effective for the Company to offer a system that produced glass with a simple cylindrical bend because the Company was unable to compete favorably against equipment designed in-house by the Company's customers. With the introduction of the Cylindrical Bending System, however, the Company now offers customers the ability to make faster changeovers by eliminating the tooling requirements typical of its other bending systems. This feature reduces the customers' production costs and maximizes their system performance. - In-line System. Unlike the movement of glass in a Quick-Sag System or a Deep Bending System, in which glass exits from the side of the bending module, the glass in an in-line system (the "In-line System") travels in a straight line throughout the entire process. An In-line System is capable of producing higher quality glass at faster output rates and at lower costs per piece of glass than a side-exit system. The first generation of the In-line System was introduced in 1985. The most recent generation of the In-line System was introduced in fiscal 1995 to produce simple and complex bends for automotive side, rear and roof windows, generally by using a more advanced deep bending technique. The Company recently introduced a new version of the In-line System that has been designed to produce complex-shaped glass for automotive windshields and back windows. Original Equipment -- Architectural. Systems designed and assembled for the Architectural Market process flat glass by tempering or by bending and tempering it for applications including residential and commercial construction, furniture, display cases, shower enclosures and appliances. Such systems range in price from $0.5 million to $3.0 million. - Flat Glass Tempering Systems. The Company's initial generation of flat glass tempering for architectural applications was introduced in 1971. Current systems can be equipped with either ERH or FCH heating technology. A system with FCH is more expensive initially than one with ERH, but offers significant energy cost savings and output advantages, particularly for reflective or low-emissivity glass. - Bending and Tempering Systems. Initially introduced in 1990 in response to the demand for curved glass from the Architectural Market, these systems are designed to shape glass of varying thicknesses into custom-specified curves. Shape is controlled by computer, eliminating the need for extensive tooling. Original Equipment -- Other. In 1992, the Company formed Stir-Melter, Inc. ("Stir-Melter"), a wholly-owned subsidiary that designs and assembles a glass-melting system that vitrifies (i.e., changes into a glass-like substance by fusion due to heat) hazardous waste for safe disposal. Stir-Melter's systems are rapid glass melters that employ aggressive mechanical stirring action in combination with direct electrical heating. Since its inception, Stir-Melter has incurred certain expenses in connection with, among other things, the Company's effort to procure patents covering certain Stir-Melter technology. 40 47 Aftermarket Business. Aftermarket products and services complement the Company's Original Equipment business. Sales in this area consist of the following items: (i) retrofits (extensions or improvements of current systems); (ii) tooling (complete sets of bending and tempering equipment designed to produce specific complex-shaped glass products); (iii) ceramic rollers (used to convey glass through the furnace); (iv) replacement parts for all the individual system components; and (v) technical services. - Retrofits. Retrofits are purchased by customers who want to increase production capacity, extend bending capability, increase system efficiency or take advantage of the latest computer and control system developments. Typical retrofits and improvements include: (i) extensions of heater length to increase capacity; (ii) conversions from automotive simple bending systems to complex bending systems, such as from a Quick-Sag System to a Deep Bending System; (iii) quench upgrades; (iv) conversion of a single-function system to a dual-function system, such as adding a Cylindrical Bending System to a Quick-Sag System; and (v) computer or control upgrades. - Tooling. The Company's customers in the Automotive Market operate complex bending and tempering systems that require part-dedicated tooling equipment to produce individual vehicle window parts that meet precise design and shape specifications. The Company's tooling products generally include: (i) bending molds; (ii) bending rings (to press the glass to the mold); (iii) lift jets (to raise the glass from the conveyor to the mold); (iv) quench rings (to transport the glass from the mold to the quench); and (v) quenching heads (which incorporate nozzles and direct air against the glass surface). - Ceramic Rollers. The Company's roller hearth technology was introduced to eliminate the marks left on glass by older vertical systems that tempered flat glass by hanging it from tongs. The ceramic rollers are used to convey the glass horizontally into and through the furnace and are manufactured to strict specifications in order to reduce distortion or markings on the glass surface. - Replacement Parts. Both proprietary and nonproprietary parts are offered to replace components used in Glasstech systems. Customers are encouraged to purchase an initial consignment of replacement parts when purchasing a new system and to maintain critical parts in inventory throughout the life of their system. - Technical Services. The Company's technical services department provides it with an important competitive advantage. The customer service staff, which consists of 28 full-time employees, provides aftermarket technical support and gathers feedback from customers regarding specific product improvement recommendations for Glasstech systems. The Company expects to launch a pilot program in 1997 to offer additional customer service through longer-term customer service contracts. PRODUCT DEVELOPMENT The Company's R&D effort is a significant factor in maintaining its market and technological leadership. The objective of the Company's R&D effort is to develop new products and to improve existing products to meet present and future market demands. The Company works closely with its customers to identify their current and future needs, enabling it to proactively design creative solutions to meet future industry requirements. Development proposals are submitted to the Company's Executive Technical Committee to be analyzed and assessed. Proposals are authorized only when the committee is satisfied that the proposal meets customer or market needs and the proposed program can be conducted cost-effectively with a reasonable probability of achieving the desired level of profitability. The Company has spent approximately $4.4 million, $4.6 million and $4.6 million (exclusive of expenditures relating to prototypes) in fiscal years 1995, 1996 and 1997, respectively, on the development of new systems or on the improvement of existing systems. 47 employees (or 17% of total employees) work in the R&D department. As a result of its recent R&D efforts, the Company expects to introduce two improvements to its Deep Bending System in 1997. Both improvements are currently in prototype production. The first improvement is expected to provide a four-fold reduction in the tooling changeover time for a Deep Bending System. The second improvement is the introduction of FCH heating technology to a Deep Bending System for sale to the 41 48 Automotive Market. In addition, the Company is developing modeling software that is intended to enable both automotive designers and glass manufacturers and processors to analyze the shape and optical precision of various glass configurations without the need to develop costly prototypes. MARKETING AND SALES The Company's sales efforts are conducted by well-qualified and experienced personnel operating in the Americas, Europe (including Africa and the Middle East) and Asia-Pacific. The Company's international sales efforts are supplemented by nonexclusive sales agents retained on a commission basis. Commission is paid only when sales are confirmed and payments have been received from the customer. The Company's sales efforts in Europe are supported by Glasstech Ltd., a wholly-owned subsidiary of the Company. The Company has installed more than 375 systems in 40 countries on six continents. The Company's customers include virtually all major glass manufacturers and processors, such as Chrysler Corporation, Ford Motor Company, Guardian Industries Corp. and PPG Industries, Inc. in the United States; Compagnie de Saint-Gobain and Pilkington plc in Europe; Asahi Glass Company, Central Glass Company and Nippon Sheet Glass Company in Japan; Hankuk Glass Industry Company and Keumkang Ltd. in Korea; and Shatterprufe (Pty) Limited in South Africa. As part of its marketing process, the Company maintains close customer relationships that enable management to understand its customers' needs for existing and new product capabilities. Due to the size of a Glasstech system, from both a physical and economic perspective, a significant commitment with respect to planning is required on the part of the Company's customers before they order new equipment and subsequently place it into operation. As part of this planning process, the customer involves the Company in discussions that can last up to one or two years before an order is actually placed. At any point in time, the Company and its customers are involved in numerous discussions that occur between their respective management teams, technical staffs and sales/purchasing staffs. The customer service staff, which consists of 28 full-time employees, provides aftermarket technical support and gathers information from customers regarding specific product improvement recommendations for Glasstech systems. Customer service representatives are also available to the Company's customers as consultants on a per diem basis. The Company's technical representatives train the customer's workforce to properly operate its Glasstech system and consult on specific technical issues or production goals. The Company's customer service department has a program which provides customers with 24-hour troubleshooting services via telephone. In-house computers enable the Company to simulate system problems that a customer might experience and provide the customer with prompt solutions. An installation of a Glasstech system typically requires ten to twelve months from the time the customer executes a contract to final acceptance of the system. Following the execution of a contract, a project manager coordinates all technical details with customer personnel before any parts are ordered from the Company's suppliers. Design, delivery of parts and assembly generally takes the Company four to six months, with shipment normally occurring five to seven months after the initial signing of the contract. Shipment to the customer can take up to one month, depending upon the destination. Installation time at the customer's location varies according to system type, but generally requires between one and two months from the simplest to the most complex systems. Following installation, the system must meet certain predetermined performance tests before the customer accepts the system. Depending on the system's complexity and customer cooperation, these tests typically take two to eight weeks. Completion of aftermarket sales vary with each product. A typical retrofit order, for example, takes between six and ten months to complete. A typical tooling order requires three to four months to complete, while orders for replacement parts and ceramic rollers typically range from six to ten weeks to complete. Customer service calls, on the other hand, are typically completed in 24 to 48 hours. A substantial portion of the Company's revenue historically has been comprised of sales to a limited number of customers. For example, in fiscal years 1995, 1996 and 1997, Asahi Glass Company, Chrysler Corporation, Nippon Sheet Glass Company and Pilkington plc collectively accounted for 40.5%, 40.8% and 42 49 50.6 % of total revenue, respectively. In addition, (i) in fiscal 1995, Asahi Glass Company and Pilkington plc each accounted for more than 10.0% of revenue; (ii) in fiscal 1996, Pilkington plc accounted for more than 10.0% of revenue; and (iii) in fiscal 1997, Asahi Glass Company, Chrysler Corporation, Nippon Sheet Glass Company and Pilkington plc accounted for more than 10.0% of revenue. The Company also generates a substantial portion of its revenue outside of the United States. See Note 9 to the Company's consolidated financial statements included herein. COMPETITION The Company's primary competition in the Automotive Market comes from either (i) the engineering departments of certain of its customers, such as Pilkington plc and Compagnie de Saint-Gobain, which design and build glass processing systems in-house or (ii) glass manufacturers which process safety glass and sell it to automobile manufacturers, such as Chrysler Corporation and Ford Motor Company, which elect to purchase processed safety glass rather than install their own Glasstech system. In either case, the Company primarily competes against its customers by developing systems with greater capabilities than those currently produced in-house. Current trends in the automobile industry are expected to provide the Company with the opportunity to further differentiate the capabilities of its new systems from those developed by in-house engineering departments. In the Architectural Market, there is significant competition among manufacturers of flat glass tempering systems, but less significant competition for bending and tempering systems. The Company's principal competitor in the Architectural Market is Tamglass Oy of Finland, which mainly competes against the Company in the market for flat glass tempering systems. Although management believes that the Company is well positioned in the flat glass tempering market, it focuses most of its marketing effort on the bent glass tempering market, which is generally comprised of customers that place a premium on the capabilities, quality and service provided by the Company rather than the price of the system. PATENTS AND PROPRIETARY RIGHTS The Company protects its technology by filing patents and patent applications in the U.S. and in major markets worldwide. It is the Company's policy to aggressively pursue patent coverage for any significant product developments and, where appropriate, multiple patent coverage both in the U.S. and other countries (which primarily extends the patent protection acquired in the U.S. to critical foreign markets). The Company holds over 100 patents in the U.S. and more than 350 patents outside the United States. In addition, the Company has more than 250 patent application filings worldwide. Typically, within each Glasstech system, numerous patents cover various controls, bending processes or general aspects of the equipment. While management does not believe that the loss of any one patent would have a material adverse effect on the Company's business, it believes the Company's aggregate patent position provides it with an important competitive advantage. The Company's patents cover a range of products and product features, including: (i) the Quick-Sag System; (ii) the Company's complex in-furnace bending process (used in both Deep Bending and In-line Systems); (iii) the Cylindrical Bending System; (iv) quenching systems; (v) process controls for systems; and (vi) general aspects of its technologies and equipment. As patents on some of the Company's older technologies, such as the Quick-Sag System, begin to expire, the Company continually applies for and is generally issued patents relating to its newer, leading edge technologies. These newer patents will generally remain in effect for more than 15 years. The Company received funding from GRI for the development of the FCH technology. Under an agreement with GRI, GRI retained rights to the resulting U.S. patents. Under the GRI agreement, the Company received two exclusive patent licenses in the U.S. One license permits the Company to use FCH technology in systems that produce flat tempered glass (the "Flat License") and the other license permits the Company to use FCH technology in systems that produce bent glass (the "Bent License"). The exclusivity with respect to the Flat License and Bent License expires in 2000 and 2002, respectively. Subject to certain obligations to exploit FCH technology with respect to the Bent License, the Company will continue to hold 43 50 nonexclusive licenses for FCH technology for the duration of the underlying patents. Under the terms of the GRI agreement, the Company holds the exclusive rights to the FCH patents outside of the U.S. Although the Company is not currently subject to any patent or proprietary rights infringement litigation, management believes that one of its customers may be infringing on certain U.S. and foreign counterpart patents relating to its Quick-Sag System and Deep Bending System technologies. In addition, one of the Company's European architectural patents relating to quenching apparatus for roller conveyed glass sheets has been opposed by two of the Company's competitors. This opposition is proceeding in the European Patent Office and may result in a change of scope, or loss, or the claims granted under this patent in Europe. Substantially all Company employees execute technology agreements that have a confidentiality provision and assign patent rights to the Company. Upon consummation of the Transactions, members of senior management will enter into employment agreements that contain noncompete provisions. See "Management -- Employment Agreements and Arrangements." MATERIALS AND SUPPLY ARRANGEMENTS The Company has reached agreement with many of its suppliers, including its ten largest suppliers, which guarantee firm pricing, generally for one year, but do not have purchase volume requirements obligating the Company to purchase certain quantities. Management believes that the Company has made adequate arrangements with backup suppliers to avoid any material adverse effect that would occur if one of its primary suppliers were unable to fill Company orders. In fiscal 1997, the Company did not purchase more than 10% of its materials and supplies from any one supplier. PROPERTIES The Company's facilities are located in Perrysburg, Ohio. The Company leases a 96,800-square-foot facility that houses both its offices and plant, as well as an adjacent 43,200-square-foot facility for production and storage. The 96,800-square-foot facility is subject to a five-year lease that will expire on December 31, 1999, after which the Company has an option to extend the lease for two additional five-year periods. The 43,200-square-foot building is subject to a three-year lease that will expire on January 31, 1998. The Company also owns an adjacent 108,000-square-foot building that houses R&D, tooling design, tooling production and prototype production equipment. The Company believes that its current facilities are adequate for its foreseeable needs. EMPLOYEES As of June 30, 1997, the Company employed 272 people, 160 of whom work in the operations department. The Company has experienced low personnel turnover throughout its history. The Company has no union employees, and no attempt has ever been made to organize its workforce. Management believes that its relations with its employees are good. BACKLOG The Company had a backlog (on a percentage of completion basis) as of June 30, 1997 of approximately $30.3 million as compared to $38.9 million on June 30, 1996. The Company expects to complete this backlog by the end of fiscal 1998. LEGAL PROCEEDINGS On January 15, 1997, James E. Heider ("Heider"), a former executive officer of the Company, commenced an action against the Company and Mark Christman, the President of the Company, in the Common Pleas Court of Wood County, Ohio, relating to the nonrenewal of his employment agreement. In the amended complaint, Heider alleges that the Company breached his written employment agreement and breached implied and express employment agreements that, according to the complaint, were created pursuant to certain alleged oral statements. The complaint also alleges that Heider was terminated in 44 51 retaliation for reporting on the conduct of certain employees and that Heider was wrongfully denied the ability to exercise certain stock options. Heider seeks compensation of approximately $9.5 million for lost wages, bonuses, back pay, vacation pay and the value of other fringe benefits he would have received through continued employment with the Company. The Company believes that this action is without merit and is barred by the provisions of Heider's written employment agreement with the Company. The Company intends to contest this action vigorously, and management does not believe that this action will have a material adverse effect on the Company's financial condition or operating results. From time to time, the Company is a party to various other legal actions and proceedings. Management does not believe that an unfavorable determination in any such other action or proceeding would have a material adverse effect upon the Company's operations. ENVIRONMENTAL MATTERS The Company's operations and properties are subject to a wide variety of increasingly complex and stringent Environmental Laws. As such, the nature of the Company's operations exposes it to the risk of claims with respect to such matters and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. Management believes its operations and properties are in compliance in all material respects with Environmental Laws. Based upon its experience to date, management believes that the future cost of compliance with and liability under existing Environmental Laws will not have a material adverse effect on the Company's business, financial condition or operating results. However, future events, such as the discovery of new information, changes in existing Environmental Laws or their interpretations and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. 45 52 MANAGEMENT The following table sets forth the names and ages of the Company's executive officers (the "Executive Management") and the directors of the Company and Holding (the "Directors"). Within 12 months of the consummation of the Transactions, the Company and Holding anticipate increasing the number of Directors to five and appointing at least one independent director to the board of directors of the Company and Holding (the "Board of Directors").
NAME AGE POSITION - ----------------------------------- --- ----------------------------------------------- Mark D. Christman 45 Director, President and Chief Executive Officer John S. Baxter 57 Director and Senior Vice President, Marketing and Sales Kenneth H. Wetmore 50 Vice President, General Counsel and Secretary Ronald A. McMaster, Ph.D. 57 Vice President, Corporate Development Diane S. Tymiak 40 Vice President, Treasurer and Chief Financial Officer Larry E. Elliott 47 Vice President, Manufacturing and Engineering James P. Schnabel 36 Vice President, Development David P. Given 42 Director
Mark D. Christman has been President and Chief Operating Officer of the Company since December 31, 1992. Mr. Christman joined the Company in 1976, and since that time has served in various capacities, including Vice President, Treasurer, Chief Financial Officer and Executive Vice President. Upon the consummation of the Transactions, Mr. Christman began to serve as President and Chief Executive Officer. John S. Baxter has been Senior Vice President, Marketing and Sales, since 1992. Mr. Baxter joined the Company in 1981 and was Managing Director of Glasstech Ltd. from 1981 to 1992. Prior to joining the Company, Mr. Baxter was employed by Triplex Safety Glass, a subsidiary of Pilkington plc, for five years. Kenneth H. Wetmore joined the Company in 1988 as General Counsel and was elected Secretary in 1989 and Vice President in 1991. Mr. Wetmore is also President of Stir-Melter, Inc. Prior to joining the Company, Mr. Wetmore was employed by Owens Corning Fiberglass Corp. for 19 years. Ronald A. McMaster, Ph.D. has been Vice President, Corporate Development since 1988. Dr. McMaster joined the Company in 1977 and has served in various capacities, including Vice President, Research and Development and Vice President, Advanced Engineering. Mr. McMaster and Mr. Christman are first cousins. Diane S. Tymiak has been Vice President, Treasurer and Chief Financial Officer since 1993. Ms. Tymiak joined the Company in 1980 and has served in various capacities since that time, most recently as Treasurer. Larry E. Elliott joined the Company in July 1996 as Vice President, Development. In December 1996, he was elected as Vice President, Manufacturing and Engineering. Prior to joining the Company, Mr. Elliott was employed by the glass division of Ford Motor Company for 25 years, most recently as Supervisor, Fabrication Facilities Engineering. James P. Schnabel was elected Vice President, Development in 1997. He has served in various engineering capacities with the Company since 1984, most recently as Director, Product Development. David P. Given has been President of KECC, a venture capital firm, since 1995. Mr. Given joined KECC as a Vice President in 1990. Mr. Given serves as a director of several privately-held companies. 46 53 EXECUTIVE COMPENSATION The following table sets forth the compensation received by the Company's Chief Operating Officer and the four other highest paid executive officers (together with the Chief Operating Officer, the "Named Executive Officers") for services to the Company in fiscal 1997. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION NAME AND ---------------------- ALL OTHER PRINCIPAL POSITION SALARY BONUS COMPENSATION(A) - ------------------------------------------------------- --------- -------- --------------- Mark D. Christman...................................... $ 291,110 $700,000 $12,520 President and Chief Operating Officer John S. Baxter......................................... 219,516 215,000 12,590 Senior Vice President, Marketing and Sales Kenneth H. Wetmore..................................... 190,448 115,000 12,590 Vice President, General Counsel and Secretary Dianne S. Tymiak....................................... 142,493 95,000 12,713 Vice President, Chief Financial Officer Norman J. Klatt........................................ 175,827 55,000 7,696 Vice President Sales - Asia
- --------------- (a) Represents (i) a pension plan contribution equal to 5% of each Named Executive Officer's first $150,000 of salary and bonus under the Company's pension plan and (ii) imputed income on life insurance provided by the Company on all such persons except Mr. Klatt. PRE-MERGER STOCK OPTION HOLDINGS No options were issued or exercised in fiscal 1997. The following table sets forth the value of options held by each of the Named Executive Officers at June 30, 1997.
FISCAL YEAR-END OPTION VALUES --------------------------------------------------------------- NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT JUNE 30, 1997(a) JUNE 30, 1997(b) ----------------------------- ----------------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------------------------- ----------- ------------- ----------- ------------- Mark D. Christman.......................... 26,424 32,283 $ 995,855 $ 1,216,666 John S. Baxter............................. 6,176 4,118 232,758 155,197 Kenneth H. Wetmore......................... 3,529 2,353 132,999 88,679 Diane S. Tymiak............................ 3,529 2,353 132,999 88,679 Norman J. Klatt............................ -- -- $ -- $ --
- --------------- (a) All outstanding options vested and were exercised upon consummation of the Merger. (b) The values are based on the value received by the Named Executive Officers upon the deemed exercise of their options in connection with the Merger. EMPLOYMENT AGREEMENTS AND ARRANGEMENTS Mr. Christman has entered into a five-year employment agreement with Holding and the Company pursuant to which Mr. Christman serves as the President and Chief Executive Officer of Holding and the Company (the "President"). Mr. Christman is paid a base salary of $272,760 per year, subject to certain cost- of-living adjustments, and receives customary executive benefits. Additionally, pursuant to his agreement and the Stockholders Agreement (as defined herein), he is entitled to receive no less than 40% of all distributions from the Performance Bonus Pool (as defined herein), participate in the Restricted Stock Program (as 47 54 defined herein), and participate in the Performance Share Program (as defined herein). See "-- Management Incentive Plans." The employment agreement also contains a noncompetition provision that prohibits Mr. Christman from competing or holding certain ownership interests in other businesses that compete against the Company for the later of five years after the initial date of the agreement or two years following the termination of Mr. Christman's employment (unless Mr. Christman is terminated without cause, in which case no restriction shall apply). The employment agreement is renewable by the Company for one-year successive terms upon completion of the initial five-year term. Each of the other members of Executive Management also entered into an employment agreement (each, an "Employment Agreement" and, collectively with the President's employment agreement, the "Employment Agreements") that is substantially similar to Mr. Christman's agreement, but is paid a base salary per year, subject to certain cost-of-living adjustments, as follows:
ANNUAL NAME SALARY ----------------------------------------------------- -------- John S. Baxter....................................... $213,438 Kenneth H. Wetmore................................... 182,210 Ronald A. McMaster, Ph.D............................. 175,844 Diane S. Tymiak...................................... 138,452 Larry E. Elliott..................................... 153,914 James P. Schnabel.................................... 132,843
MANAGEMENT INCENTIVE PLANS In connection with the Transactions, the Company established: (i) a performance bonus pool (the "Performance Bonus Pool"); (ii) a restricted stock plan (the "Restricted Stock Program"); and (iii) a performance share program (the "Performance Share Program"), all of which were designed to retain and reward members of Executive Management. Performance Bonus Pool. Commencing fiscal 1998, each member of Executive Management will be eligible to receive a distribution from the Performance Bonus Pool. Amounts made available by the Company pursuant to the Performance Bonus Pool at the end of each fiscal year shall be based on the operating results of the Company for such fiscal year. If EBITDA (which for such purpose will be computed before deducting any fees payable to KECC) is between $14.0 million and $15.0 million for such fiscal year, then amounts available for distribution pursuant to the Performance Bonus Pool will generally be 5.0% of such EBITDA. If EBITDA is more than $15.0 million but not over $16.0 million, then amounts available for distribution pursuant to the Performance Bonus Pool will generally be 7.5% of EBITDA. If EBITDA is more than $16.0 million, then amounts available for distribution pursuant to the Performance Bonus Pool will generally be 10.0% of EBITDA. The Board of Directors, in consultation with the President, will distribute the Performance Bonus Pool among the members of Executive Management using its discretion; provided, however, Mr. Christman, pursuant to the terms of his employment agreement, shall be entitled to receive at least 40% of the Performance Bonus Pool. The Board of Directors will be required to distribute the entire amount of the Performance Bonus Pool among some or all members of Executive Management. Restricted Stock Program. Simultaneous with the consummation of the Transactions, Holding and the members of the Key Equity Group entered into a stockholders agreement (the "Stockholders Agreement"), pursuant to which Holding established the Restricted Stock Program. Under the terms of the Restricted Stock Program, members of Executive Management were granted, pursuant to their employment agreements, in the aggregate, 1,667 shares of restricted Class C Common Stock (as defined herein) of Holding. The restricted Class C Common Stock may not be sold or otherwise transferred while the restrictions are in effect and may be forfeited to the Company if the recipient leaves the Company before the restrictions lapse. The shares of Class C Common Stock are non-voting and the restrictions will generally lapse in equal amounts over a four-year period. However, all such restrictions will lapse upon a Change of Control (as defined in the Employment Agreements). Performance Share Program. The Performance Share Program was established pursuant to the Stockholders Agreement. See "Certain Transactions -- Post Merger Transactions -- Stockholders Agreement." 48 55 Under the terms of the Performance Share Program, members of Executive Management purchased shares of Class D Common Stock of Holding (the "Class D Holders") by paying $0.01 in cash and paying for the balance by issuing to Holding promissory notes in consideration therefor and pledging such shares to Holding to secure such debt. Upon the occurrence of a Liquidity Event (as defined herein), a final determination of the number of shares of Class D Common Stock that will be retained by members of Executive Management will be made based upon the achievement by the Key Equity Group of certain goals relating to its return on the Equity Contribution as adjusted to account for the value attributable to the Warrants. "Liquidity Event" is defined in the Stockholders Agreement as the first to occur of: (i) the sale of Holding and (ii) a public offering of any of Holding's securities (each, a "Liquidity Event"). The Company will have the right to repurchase shares of Class D Common Stock under certain circumstances upon a termination of employment. EMPLOYEES' PENSION PLAN AND EMPLOYEES' SAVINGS PLAN The Company's Employees' Pension Plan and Employees' Savings Plan cover substantially all of its employees. Under the Employees' Pension Plan, the Company may make annual contributions to the participants equal to 5% of each participant's compensation up to $150,000. For the fiscal years ended June 30, 1995, 1996 and 1997, the Company made contributions under the Employees' Pension Plan of approximately $459,000 $541,000 and $604,000 respectively. The Company does not match contributions made by employees under the Employees' Savings Plan, a 401(k) plan. DIRECTOR COMPENSATION No Director currently receives compensation solely in connection with his or her duties as a Director. The Company will institute a compensation program for independent Directors at the time the independent Director joins the Board of Directors. The Company will pay the reasonable out-of-pocket expenses incurred by each Director in connection with their attendance at meetings of the Board of Directors (and any committee hereof) of the Company or any of its subsidiaries. Members of the Board of Directors prior to the consummation of the Transactions have received certain fees and options and warrants to purchase shares of common stock of the Company since the Reorganization. See "Certain Transactions -- Pre-Merger Transactions." 49 56 CERTAIN TRANSACTIONS POST-MERGER TRANSACTIONS Advisory Agreement Upon consummation of the Transactions, the Company entered into an advisory agreement with KECC, pursuant to which KECC consults with the Directors and members of Executive Management on such general business and financial matters as may be requested by the Board of Directors, including: (i) corporate strategy; (ii) budgeting of future corporate investment; and (iii) acquisition and divestiture strategies. In exchange for such services, KECC receives an annual fee of $200,000, payable quarterly in arrears. Stockholders Agreement Simultaneously with the consummation of the Transactions, members of the Key Equity Group and Holding entered into the Stockholders Agreement which, together with the Amended and Restated Certificate of Incorporation of Holding (the "Certificate of Incorporation"), governs the terms of the capital stock of Holding. Classes of Common Stock. The authorized shares of capital stock of Holding (the "Common Stock") consists of: (i) 18,072 authorized shares of Class A Voting Common Stock, $0.01 par value (the "Class A Common Stock"); (ii) 13,070 authorized shares of Class B Non-Voting Common Stock, $0.01 par value (the "Class B Common Stock"); (iii) 5,002 shares of Class C Stock Non-Voting Common Stock, $0.01 par value (the "Class C Common Stock"); and (iv) 10,000 shares of Class D Non-Voting Common Stock, $0.01 par value (the "Class D Common Stock"). The holders of Class A Common Stock have the right to vote on all matters to be voted on by the stockholders of Holding. At every meeting of stockholders of Holding, each holder of Class A Common Stock is entitled to one vote per share. Except as otherwise required by law, a holder of Class B Common Stock, Class C Common Stock or Class D Common Stock has no voting rights with respect to such Common Stock. Control. The Certificate of Incorporation requires Holding to obtain the approval by vote or written consent of 55% of the then-outstanding shares of Class A Common Stock, in addition to any other vote required by law, in order to do any of the following: (i) redeem, purchase or otherwise acquire for value any shares of Common Stock or any other shares of its capital stock, except as specifically permitted in the Stockholders Agreement; (ii) authorize or issue, or obligate itself to authorize or issue, additional shares of Common Stock or any other shares of its capital stock except as contemplated in the Certificate of Incorporation or in the Stockholders Agreement; (iii) amend, alter or repeal the Certificate of Incorporation or the By-Laws of Holding (the "By-Laws"); (iv) declare or pay any dividends or make any distributions with respect to any of its capital stock; or (v) except as specifically permitted by the Stockholders Agreement, effect, or obligate itself to effect, any sale, lease, assignment, transfer or other conveyance of all or substantially all of the assets of Holding or any subsidiary thereof, or any consolidation or merger involving Holding or any subsidiary thereof, or any reclassification or other change of capital stock, or any recapitalization or reorganization or any dissolution, liquidation or winding up of Holding or any subsidiary thereof, except for the merger into Holding of, or the transfer of assets to Holding from, any wholly-owned subsidiary. In addition, the Stockholders Agreement provides that Holding will not, and will not permit any of its subsidiaries (including the Company), to take any of the following actions without the written consent of KECC or Key Equity Partners 97, a general partnership comprised of certain affiliates of KECC ("KEP 97"): (i) acquire any assets (other than in the ordinary course of business), capital stock, or any other interest in another business or entity; (ii) sell, lease, transfer, mortgage, pledge, or encumber all or substantially all of its assets; (iii) dispose of any business entity or product line or any division or subsidiary; (iv) enter into any merger, consolidation, reorganization or recapitalization, or any agreement to do any of the foregoing or reclassify any of its equity securities; (v) issue any equity security, or issue any options, warrants, convertible securities, or other rights (contingent or otherwise) to acquire any equity securities, except for shares of Class A Common Stock issued pursuant to the Warrants and the issuance of stock to an employee of Holding 50 57 or any of its subsidiaries in accordance with a stock purchase or award program plan or the conversion of stock as described in the Certificate of Incorporation; (vi) form or acquire any subsidiary except those now existing; (vii) except as otherwise contemplated by the Stockholders Agreement, declare or pay any dividends or distributions on the Common Stock or other equity securities or redeem or repurchase any Common Stock; (viii) grant its consent to a transfer of stock otherwise prohibited by the Stockholders Agreement; (ix) incur, assume or guaranty any indebtedness for borrowed money in excess of certain amounts in any fiscal year; (x) make any loans or advances to any stockholders or any employees of Holding or any of its subsidiaries other than advances to employees in the ordinary course of business which do not exceed certain amounts per year; (xi) make capital expenditures in excess of certain amounts in any fiscal year; (xii) except as otherwise contemplated by the Stockholders Agreement, enter into any transaction with any stockholder or any affiliate of Holding or its subsidiaries or any stockholder that is on terms less favorable to Holding and its subsidiaries than could be obtained from unaffiliated third parties on an arm's-length basis; (xiii) amend its Certificate of Incorporation or By-Laws; or (xiv) enter into any agreement to do any of the foregoing. Conversion. Each holder of Class B Common Stock is entitled at any time and from time to time to convert any or all of the shares of that holder's Class B Common Stock into the same number of shares of Class A Common Stock as provided in the Certificate of Incorporation; each holder of Class A Common Stock is entitled at any time and from time to time to convert any or all of the shares of that holder's Class A Common Stock into the same number of shares of Class B Common Stock as provided in the Certificate of Incorporation; provided that in the case of a conversion from Class B Common Stock, which is non-voting, into Class A Common Stock, which is voting, the holder of shares to be converted would be permitted under applicable law to hold the total number of shares of Class A Common Stock which would be held after giving effect to the conversion. Each holder of Class C Common Stock is entitled to convert any or all of the shares of that holder's Class C Common Stock into the same number of shares of Class A Common Stock only upon the occurrence of any public offering or public sale of securities of the Corporation (including a public offering registered under the Securities Act and a sale pursuant to Rule 144 of the Securities Act or any similar rule then in effect) (any such offering, a "Conversion Event"). In addition, each holder of Class C Common Stock is entitled to convert shares of Class C Common Stock if such holder reasonably believes that a Conversion Event will be consummated. The Company is obligated, upon written request of the holder of Class C Common Stock, to effect such conversion in a timely manner so as to enable each such holder to participate in such Conversion Event. If any shares of Class C Common Stock are converted into shares of Class A Common Stock in connection with a Conversion Event and such shares of Class A Common Stock are not actually distributed, disposed of or sold pursuant to such Conversion Event, such shares of Class A Common Stock will promptly be converted back into the same number of shares of Class C Common Stock that had been the subject of the request for conversion. Restrictions on Transfer. Generally, the shares of Common Stock are subject to certain restrictions on transfer contained in the Stockholders Agreement. The shares of Common Stock may be transferred among affiliates and immediate family members without restrictions as long as the recipient complies with the provisions of the Stockholders Agreement and the applicable rules and regulations of the Commission. In addition, Holding may repurchase shares of Common Stock from departing members of Executive Management. Preemptive Rights. The holders of Common Stock have a pro rata right to participate in all future offerings of shares of equity securities of Holding or any securities convertible into or exchangeable for or carrying rights or options to purchase any shares or any other equity securities of the Company. Certain Rights of KECC and KEP 97. KECC and KEP 97 have the right, in the future to exercise a right to require Holding to repurchase their shares of Common Stock any time after June 2004. In addition, KECC and KEP 97 also have certain demand registration rights pursuant to which members of Executive Management also be able to participate. Election of Directors of Holding. The Board of Directors of Holding initially consists of three members as follows: (i) a representative selected by KECC (initially, Mr. Given); (ii) the Chief Executive Officer of the Company (initially, Mr. Christman); and (iii) an individual to be jointly designated by Mr. Given and 51 58 Mr. Christman (initially, Mr. Baxter). The board of directors of each subsidiary of Holding (including the Company) will be the same as the Board of Directors of Holding. Holding and the Company anticipate increasing the size of the Board of Directors to five within 12 months of the consummation of the Transactions and electing at least one independent Director. Advances to Holding Through August 1, 1997, the Company has advanced to Holding the sum of $656,399. The advances have been made to Holding to permit Holding to satisfy certain obligations it entered into in connection with the Transactions, including, without limitation, obligations to loan funds to members of Executive Management to allow them to satisfy certain tax liabilities. The tax liabilities resulted from the members of Executive Management making certain elections under Section 83(b) of the Code with respect to the shares of Class C Common Stock. See "Ownership and Control." The advances are payable from Holding to the Company on demand and bear interest at a rate of 4.96% per annum. PRE-MERGER TRANSACTIONS In connection with the Reorganization, the Company entered into a long-term agreement to lease its manufacturing and office building from H.N.F. Realty Co., a partnership comprised of certain parties who were stockholders prior to the consummation of the Reorganization. The minimum annual rental associated with this lease for each of the next two years is approximately $300,000, after which the Company has an option to extend the lease for two additional five-year periods. Total rental expense amounted to approximately $300,000 for each of the years ended June 30, 1997, 1996 and 1995. Management believes the terms of the lease are no less favorable than the Company could have received from an unaffiliated third party. In connection with the Reorganization, the Company entered into a stockholders agreement dated January 3, 1995 (the "1995 Stockholders Agreement") with the institutional and independent holders of all of the outstanding shares of the Company's capital stock issued upon its emergence from Chapter 11. Pursuant to the 1995 Stockholders Agreement, a new Board of Directors of the Company was appointed that was comprised of Jay P. Goldsmith, Chairman of the Board, Harry Freund, Vice Chairman of the Board (together, the "Executive Directors"), and Clifford B. Cohn, Richard P. Rifenburgh, Larry Schafran and William J. Nightingale, as directors (collectively, the "Remaining Directors"). The 1995 Stockholders Agreement terminated upon consummation of the Merger, and each of the directors resigned. In connection with their appointments and performance as the Executive Directors, each Executive Director received annual compensation of approximately $25,000 and 58,823 options to purchase shares of common stock at $20.00 per share in fiscal 1995, annual compensation of $95,333, a bonus of $200,000 and warrants to purchase 32,645 shares of common stock at $25.00 per share in fiscal 1996 and during fiscal 1997 annual compensation of $108,333 and a bonus of $300,000. In connection with their appointments and performance as the Remaining Directors, each Remaining Director received approximately $23,000 in annual compensation and meeting fees and 5,000 options to purchase shares of common stock at $20.00 per share in fiscal 1995, annual compensation and meeting fees of approximately $46,000 in fiscal 1996 and annual compensation and meeting fees of approximately $52,500 in fiscal 1997. All options and warrants were exercised in connection with the Transactions. In fiscal 1996, the Company also paid consulting fees to Anthony Pacchia and Donald Weisburg, affiliates of Balfour Investors Inc., of approximately $110,000 and $88,000, respectively, and in fiscal 1997 the Company paid Mr. Pacchia and Mr. Weisburg consulting fees in the amount of approximately $125,000 and $63,000, respectively. Balfour Investors Inc. was an affiliate of the Company since the Reorganization. KECC received a financing fee in an amount equal to $1.0 million for its assistance in structuring, arranging and closing the Transactions. The Company arranged for the payment of success bonuses to members of Executive Management in connection with the successful completion of the Transactions. The aggregate amount of such success bonuses was $2.7 million, the allocation of which was as follows: (i) Mark D. Christman received $1,865,000; (ii) John S. Baxter received $280,000; (iii) Kenneth H. Wetmore received $165,000; (iv) Diane S. Tymiak received 165,000; (v) Larry E. Elliott received $95,000; and (vi) James P. Schnabel, Jr. received $95,000. 52 59 OWNERSHIP AND CONTROL Holding owns 100% of the issued and outstanding common stock of the Company. As of July 2, 1997, the following entities or persons owned the outstanding Common Stock of Holding as set forth below.
NUMBER OF NUMBER OF NUMBER OF NUMBER OF SHARES OF SHARES OF PERCENT SHARES OF PERCENT SHARES OF PERCENT CLASS A PERCENT OF CLASS B OF CLASS CLASS C OF CLASS D OF COMMON CLASS A COMMON B COMMON CLASS C COMMON CLASS D STOCK(a) OWNERSHIP(b) STOCK(c) OWNERSHIP STOCK OWNERSHIP STOCK OWNERSHIP --------- ------------ --------- --------- --------- --------- --------- --------- Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114-1306(d)(e)............. 1,600 38.7% 8,405 100.0% -- -- -- -- Key Equity Partners 97 127 Public Square, 6th Floor Cleveland, Ohio 44114-1306(e)................ -- -- -- -- 3,335 66.7% -- -- David Given(f) 127 Public Square, 6th Floor Cleveland, Ohio 44114-1306... 1,600 38.7 8,405 100.0% 3,335 66.7% -- -- Executive Management(g) Mark D. Christman............ 1,010 24.4% -- -- 834 16.7% 4,000 40.0% John S. Baxter............... 175 4.2% -- -- 267 5.3% 1,800 18.0% Kenneth H. Wetmore........... 125 3.0% -- -- 133 2.7% 1,000 10.0% Ronald A. McMaster, Ph.D..... 150 3.6% -- -- 67 1.3% 500 5.0% Diane S. Tymiak.............. 90 2.2% -- -- 100 1.9% 700 7.0% Larry E. Elliot.............. 35 0.9% -- -- 133 2.7% 1,000 10.0% James P. Schabel............. 75 1.8% -- -- 133 2.7% 1,000 10.0% Key Equity Group(h)............ 3,260 78.8% 8,405 100.0% 5,002 100.0% 10,000 100.0% All officers and directors as a group........................ 3,260 78.8% 8,405 100.0% 5,002 100.0% 10,000 100.0%
- --------------- (a) Does not include shares of Class A Common Stock issuable upon conversion of Class B Common Stock, or following the occurrence of a Conversion Event, Class C Common Stock. (b) Assumes 877.21 shares of Class A Common Stock issuable pursuant to the Warrants are outstanding. (c) Does not include shares of Class B Common Stock issuable upon conversion of Class A Common Stock. (d) KECC is a wholly-owned subsidiary of Key Bank, N.A., which is a wholly-owned subsidiary of KeyCorp, a bank holding corporation. (e) Mr. Given is the President and Director of KECC and is a partner of KEP 97. Accordingly, Mr. Given may be deemed to beneficially own the shares owned by KECC and KEP 97. Mr. Given disclaims beneficial ownership of the shares owned by KECC. (f) Includes all the shares of Class A Common Stock and Class B Common Stock owned by KECC and all the shares of Class C Common Stock owned by KEP 97, because as the President and a Director of KECC and a partner of KEP 97, Mr. Given may be deemed to beneficially own all such shares. (g) Simultaneously with the consummation of Transactions, Executive Management purchased 1,660 shares of Class A Common Stock on the same terms and conditions as those shares of Class A Common Stock that are purchased by KECC. In addition, Executive Management received 1,667 shares of Class C Common Stock in connection with the Restricted Stock Plan and up to 10,000 shares of Class D Common Stock that may be earned under the Performance Share Program. (h) The Key Equity Group is comprised of Executive Management, KECC and KEP 97. See "Certain Transactions -- Post-Merger Transactions." 53 60 DESCRIPTION OF THE REVOLVING CREDIT FACILITY The Company has entered into certain loan agreements with NationsBank, N.A. ("NationsBank") to provide the Revolving Credit Facility, a senior secured revolving line of credit in an aggregate principal amount of $10.0 million. The following summary of the Revolving Credit Facility is based upon the terms of such loan agreements. Borrowings under the Revolving Credit Facility bear interest either at: (i) NationsBank's Prime Rate (as defined therein); or (ii) reserve adjusted LIBOR plus 2.0% per annum. The Revolving Credit Facility provides for certain ongoing fees, including an unused line fee on the portion of the Revolving Credit Facility that is not utilized equal to 0.25% per annum. The Revolving Credit Facility extends for an initial term of five years and will renew in increments of one year thereafter, subject to termination as provided for therein. The required minimum unused availability under the Revolving Credit Facility was $2.0 million on its closing date and is $500,000 at all times thereafter. The obligations of the Company under the Revolving Credit Facility are secured by a first priority lien upon all of the Company's existing and acquired or created assets, including, but not limited to, accounts receivable, inventory, chattel paper, documents, instruments, deposit accounts, contract rights, general intangibles, machinery, equipment, real estate and other personal property. The Revolving Credit Facility contains, among other things, covenants restricting the ability of the Company to incur indebtedness, to dispose of assets, make distributions to Holding or the Company's subsidiaries, create liens, make capital expenditures, make certain investments or acquisitions, enter into transactions with affiliates and otherwise restrict certain activities. The Revolving Credit Facility contains financial covenants pursuant to which the Company pledges to maintain a minimum net worth (with annual step-ups) and minimum current, fixed charge and leverage ratios. Events of default under the Revolving Credit Facility include those usual and customary for facilities of this type, including, among other things, default in the payment of principal or interest in respect of material amounts of indebtedness of the Company or its subsidiaries; any nonpayment on such indebtedness; a change of control (as defined therein); any breach of the covenants or a material breach of the representations and warranties included in the Revolving Credit Facility and related documents; the institution of any bankruptcy proceedings; and the failure of any security agreement related to the Revolving Credit Facility or lien granted thereunder to be valid and enforceable. Upon the occurrence and continuance of an event of default under the Revolving Credit Facility, the lender may terminate its commitment to lend and declare the then-outstanding loan due and payable. 54 61 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Old Notes were originally sold by the Company to the Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser subsequently resold the Old Notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. As a condition to the Purchase Agreement, Sub Co. entered into the Registration Rights Agreement with the Initial Purchaser pursuant to which the Company, as successor to Sub Co., has agreed, for the benefit of the holders of the Old Notes, at the Company's cost, to use its best efforts to (i) file the Exchange Offer Registration Statement within 60 days after the date of the original issue of the Old Notes with the Commission with respect to the Exchange Offer for the New Notes; (ii) use its best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 150 days after the date of the original issuance of the Old Notes and (iii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, commence the Exchange Offer and use its best efforts to issue on or prior to 60 days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission (the "Exchange Offer Effectiveness Date") New Notes in exchange for all Old Notes tendered prior thereto in the Exchange Offer. Upon the Exchange Offer Registration Statement being declared effective, the Company will offer the New Notes in exchange for surrender of the Old Notes. The Company will keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date on which notice of the Exchange Offer is mailed to the holders of the Old Notes. For each Old Note surrendered to the Company pursuant to the Exchange Offer, the holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. Each New Note will bear interest from its issuance date. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the issuance date of the New Notes. Such interest will be paid with the first interest payment on the New Notes. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. Under existing interpretations of the staff of the Commission contained in several no-action letters to third parties, the New Notes will in general be freely tradeable after the Exchange Offer without further registration under the Securities Act. However, any purchaser of Old Notes who is an affiliate of the Company or who intends to participate in the Exchange Offer for the purpose of distributing the New Notes (i) will not be able to rely on the interpretation of the staff of the Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Old Notes, unless such sale or transfer is made pursuant to an exemption from such requirements. As contemplated by these no-action letters and the Registration Rights Agreement, each holder accepting the Exchange Offer is required to represent to the Company in the Letter of Transmittal that (i) the New Notes are to be acquired by the holder or the person receiving such New Notes, whether or not such person is the holder, in the ordinary course of business, (ii) the holder or any such other person (other than a brokerdealer referred to in the next sentence) is not engaging, and does not intend to engage, in distribution of the New Notes, (iii) the holder or any such other person has no arrangement or understanding with any person to participate in the distribution of the New Notes, (iv) neither the holder nor any such other person is an affiliate of the Company within the meaning of Rule 405 under the Securities Act, and (v) the holder or any such other person acknowledges that if such holder or any other person participates in the Exchange Offer for the purpose of distributing the New Notes it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes and cannot rely on those no-action Letters. As indicated above, each Participating Broker-Dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it (i) acquired the Old Notes for its own account as a result of market-making activities or other trading activities, (ii) has not entered into any arrangement or understanding with the Company or any affiliate of the Company (within the meaning of Rule 405 under the Securities Act) to distribute the New Notes to be received in the Exchange Offer and (iii) will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. For a description of the procedures for resales by Participating Broker-Dealers, see "Plan of Distribution." 55 62 In the event that changes in the law or the applicable interpretations of the staff of the Commission do not permit the Company to effect such an Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 210 days of the date of the original issuance of the Old Notes, the Company will (i), as promptly as possible, file the Shelf Registration Statement covering resales of the Old Notes, (ii) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (iii) use its respective best efforts to keep effective the Shelf Registration Statement until three years after its effective date. The Company will, in the event of the filing of the Shelf Registration Statement, provide to each holder of the Old Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resale of the Old Notes. A holder of the Old Notes that sells such Old Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). The Registration Rights Agreement provides that (i) the Company will file an Exchange Offer Registration Statement with the Commission on or prior to 60 days after the date of the original issue of the Old Notes, (ii) the Company will use its best efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 150 days after the date of the original issue of the Old Notes, (iii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company will commence the Exchange Offer and use its best efforts to issue on or prior to 60 days after the effectiveness of the Exchange Offer Registration Statement New Notes in exchange for all Old Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf Registration Statement, the Company will use its best efforts to file the Shelf Registration Statement with the Commission in a timely fashion. If (a) the Company fails to file any of the registration statements required by the Registration Rights Agreement on or before the date specified for such filing, (b) any of such registration statements is not declared effective by the Commission on or prior to the date specified for such effectiveness, (c) the Company fails to consummate the Exchange Offer within 60 days of the effectiveness of the Exchange Offer Registration Statement, or (d) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities (as defined herein) during the period specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a "Registration Default"), the sole remedy available to holders of the Old Notes will be the immediate assessment of Additional Interest as follows: the per annum interest rate on the Old Notes will increase by 0.5% during the first 90-day period the Registration Default exists and is not waived or cured and the per annum interest rate will increase by an additional 0.25% for each subsequent 90-day period during which the Registration Default remains uncured, up to a maximum additional interest rate of 2.0% per annum in excess of 12 3/4% per annum. All Additional Interest will be payable to holders of the Old Notes in cash on each January 1 and July 1, commencing with the first such date occurring after any such Additional Interest commences to accrue, until such Registration Default is cured. After the date on which such Registration Default is cured, the interest rate on the Old Notes will revert to 12 3/4% per annum. For purposes of the foregoing, "Transfer Restricted Securities" means each Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. Holders of Old Notes will be required to make certain representations (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver information to be used in connection with the Shelf Registration Statement within the time periods set forth in the 56 63 Registration Rights Agreement in order to have their Old Notes included in the Shelf Registration Statement and benefit from the provisions regarding Additional Interest set forth above. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Registration Rights Agreement, a copy of which is filed as an exhibit to the Exchange Offer Registration Statement of which this Prospectus is a part. Following the consummation of the Exchange Offer, holders of the Old Notes who were eligible to participate in the Exchange Offer but who did not tender their Old Notes will not have any further registration rights and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes accepted in the Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in integral multiples of $1,000. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) the New Notes bear a Series B designation and a different CUSIP number from the Old Notes, (ii) the New Notes have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (iii) the holders of the New Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Old Notes in certain circumstances relating to the timing of the Exchange Offer, all of which rights will terminate when the Exchange Offer is terminated. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. As of the date of this Prospectus, $70,000,000 aggregate principal amount of Old Notes were outstanding. The Company has fixed the close of business on , 1997 as the record date for the Exchange Offer for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. Holders of Old Notes do not have any appraisal or dissenters' rights under the General Corporation law of Delaware or the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the New Notes from the Company. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See "-- Fees and Expenses." 57 64 EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the Company in its sole discretion extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the registered holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. The Company reserves the right, in its sole discretion, prior to the Expiration Date (i) to delay accepting any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "Conditions" shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. INTEREST ON THE NEW NOTES The New Notes will bear interest from their date of issuance. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the date of issuance of the New Notes. Such interest will be paid with the first interest payment on the New Notes on January 1, 1998. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. Interest on the New Notes is payable semiannually on each January 1 and July 1, commencing on January 1, 1998. PROCEDURES FOR TENDERING Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Notes and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be tendered effectively, the Old Notes, Letter of Transmittal or an Agent's Message (as defined herein) in connection with a book-entry transfer and other required documents must be completed and received by the Exchange Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Old Notes may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. The term "Agent's Message" means a message, transmitted by a book-entry transfer facility to, and received by, the Exchange Agent, forming a part of a confirmation of a book-entry transfer, which states that such book-entry transfer facility has received an express acknowledgment from the participant in such book-entry transfer facility tendering the Notes that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against such participant. By executing the Letter of Transmittal, each holder will make the representations set forth above in the third paragraph under the heading "-- Purpose and Effect of the Exchange Offer." The tender by a holder and the acceptance thereof by the Company will constitute agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY 58 65 MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALER, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included with the Letter of Transmittal. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined herein) unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of the Medallion System (an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Old Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, offices of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Old Notes at DTC for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in DTC's system may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account with respect to the Old Notes in accordance with DTC's procedures for such transfer. Although delivery of the Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to DTC does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not property tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the 59 66 defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, the Letter of Transmittal or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution, (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a property completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificates) representing the Old Notes (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account at DTC), and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such property completed and executed Letter of Transmittal (of facsimile thereof), as well as the certificates) representing all tendered Old Notes in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC), and all other documents required by the Letter of Transmittal are received by the Exchange Agent upon three New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their old Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex, letter or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"); (ii) identify the Old Notes to be withdrawn (including the certificate number(s) and principal amount of such Old Notes, or, in the case of Old Notes transferred by book-entry transfer, the name and number of the account at DTC to be credited); (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the Expiration Date. 60 67 CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange New Notes for, any Old Notes, and may terminate or amend the Exchange Offer as provided herein prior to the Expiration Date, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries; or (b) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (c) any governmental approval has not been obtained, which approval the Company shall, in its reasonable discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its reasonable discretion that any of the above conditions are not satisfied, the Company may (i) refuse to accept any Old Notes and return all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Old Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all property tendered Old Notes which have not been withdrawn. EXCHANGE AGENT United States Trust Company of New York has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: BY REGISTERED OR BY OVERNIGHT COURIER AND BY HAND TO 4:30 P.M.: CERTIFIED MAIL: BY HAND AFTER 4:30 P.M.: United States Trust United States Trust Company United States Trust Company of New York Company of New York P.O. Box 844 of New York 111 Broadway Cooper Station 770 Broadway Lower Level New York, New York New York, New York 10003 Corporate Trust Window 10276-0844 Attn: Corporate Trust New York, New York 10006
BY FACSIMILE: United States Trust Company of New York (212) 780-0592 Attn: Corporate Trust CONFIRM BY TELEPHONE: (800) 548-6565 DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 61 68 FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telecopy, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes, which is face value less the value attributable to the Warrants upon the issuance of the Old Notes, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The expenses of the Exchange Offer will be expensed over the term of the New Notes. CONSEQUENCES OF FAILURE TO EXCHANGE The Old Notes that are not exchanged for New Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Notes may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, (iii) in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel reasonably acceptable to the Company), (iv) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, or (v) pursuant to an effective registration under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. RESALE OF THE NEW NOTES With respect to resales of New Notes, based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that a holder or other person who receives New Notes, whether or not such person is the holder (other than a person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who receives New Notes in exchange for Old Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes, will be allowed to resell the New Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the New Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires New Notes in the Exchange Offer for the purpose of distributing or participating in a distribution of the New Notes, such holder cannot rely on the position of the staff of the Commission set forth in such no-action letters or any similar interpretive letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each Participating Broker-Dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. 62 69 As contemplated by these no-action letters and the Registration Rights Agreement, each holder accepting the Exchange Offer is required to represent to the Company in the Letter of Transmittal that (i) the New Notes are to be acquired by the holder or the person receiving such New Notes, whether or not such person is the holder, in the ordinary course of business, (ii) the holder or any such other person (other than a brokerdealer referred to in the next sentence) is not engaging, and does not intend to engage, in the distribution of the New Notes, (iii) the holder or any such other person has no arrangement or understanding with any person to participate in the distribution of the New Notes, (iv) neither the holder nor any such other person is an affiliate of the Company within the meaning of Rule 405 under the Securities Act, and (v) the holder or any such other person acknowledges that if such holder or other person participates in the Exchange Offer for the purpose of distributing the New Notes it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes and cannot rely on those no-action letters. As indicated above, each Participating Broker-Dealer that receives a New Note for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. For a description of the procedures for such resales by Participating Broker-Dealers, see "Plan of Distribution." DESCRIPTION OF THE NOTES The Old Notes were issued under the Indenture and the New Notes will be issued under the Indenture. The terms of the New Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") as in effect on the date of the Indenture. The form and terms of the New Notes are the same as the form and terms of the Old Notes (which they replace) except that (i) the New Notes bear a Series B designation, (ii) the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting transfer thereof, and (iii) the holders of New Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Old Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. The New Notes are subject to all such terms, and holders of the New Notes are referred to the Indenture and the Act for a statement of them. The following is a summary of the material terms and provisions of the New Notes. This summary does not purport to be a complete description of the New Notes and is subject to the detailed provisions of, and qualified in its entirety by reference to, the New Notes and the Indenture (including the definitions contained therein). A copy of the form of Indenture may be obtained from the Company by any holder or prospective investor upon request. Definitions relating to certain capitalized terms are set forth under " -- Certain Definitions" and throughout this description. Capitalized terms that are used but not otherwise defined herein have the meanings assigned to them in the Indenture and such definitions are incorporated herein by reference. The term Notes means the New Notes and the Old Notes treated as a single class. GENERAL The Notes will be general senior unsecured obligations of the Company, limited in aggregate principal amount to $70,000,000. The Notes will be unconditionally guaranteed, on a senior unsecured basis, as to payment of principal, premium, if any, and interest, jointly and severally, by each Restricted Subsidiary which guarantees payment of the Notes pursuant to the covenant described under " -- Certain Covenants -- Limitation on Creation of Subsidiaries". MATURITY, INTEREST AND PRINCIPAL The Notes will mature on July 1, 2004. The Notes will bear interest at a rate of 12 3/4% per annum from the date of original issuance until maturity. Interest is payable semi-annually in arrears on January 1 and July 1, commencing January 1, 1998, to holders of record of the Notes at the close of business on the immediately preceding December 15 and June 15, respectively. 63 70 OPTIONAL REDEMPTION The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002 at the following redemption prices (expressed as a percentage of principal amount), together, in each case, with accrued and unpaid interest to the redemption date, if redeemed during the twelve-month period beginning on July 1 of each year listed below:
YEAR PERCENTAGE --------------------------------------------------------------- ---------- 2002........................................................... 103.188% 2003........................................................... 100.000%
Notwithstanding the foregoing, the Company may redeem in the aggregate up to 25% of the original principal amount of Notes at any time and from time to time prior to July 1, 2000 at a redemption price equal to 112.75% of the aggregate principal amount so redeemed, plus accrued and unpaid interest to the redemption date out of the Net Proceeds of one or more Qualified Equity Offerings; provided, that at least $52.5 million of the principal amount of Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that any such redemption occurs within 90 days following the closing of any such Qualified Equity Offering. In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; and provided, further, that if a partial redemption is made with the proceeds of a Qualified Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of the Depository Trust Company), unless such method is otherwise prohibited. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent for the Notes funds in satisfaction of the applicable redemption price pursuant to the Indenture. CERTAIN COVENANTS The Indenture contains, among others, the following covenants. Except as otherwise specified, all of the covenants described below appear in the Indenture. Limitation on Additional Indebtedness The Company will not, and will not permit any Restricted Subsidiary of the Company to, directly or indirectly, incur (as defined) any Indebtedness (including Acquired Indebtedness) unless (a) after giving effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, the Company's Fixed Charge Coverage Ratio (determined on a pro forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) is greater than 2.25 to 1, and (b) no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of such Indebtedness. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may incur Permitted Indebtedness. 64 71 Limitation on Restricted Payments The Company will not make, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless: (a) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Restricted Payment; (b) immediately after giving pro forma effect to such Restricted Payment, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the covenant set forth under " -- Limitation on Additional Indebtedness"; and (c) immediately after giving effect to such Restricted Payment, the aggregate of all Restricted Payments declared or made after the Issue Date does not exceed the sum of (1) 50% of the cumulative Consolidated Net Income of the Company (or in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit), plus (2) 100% of the aggregate Net Proceeds and the fair market value of securities or other property received by the Company from the issue or sale, after the Issue Date, of Capital Stock (other than Disqualified Capital Stock or Capital Stock of the Company issued to any Subsidiary of the Company) of the Company or any Indebtedness or other securities of the Company convertible into or exercisable or exchangeable for Capital Stock (other than Disqualified Capital Stock) of the Company which has been so converted or exercised or exchanged, as the case may be. For purposes of determining under this clause (c) the amount expended for Restricted Payments, cash distributed shall be valued at the face amount thereof and property other than cash shall be valued at its fair market value. The provisions of this covenant shall not prohibit (i) the payment of any distribution within 60 days after the date of declaration thereof, if at such date of declaration such payment would comply with the provisions of the Indenture, (ii) so long as no Default or Event of Default shall have occurred and be continuing, the retirement of any shares of Capital Stock of the Company or subordinated Indebtedness (A) by conversion into, or by or in exchange for, shares of Capital Stock (other than Disqualified Capital Stock) of the Company, or (B) out of, the Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of other shares of Capital Stock of the Company (other than Disqualified Capital Stock), (iii) so long as no Default or Event of Default shall have occurred and be continuing, the redemption or retirement of Indebtedness of the Company subordinated to the Notes in exchange for, by conversion into, or out of the Net Proceeds of, a substantially concurrent sale or incurrence of Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company that is contractually subordinated in right of payment to the Notes to at least the same extent as the Subordinated Indebtedness being redeemed or retired, (iv) so long as no Default or Event of Default shall have occurred and be continuing, the retirement of any shares of Disqualified Capital Stock by conversion into, or by exchange for, shares of Disqualified Capital Stock, or out of the Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of other shares of Disqualified Capital Stock; provided that (a) such Disqualified Capital Stock is not subject to mandatory redemption earlier than the maturity of the Notes, (b) such Disqualified Capital Stock is in an aggregate liquidation preference that is equal to or less than the sum of (x) the aggregate liquidation preference of the Disqualified Capital Stock being retired, (y) the amount of accrued and unpaid dividends, if any, and premiums owed, if any, on the Disqualified Capital Stock being required and (z) the amount of customary fees, expenses and costs related to the incurrence of such Disqualified Capital Stock and (c) such Disqualified Capital Stock is incurred by the same person that initially incurred the disqualified Capital Stock being retired, except that the Company may incur Disqualified Capital Stock to refund or refinance Disqualified Capital Stock of any Wholly-Owned Restricted Subsidiary of the Company, (v) the payment by the Company of cash dividends to Holding for the purpose of paying, so long as all proceeds thereof are promptly used by Holding to pay, franchise taxes and federal, state and local income taxes and interest and penalties with respect thereto, if any, payable by Holding, provided that any refund shall be promptly returned by Holding to the Company, (vi) so long as no Default or Event of Default shall have occurred and be continuing, payments to employees for repurchases of Capital Stock of Holding; provided, however, that the amount of all such payments under this clause (vi) does not exceed $250,000 during any twelve month period; 65 72 (vii) deposits and loans, not to exceed $3.0 million at any time outstanding, made in connection with acquisition agreements; (viii) the making of payments by the Company to Holding to pay (A) upon consummation of the Transactions, up to $65,000 in connection with the delivery of an opinion relating to the solvency of the Company on the Issue Date and (B) operating expenses, not to exceed $25,000 in any fiscal year; or (ix) any payment from the Company to Holding in the amount of any payment received by the Company pursuant to a distribution from the Escrow Accounts in connection with the Merger under the terms of the Merger Agreement, not to exceed $50,000. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (c) of the immediately preceding paragraph, amounts expended pursuant to clauses (i), (ii)(B) and (iv) shall be included in such calculation and, in the event the acquisition contemplated in clause (vii) is not consummated within 180 days after the deposit or loan is made in connection therewith, (vii) shall also be included in such calculation. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant " -- Limitation on Restricted Payments" were computed, which calculations may be based upon the Company's latest available financial statements, and that no Default or Event of Default exists and is continuing and no Default or Event of Default will occur immediately after giving effect to any Restricted Payments. Limitations on Investments The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Investment other than (i) a Permitted Investment or (ii) an Investment that is made as a Restricted Payment in compliance with the " -- Limitation on Restricted Payments" covenant, after the Issue Date. Limitations on Liens The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur or otherwise cause or suffer to exist or become effective any Liens of any kind (other than Permitted Liens) upon any property or asset of the Company or any Restricted Subsidiary or any shares of stock or debt of any Restricted Subsidiary which owns property or assets, now owned or hereafter acquired, unless (i) if such Lien secures Indebtedness which is pari passu with the Notes, then the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligation is no longer secured by a Lien or (ii) if such Lien secures Indebtedness which is subordinated to the Notes, any such Lien shall be subordinated to a Lien on such property or asset or shares of stock or debt granted to the holders of the Notes to the same extent as such subordinated Indebtedness is subordinated to the Notes. Limitation on Transactions with Affiliates The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate (including entities in which the Company or any of its Restricted Subsidiaries own a minority interest) or holder of 10% or more of the Common Stock of the Company (an "Affiliate Transaction") or extend, renew, waive or otherwise modify the terms of any Affiliate Transaction entered into prior to the Issue Date unless (i) such Affiliate Transaction is between or among the Company and its Wholly-Owned Restricted Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and reasonable to the Company or such Restricted Subsidiary, as the case may be, and the terms of such Affiliate Transaction are at least as favorable as the terms which could be obtained by the Company or such Restricted Subsidiary, as the case may be, in a comparable transaction made on an arm's-length basis between unaffiliated parties. In any Affiliate Transaction involving an amount or having a value in excess of $1.0 million which is not permitted under clause (i) above, the Company must obtain a resolution of the Board of Directors certifying that such Affiliate Transaction complies with clause (ii) above. In transactions with a value in excess of $5.0 million which are not permitted under clause (i) above, the Company must obtain a written opinion as to the fairness of such a transaction from a nationally recognized independent investment banking firm. 66 73 The foregoing provisions will not apply to (i) any Restricted Payment that is not prohibited by the provisions described under " -- Limitations on Restricted Payments" contained herein, (ii) any transaction, approved by the Board of Directors of the Company, with an officer or director of the Company or of any Subsidiary in his or her capacity as officer or director entered into in the ordinary course of business, (iii) any transactions with KECC for advisory services to the extent the payment for such services do not exceed $200,000 per year, (iv) customary banking transactions with an Affiliate of KECC, (v) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Subsidiary of the Company as determined in good faith by the Company's Board of Directors, or (vi) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by the Indenture. Limitation on Creation of Subsidiaries The Company shall not create or acquire, nor permit any of its Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted Subsidiary existing as of the date of the Indenture, (ii) a Restricted Subsidiary conducting a business similar or reasonably related to the business of the Company and its Subsidiaries on the Issue Date, or (iii) an Unrestricted Subsidiary; provided, however, that each Restricted Subsidiary organized under the laws of the United States or any State thereof or the District of Columbia acquired or created pursuant to clause (ii) shall, at the time it has either assets or shareholder's equity in excess of $10,000, execute a guarantee, in the form attached to the Indenture and reasonably satisfactory in form and substance to the Trustee (and with such documentation relating thereto as the Trustee shall require, including, without limitation a supplement or amendment to the Indenture and opinions of counsel as to the enforceability of such guarantee). See "-- Future Guarantees." Limitation on Certain Asset Sales The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or its Restricted Subsidiaries, as the case may be, receives consideration at the time of such sale or other disposition at least equal to the fair market value thereof (as determined in good faith by the Company's board of directors, and evidenced by a board resolution); (ii) not less than 85% of the consideration received by the Company or its Subsidiaries, as the case may be, is in the form of cash or cash equivalents (those equivalents allowed under "Temporary Cash Investments"); and (iii) the Asset Sale Proceeds received by the Company or such Restricted Subsidiary are applied (a) first, to the extent the Company elects, or is required to prepay, repay or purchase Indebtedness (other than Subordinated Indebtedness) of the Company or any Restricted Subsidiary within 270 days following the receipt of the Asset Sale Proceeds from any Asset Sale, provided that any such repayment shall result in a permanent reduction of the commitments thereunder in an amount equal to the principal amount so repaid; (b) second, to the extent of the balance of Asset Sale Proceeds after application as described above, to the extent the Company elects, to an investment in assets (including Capital Stock or other securities purchased in connection with the acquisition of Capital Stock or property of another person) used or useful in businesses similar or ancillary to the business of the Company or Restricted Subsidiary as conducted at the time of such Asset Sale, provided that such investment occurs or the Company or a Restricted Subsidiary enters into contractual commitments to make such investment, subject only to customary conditions (other than the obtaining of financing), on or prior to the 271st day following receipt of such Asset Sale Proceeds (the "Reinvestment Date") and Asset Sale Proceeds contractually committed are so applied within 365 days following the receipt of such Asset Sale Proceeds; and (c) third, if on the Reinvestment Date with respect to any Asset Sale, the Available Asset Sale Proceeds exceed $5.0 million, the Company shall apply an amount equal to Available Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (an "Excess Proceeds Offer"). If an Excess Proceeds Offer is not fully subscribed, the Company may retain the portion of the Available Asset Sale Proceeds not required to repurchase Notes. 67 74 If the Company is required to make an Excess Proceeds Offer, the Company shall mail, within 30 days following the Reinvestment Date, a notice to the Holders stating, among other things: (1) that such holders have the right to require the Company to apply the Available Asset Sale Proceeds to repurchase such Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase; (2) the purchase date, which shall be no earlier than 30 days and not later than 60 days from the date such notice is mailed; (3) the instructions, determined by the Company, that each Holder must follow in order to have such Notes repurchased; and (4) the calculations used in determining the amount of Available Asset Sale Proceeds to be applied to the repurchase of such Notes. Limitation on Preferred Stock of Restricted Subsidiaries The Company will not permit any Restricted Subsidiary to issue any Preferred Stock (except Preferred Stock to the Company or a Restricted Subsidiary) or permit any Person (other than the Company or a Subsidiary) to hold any such Preferred Stock unless the Company or such Restricted Subsidiary would be entitled to incur or assume Indebtedness under the first paragraph of the covenant described under " -- Limitation on Additional Indebtedness" in the aggregate principal amount equal to the aggregate liquidation value of the Preferred Stock to be issued. Limitation on Capital Stock of Restricted Subsidiaries The Company will not (i) sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of a Subsidiary (other than under the Revolving Credit Facility or a successor facility) or (ii) permit any of its Subsidiaries to issue any Capital Stock, other than to the Company or a Wholly-Owned Restricted Subsidiary of the Company. The foregoing restrictions shall not apply to an Asset Sale made in compliance with " -- Limitation on Certain Asset Sales" or the issuance of Preferred Stock in compliance with the covenant described under " -- Limitation on Preferred Stock of Restricted Subsidiaries." Limitation on Sale and Lease-Back Transactions The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the consideration received in such Sale and Lease-Back Transaction is at least equal to the fair market value of the property sold, as determined by a board resolution of the Company and (ii) the Company could incur the Attributable Indebtedness in respect of such Sale and Lease-Back Transaction in compliance with the covenant described under " -- Limitation on Additional Indebtedness." Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (b) make loans or advances or capital contributions to the Company or any of its Restricted Subsidiaries or (c) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) encumbrances or restriction existing on the Issue Date or under the Revolving Credit Facility, (ii) the Indenture, the Notes and the Guarantees, if applicable, (iii) applicable law, (iv) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries or of any Person that becomes a Restricted Subsidiary as in effect at the time of such acquisition or such Person becoming a Restricted Subsidiary (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition or such Person becoming a Restricted Subsidiary), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person (including any Subsidiary of the Person), so acquired, provided that the EBITDA of such Person is not taken into account (to the extent of such restriction) in determining whether any financing or Restricted Payment in connection with such acquisition was permitted by the terms of the Indenture, 68 75 (v) customary nonassignment provisions in leases or other agreements entered into in the ordinary course of business and consistent with past practices, (vi) Refinancing Indebtedness; provided that such restrictions are in the aggregate no more restrictive than those contained in the agreements governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded or (vii) customary restrictions in security agreements, liens or mortgages securing Indebtedness of the Company or a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements and mortgages. Payments for Consent Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, including out-of-pocket costs and expenses, to any holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all holders of the Notes which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. CHANGE OF CONTROL OFFER Within 20 days of the occurrence of a Change of Control, the Company shall notify the Trustee in writing of such occurrence and shall make an offer to purchase (the "Change of Control Offer") the outstanding Notes at a purchase price equal to 101% of the principal amount thereof plus any accrued and unpaid interest thereon to the Change of Control Payment Date (as hereinafter defined) (such applicable purchase price being hereinafter referred to as the "Change of Control Purchase Price") in accordance with the procedures set forth in this covenant. Within 30 days of the occurrence of a Change of Control, the Company also shall (i) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (ii) send by first-class mail, postage prepaid, to the Trustee and to each holder of the Notes, at the address appearing in the register maintained by the Registrar of the Notes, a notice stating: (1) that the Change of Control Offer is being made pursuant to this covenant and that all Notes tendered will be accepted for payment, and otherwise subject to the terms and conditions set forth herein; (2) the Change of Control Purchase Price and the purchase date (which shall be a Business Day no earlier than 30 business days from the date such notice is mailed (the "Change of Control Payment Date")); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Purchase Price, any Notes 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 accepting the offer to have their Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Change of Control Payment Date; (6) that holders will be entitled to withdraw their acceptance if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the principal amount of the Notes delivered for purchase, and a statement that such holder is withdrawing his election to have such Notes purchased; (7) that holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, provided that each Note purchased and each such new Note issued shall be in an original principal amount in denominations of $1,000 and integral multiples thereof; 69 76 (8) any other procedures that a holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance; and (9) the name and address of the Paying Agent. On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof tendered to the Company. The Paying Agent shall promptly mail to each holder of Notes so accepted payment in an amount equal to the purchase price for such Notes, and the Company shall execute and issue, and the Trustee shall promptly authenticate and mail to such holder, a new Note equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be issued in an original principal amount in denominations of $1,000 and integral multiples thereof. The Revolving Credit Facility restricts the Company's ability to repurchase any Notes pursuant to a Change of Control Offer prior to repayment in full of all obligations under or in respect of the Revolving Credit Facility or requires the Company to obtain the requisite consent under the Revolving Credit Facility to permit the repurchase of the Notes pursuant to a Change of Control Offer. The Revolving Credit Facility contains a "change of control" provision that is similar in most respects to the provision of the Indenture relating to a Change of Control, and the occurrence of such a "change of control" will constitute an event of default under the Revolving Credit Facility. The Indenture requires that if the Revolving Credit Facility is in effect, or any amounts are owing thereunder or in respect thereof, at the time of the occurrence of a Change of Control, prior to the mailing of the notice to holders described in the second preceding paragraph, but in any event within 30 days following any Change of Control, the Company shall (i) repay in full all obligations under or in respect of the Revolving Credit Facility or offer to repay in full all obligations under or in respect of the Revolving Credit Facility and repay the obligations under or in respect of the Revolving Credit Facility of each lender who has accepted such offer or (ii) obtain the requisite consent under the Revolving Credit Facility to permit the repurchase of the Notes as described above. The Company must first comply with the covenant described in the preceding sentence before it may commence a Change of Control Offer in the event of a Change of Control; provided that the Company's failure to comply with the covenant described in the preceding sentence constitutes an Event of Default described in clause (iii) under "-- Events of Default" below if not cured within 30 days after the notice required by such clause. As a result of the foregoing, a holder of the Notes may not be able to compel the Company to purchase the Notes unless the Company is able at the time to refinance all of the obligations under or in respect of the Revolving Credit Facility or obtain requisite consents under the Revolving Credit Facility. There can be no assurance that if a Change of Control were to occur, the Company would have sufficient assets to first satisfy its obligations in respect of the Revolving Credit Facility and then to repurchase all of the Notes that might be delivered by holders seeking to accept a Change of Control Offer. Failure by the Company to make a Change of Control Offer when required by the Indenture constitutes a default under the Indenture and, if not cured within 30 days after notice, constitutes an Event of Default. The Indenture provides that, (A) if the Company or any Subsidiary thereof has issued any outstanding (i) Indebtedness that is subordinated in right of payment to the Notes or (ii) Preferred Stock, and the Company or such Subsidiary is required to make a Change of Control Offer or to make a distribution with respect to such subordinated Indebtedness or Preferred Stock in the event of a change of control, the Company shall not consummate any such offer or distribution with respect to such subordinated Indebtedness or Preferred Stock until such time as the Company shall have paid the Change of Control Purchase Price in full to the holders of Notes that have accepted the Company's Change of Control Offer and shall otherwise have consummated the Change of Control Offer made to holders of the Notes and (B) the Company will not issue Indebtedness that is subordinated in right of payment to the Notes or Preferred Stock with change of control provisions requiring the payment of such Indebtedness or Preferred Stock prior to the payment of the Notes in the event of a Change in Control under the Indenture. 70 77 In the event that a Change of Control occurs and the holders of Notes exercise their right to require the Company to purchase Notes, if such purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time, the Company will comply with the requirements of Rule 14e-1 as then in effect with respect to such repurchase. MERGER, CONSOLIDATION OR SALE OF ASSETS The Company will not and will not permit any Guarantor, if applicable, to consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions), to any Person unless: (i) the Company or the Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or the Guarantor) formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or to which the properties and assets of the Company or the Guarantor, as the case may be, are transferred shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company or the Guarantor, as the case may be, under the Notes and the Indenture, and the obligations under the Indenture shall remain in full force and effect; (ii) immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis the Consolidated Net Worth of the Company or the surviving entity as the case may be is at least equal to the Consolidated Net Worth of the Company immediately before such transaction or series of transactions; and (iv) immediately after giving effect to such transaction on a pro forma basis the Company or such Person could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the covenant set forth under "-- Certain Covenants -- Limitation on Additional Indebtedness;" provided that a Person that is a Guarantor may consolidate with, merge into or transfer all or substantially all of its assets to the Company or another Person that is a Guarantor without complying with this clause (iv). In connection with any consolidation, merger or transfer of assets contemplated by this provision, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto comply with this provision and that all conditions precedent herein provided for relating to such transaction or transactions have been complied with by the appropriate Persons. FUTURE GUARANTEES The Notes will be jointly and severally unconditionally guaranteed on a senior unsecured basis by the Guarantors. The obligations of each Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the Adjusted Net Assets of each Guarantor. A Guarantor shall be released from all of its obligations under its Guarantee if all or substantially all of its assets are sold or all of its Capital Stock is sold, in each case in a transaction in compliance with the covenant described under "-- Certain Covenants -- Limitation on Certain Asset Sales," or the Guarantor merges with or into or consolidates with, or transfers all or substantially all of its assets to, the Company or another Guarantor in a transaction in compliance with "-- Merger, Consolidation or Sale of Assets," and such 71 78 Guarantor has delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent herein provided for relating to such transaction have been complied with. EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default": (i) default in payment of any principal of, or premium, if any, on the Notes; (ii) default for 30 days in payment of any interest on the Notes; (iii) default by the Company or any Guarantor in the observance or performance of any other covenant in the Notes or the Indenture for 30 days after written notice from the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding; (iv) failure to pay when due principal, interest or premium in an aggregate amount of $5.0 million or more with respect to any Indebtedness of the Company or any Restricted Subsidiary thereof, or the acceleration of any such Indebtedness aggregating $5.0 million or more which default shall not be cured, waived or postponed pursuant to an agreement with the holders of such Indebtedness within 60 days after written notice as provided in the Indenture, or such acceleration shall not be rescinded or annulled within 20 days after written notice as provided in the Indenture; (v) any final judgment or judgments which can no longer be appealed for the payment of money in excess of $3.0 million (which are not paid or covered by insurance so long as the insurer has not disclaimed coverage or so long as a court of competent jurisdiction has ordered, in a final and nonappealable order, the insurer to make payment) shall be rendered against the Company or any Restricted Subsidiary thereof, and shall not be discharged for any period of 60 consecutive days during which a stay of enforcement shall not be in effect; and (vi) certain events involving bankruptcy, insolvency or reorganization of the Company or any Restricted Subsidiary thereof. The Indenture provides that the Trustee may withhold notice to the holders of the Notes of any default (except in payment of principal or premium, if any, or interest on the Notes) if the Trustee considers it to be in the best interest of the holders of the Notes to do so. The Indenture provides that if an Event of Default (other than an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization) shall have occurred and be continuing, then the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding may declare to be immediately due and payable the entire principal amount of all the Notes then outstanding plus accrued interest to the date of acceleration; provided, however, that after such acceleration but before a judgment or decree based on acceleration is obtained by the Trustee, the holders of a majority in aggregate principal amount of outstanding Notes may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than nonpayment of accelerated principal, premium or interest, have been cured or waived as provided in the Indenture. In case an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization shall occur, the principal, premium and interest amount with respect to all of the Notes shall be due and payable immediately without any declaration or other act on the part of the Trustee or the holders of the Notes. The holders of a majority in principal amount of the Notes then outstanding shall have the right to waive any existing default or compliance with any provision of the Indenture or the Notes and to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, subject to certain limitations specified in the Indenture. No holder of any Note will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such holder shall have previously given to the Trustee written notice of a continuing Event of Default and unless also the holders of at least 25% in aggregate principal amount of the outstanding Notes shall have made written request and offered reasonable indemnity to the Trustee to institute 72 79 such proceeding as a trustee, and unless the Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted on such Note on or after the respective due dates expressed in such Note. DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides that the Company may elect either (a) to defease and be discharged from any and all obligations with respect to the Notes (except for the obligations to register the transfer or exchange of such Notes, to replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office or agency in respect of the Notes and to hold monies for payment in trust) ("defeasance") or (b) to be released from their obligations with respect to the Notes under certain covenants contained in the Indenture and described above under "-- Certain Covenants" ("covenant defeasance"), upon the deposit with the Trustee (or other qualifying trustee), in trust for such purpose, of money and/or U.S. Government Obligations which through the payment of principal and interest in accordance with their terms will provide money, in an amount sufficient to pay the principal of, premium, if any, and interest on the Notes, on the scheduled due dates therefor or on a selected date of redemption in accordance with the terms of the Indenture. Such a trust may only be established if, among other things, the Company has delivered to the Trustee an Opinion of Counsel (as specified in the Indenture) (i) to the effect that neither the trust nor the Trustee will be required to register as an investment company under the Investment Company Act of 1940, as amended, and (ii) describing either a private ruling concerning the Notes or a published ruling of the Internal Revenue Service, to the effect that holders of the Notes or persons in their positions will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred. MODIFICATION OF INDENTURE From time to time, the Company, the Guarantors, if applicable, and the Trustee may, without the consent of holders of the Notes, amend or waive provisions of the Indenture or the Notes or supplement the Indenture for certain specified purposes, including providing for uncertificated Notes in addition to certificated Notes, and curing any ambiguity, defect or inconsistency, or making any other change that does not materially and adversely affect the rights of any holder. The Indenture contains provisions permitting the Company, the Guarantors, if applicable, and the Trustee, with the consent of holders of at least a majority in principal amount of the outstanding Notes, to modify or supplement the Indenture or the Notes, except that no such modification shall, without the consent of each holder affected thereby, (i) reduce the principal amount of outstanding Notes whose holders must consent to an amendment, supplement, or waiver to the Indenture or the Notes, (ii) reduce the rate of or change the time for payment of interest on any Note, (iii) reduce the principal of or premium on or change the stated maturity of any Note, (iv) make any Note payable in money other than that stated in the Note or change the place of payment from New York, New York, (v) change the amount or time of any payment required by the Notes or reduce the premium payable upon any redemption of Notes, or change the time before which no such redemption may be made, (vi) waive a default on the payment of the principal of, interest on, or redemption payment with respect to any Note, (vii) alter the Company's obligation to purchase the Notes in accordance with the Indenture following the occurrence of an Asset Sale or a Change of Control or waive any default in the performance thereof, (viii) affect the ranking of the Notes in a manner adverse to the holders of the Notes or (ix) take any other action otherwise prohibited by the Indenture to be taken without the consent of each holder affected thereby. REPORTS TO HOLDERS So long as the Company is subject to the periodic reporting requirements of the Exchange Act, it will furnish the information required thereby to the Commission and to the holders of the Notes. The Indenture provides that even if the Company is entitled under the Exchange Act not to furnish such information to the Commission or to the holders of the Notes, it will nonetheless furnish to the Commission and holders of the 73 80 Notes (i) within 120 days after the end of each fiscal year of the Company, (x) audited year-end consolidated financial statements (including a balance sheet, income statement and statement of changes of cash flow) prepared in accordance with GAAP and substantially in the form required under Regulation S-X under the Securities Act and (y) the information described in Item 303 of Regulation S-K under the Securities Act with respect to such period and (ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year of the Company, (x) unaudited quarterly consolidated financial statements (including a balance sheet, income statement and statement of changes of cash flows) prepared in accordance with GAAP and substantially in the form required by Regulation S-X under the Securities Act and (y) the information described in Item 303 of Regulation S-K under the Securities Act with respect to such period. COMPLIANCE CERTIFICATE The Company will deliver to the Trustee on or before 120 days after the end of the Company's fiscal year and on or before 50 days after the end of each the first, second and third fiscal quarters in each year an Officers' Certificate stating whether or not the signers know of any Default or Event of Default that has occurred. If they do, the certificate will describe the Default or Event of Default and its status. THE TRUSTEE The Trustee under the Indenture will be the Registrar and Paying Agent with regard to the Notes. The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. TRANSFER AND EXCHANGE Holders of the Notes may transfer or exchange Notes in accordance with the Indenture. The Registrar under such Indenture 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 Indentures. The Registrar is not required to transfer or exchange any Note selected for redemption. Also, the Registrar is not required to transfer or exchange any Note for a period of 15 days before selection of the Notes to be redeemed. The registered holder of a Note may be treated as the owner of it for all purposes. GOVERNING LAW The Indenture provides that the Indenture, the Notes and any Guarantee will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of laws. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the covenants contained in the Indenture. Reference is made to the Indenture for the full definition of all such terms as well as any other capitalized terms used herein for which no definition is provided. "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary) existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with the acquisition of assets from such Person. "Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of the amount by which (x) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities), but excluding liabilities under the Guarantee, of such Guarantor at such date and (y) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of 74 81 such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities and after giving effect to any collection from any subsidiary of such Guarantor in respect of the obligations of such Subsidiary under the Guarantee), excluding Indebtedness in respect of the Guarantee, as they become absolute and matured. "Affiliate" of any specified Person means any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by," and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that the term "Affiliate" shall not include any portfolio company of KECC so long as such portfolio company does not own or control any shares of capital stock of the Company or Holding and the Company or Holding does not own or control any shares of the capital stock of such portfolio company. "Asset Sale" means the sale, transfer or other disposition (other than to the Company or any of its Restricted Subsidiaries) in any single transaction or series of related transactions of (a) any Capital Stock of or other equity interest in any Restricted Subsidiary of the Company, (b) all or substantially all of the assets of the Company or of any Restricted Subsidiary thereof, (c) real property, other than the lease thereof in the ordinary course of business, or (d) all or substantially all of the assets of any business owned by the Company or any Restricted Subsidiary thereof, or a division, line of business or comparable business segment of the Company or any Restricted Subsidiary thereof; provided that Asset Sales shall not include sales, leases, conveyances, transfers or other dispositions to the Company or to a Restricted Subsidiary or to any other Person if after giving effect to such sale, lease, conveyance, transfer or other disposition such other Person becomes a Restricted Subsidiary. "Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash received by the Company or any Restricted Subsidiary from such Asset Sale (including cash received as consideration for the assumption of liabilities incurred in connection with or in anticipation of such Asset Sale), after (a) provision for all income or other taxes measured by or resulting from such Asset Sale, (b) payment of all brokerage commissions, underwriting and other fees and expenses related to such Asset Sale, (c) provision for minority interest holders in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of appropriate amounts to be provided by the Company or a Restricted Subsidiary as a reserve, in accordance with GAAP, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by the Company or a Restricted Subsidiary after such Asset Sale, including, without limitation, pension and other post employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and other noncash consideration received by the Company or any Restricted Subsidiary from such Asset Sale or other disposition upon the liquidation or conversion of such notes or noncash consideration into cash. "Attributable Indebtedness" under the Indenture in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the greater of (i) the fair value of the property subject to such arrangement (as determined by the Board of Directors) and (ii) the present value (discounted according to GAAP at the cost of indebtedness implied in the lease) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended). "Available Asset Sale Proceeds" means, with respect to any Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sales that have not been applied or committed in accordance with clauses (iii)(a) or (iii)(b), and which has not yet been the basis for an Excess Proceeds Offer in accordance with clause (iii)(c) of the first paragraph of "Certain Covenants -- Limitation on Certain Asset Sales". "Capital Stock" means, with respect to any Person, any and all shares or other equivalents (however designated) of capital stock, partnership interests or any other participation, right or other interest in the nature of an equity interest in such Person or any option, warrant or other security convertible into any of the foregoing. 75 82 "Capitalized Lease Obligations" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. A "Change of Control" will be deemed to have occurred at such time as (i) the Permitted Holders, individually or in the aggregate, cease to beneficially own (as defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act), directly or indirectly, 50.1% or more of the Common Equity Interests of the Company or Holding, (ii) there shall be consummated any consolidation or merger of the Company or Holding in which the Company or Holding, as the case may be, is not the continuing or surviving corporation or pursuant to which the Common Equity Interests of the Company or Holding, as the case may be, would be converted into cash, securities or other property, other than a merger or consolidation of the Company in which the holders of the Common Equity Interests of the Company or Holding, as the case may be, outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the Common Equity Interests of the surviving corporation immediately after such consolidation or merger, (iii) there is a sale, lease or transfer of all or substantially all of the assets of the Company or Holding to any Person or group (as such term is defined in Section 13(d)(3) of the Exchange Act), other than a Permitted Holder or (iv) the replacement of a majority of the Board of Directors of Holding over a two-year period from the directors who constituted the Board of Directors of Holding at the beginning of such period, and such replacement shall not have been approved or recommended by a vote of at least a majority of the Board of Directors of Holding then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved. "Common Equity Interests" of any Person means all Equity Interests of such Person that are generally entitled to (i) vote in the election of directors of such person or (ii) if such person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. "Common Stock" of any Person means all Capital Stock of such Person that is generally entitled to (i) vote in the election of directors of such Person or (ii) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. "Consolidated Fixed Charges" means, with respect to any Person the sum of a Person's (i) Consolidated Interest Expense, plus (ii) the product of (x) the aggregate amount of all dividends paid on Disqualified Capital Stock of the Company or on each series of preferred stock of each Subsidiary of such Person (other than dividends paid or payable in additional shares of preferred stock or to the Company or any of its Wholly-Owned Restricted Subsidiaries) times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective combined federal, state and local tax rate of such Person (expressed as a decimal), in each case, for such four-quarter period. "Consolidated Interest Expense" means, with respect to any Person, for any period, the aggregate amount of interest which, in conformity with GAAP, would be set forth opposite the caption "interest expense" or any like caption on an income statement for such Person and its Subsidiaries on a consolidated basis, imputed interest included in Capitalized Lease Obligations, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, the net costs associated with hedging obligations, amortization of other financing fees and expenses, the interest portion of any deferred payment obligation, amortization of discount or premium, if any, and all other non-cash interest expense (other than interest amortized to cost of sales) plus, without duplication, all net capitalized interest for such period and all interest incurred or paid under any guarantee of Indebtedness (including a guarantee of principal, interest or any combination thereof) of any Person. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income (before preferred stock dividends) of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided, however, that (a) the Net Income of any Person (the "other Person") in which the Person in question or any of its Subsidiaries has less than a 100% 76 83 interest (which interest does not cause the net income of such other Person to be consolidated into the net income of the Person in question in accordance with GAAP) shall be included only to the extent of the amount of dividends or distributions paid to the Person in question or the Subsidiary, (b) the Net Income of any Subsidiary of the Person in question that is subject to any restriction or limitation on the payment of dividends or the making of other distributions (other than pursuant to the Notes or the Indenture) shall be excluded to the extent of such restriction or limitation, (c)(i) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition and (ii) any net gain (but not loss) resulting from an Asset Sale by the Person in question or any of its Subsidiaries other than in the ordinary course of business shall be excluded, and (d) extraordinary, unusual and non-recurring gains and losses shall be excluded. "Consolidated Net Worth" means, with respect to any Person at any date, the consolidated stockholder's equity of such Person less the amount of such stockholder's equity attributable to Disqualified Capital Stock of such Person and its Subsidiaries, as determined in accordance with GAAP. "Currency Agreement" means, for any Person, any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in currency values. "Disqualified Capital Stock" means any Capital Stock of the Company or a Restricted Subsidiary thereof which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the maturity date of the Notes, for cash or securities constituting Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of the Company and (ii) any Preferred Stock of the Company, with respect to either of which, under the terms of such Preferred Stock, by agreement or otherwise, such Restricted Subsidiary or the Company is obligated to pay current dividends or distributions in cash during the period prior to the maturity date of the Notes; provided, however, that Preferred Stock of the Company or any Restricted Subsidiary thereof that is issued with the benefit of provisions requiring a change of control offer to be made for such Preferred Stock in the event of a change of control of the Company or Restricted Subsidiary, which provisions have substantially the same effect as the provisions of the Indenture described under "Change of Control," shall not be deemed to be Disqualified Capital Stock solely by virtue of such provisions. "EBITDA" means, for any Person, for any period, an amount equal to (a) the sum of (i) Consolidated Net Income for such period, plus (ii) the provision for taxes for such period based on income or profits to the extent such income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net Income for such period, plus, minus (b) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP, except that with respect to the Company each of the foregoing items shall be determined on a consolidated basis with respect to the Company and its Restricted Subsidiaries only; and provided, however, that, for purposes of calculating EBITDA during any fiscal quarter, cash income from a particular Investment of such Person shall be included only (x) if cash income has been received by such Person with respect to such Investment during each of the previous four fiscal quarters, or (y) if the cash income derived from such Investment is attributable to Temporary Cash Investments. "Equity Interests" means, with respect to any Person, any and all shares or other equivalents (however designated) of capital stock, partnership interests or any other participation, right or other interest in the nature of an equity interest in such Person or any option, warrant or other security convertible or exchangeable for any of the foregoing. "Fixed Charge Coverage Ratio" of any Person means, with respect to any determination date, the ratio of (i) EBITDA for such Person's prior four full fiscal quarters for which financial results have been reported 77 84 immediately preceding the determination date, to (ii) Consolidated Fixed Charges of such Person. For purposes of computing the Fixed Charge Coverage Ratio, (A) if the Indebtedness which is the subject of a determination under this provision is Acquired Indebtedness, or Indebtedness incurred in connection with the simultaneous acquisition (by way of merger, consolidation or otherwise) of any Person, business, property or assets (an "Acquisition"), then such ratio shall be determined by giving effect to (on a pro forma basis, as if the transaction had occurred at the beginning of the four-quarter period used to make such calculation) to both the incurrence or assumption of such Acquired Indebtedness or such other Indebtedness and the inclusion in the Company's EBITDA of the EBITDA of the acquired Person, business, property or assets, (B) if any Indebtedness outstanding or to be incurred (x) bears a floating rate of interest, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account on a pro forma basis any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months), (y) bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company or such Restricted Subsidiary, either a fixed or floating rate and (z) was incurred under a revolving credit facility, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period, (C) for any quarter prior to the date hereof included in the calculation of such ratio, such calculation shall be made on a pro forma basis, giving effect to the issuance of the Notes and the use of the net proceeds therefrom as if the same had occurred at the beginning of the four-quarter period used to make such calculation and (D) for any quarter included in the calculation of such ratio prior to the date that any Asset Sale was consummated, or that any Indebtedness was incurred, or that any Acquisition was effected, by the Company or any of its Subsidiaries, such calculation shall be made on a pro forma basis, giving effect to each Asset Sale, incurrence of Indebtedness or Acquisition, as the case may be, and the use of any proceeds therefrom, as if the same had occurred at the beginning of the four quarter period used to make such calculation. "GAAP" means generally accepted accounting principles consistently applied as in effect in the United States on the Issue Date. "incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such person (and "incurrence," "incurred," "incurable," and "incurring" shall have meanings correlative to the foregoing); provided that a change in GAAP that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an incurrence of such Indebtedness. "Indebtedness" means (without duplication), with respect to any Person, any indebtedness at any time outstanding, secured or unsecured, contingent or otherwise, which is for 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), or evidenced by bonds, notes, debentures or similar instruments or representing the balance deferred and unpaid of the purchase price of any property (excluding, without limitation, any balances that constitute accounts payable or trade payables, and other accrued liabilities (including long-term pension and healthcare liabilities) arising in the ordinary course of business) if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and shall also include, to the extent not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations secured by a lien to which the property or assets owned or held by such Person is subject, whether or not the obligation or obligations secured thereby shall have been assumed, (iii) guarantees of items of other Persons which would be included within this definition for such other Persons, (iv) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (v) in the case of the Company, Disqualified Capital Stock of the Company or any Restricted Subsidiary thereof, and (vi) obligations of any such Person under any Interest Rate Agreement applicable to any of the foregoing (if and to the extent such Interest Rate Agreement obligations would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP). The amount of Indebtedness of any Person at any date 78 85 shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided (i) that the amount outstanding at any time of any Indebtedness issued with original issue discount, including the Notes, is the principal amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP and (ii) that Indebtedness shall not include any liability for federal, state, local or other taxes. Notwithstanding any other provision of the foregoing definition, any trade payable arising from the purchase of goods or materials or for services obtained in the ordinary course of business shall not be deemed to be "Indebtedness" of the Company or any Restricted Subsidiaries for purposes of this definition. Furthermore, guarantees of (or obligations with respect to letters of credit supporting) Indebtedness otherwise included in the determination of such amount shall not also be included. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement designed to protect the party indicated therein against fluctuations in interest rates. "Investments" means, directly or indirectly, any advance, account receivable (other than an account receivable arising in the ordinary course of business), loan or capital contribution to (by means of transfers of property to others, payments for property or services for the account or use of others or otherwise), the purchase of any stock, bonds, notes, debentures, partnership or joint venture interests or other securities of, the acquisition, by purchase or otherwise, of all or substantially all of the business or assets or stock or other evidence of beneficial ownership of, any Person or the making of any investment in any Person. Investments shall exclude (i) extensions of trade credit on commercially reasonable terms in accordance with normal trade practices and (ii) the repurchase of securities of any Person by such Person. "Issue Date" means the date the Notes were first issued by Sub Co. and authenticated by the Trustee under the Indenture. "Lien" means, with respect to any property or assets of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement, encumbrance, preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any Capitalized Lease Obligation, conditional sales, or other title retention agreement having substantially the same economic effect as any of the foregoing). "Net Income" means, with respect to any Person for any period, the net income (loss) of such Person determined in accordance with GAAP. "Net Proceeds" means (a) in the case of any sale of Capital Stock by Holding or the Company, the aggregate net proceeds received by such Person, after payment of expenses, commissions and the like incurred in connection therewith, whether such proceeds are in cash or in property (valued at the fair market value thereof, as determined in good faith by the board of directors, at the time of receipt), (b) in the case of any exchange, exercise, conversion or surrender of outstanding securities of any kind for or into shares of Capital Stock of the Company which is not Disqualified Capital Stock, the net book value of such outstanding securities on the date of such exchange, exercise, conversion or surrender (plus any additional amount required to be paid by the holder to the Company upon such exchange, exercise, conversion or surrender, less any and all payments made to the holders, e.g., on account of fractional shares and less all expenses incurred by the Company in connection therewith) and (c) in the case of any issuance of any Indebtedness by the Company or any Restricted Subsidiary, the aggregate net cash proceeds received by such Person after the payment of expenses, commissions, underwriting discounts and the like incurred in connection therewith. "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chief Executive Officer, the Chief Operating Officer, the President or any Vice President and the Chief Financial Officer or any Treasurer of such Person that shall comply with applicable provisions of the Indenture. "Permitted Holders" means (i) KECC and its Affiliates, (ii) any "group" (as such term is used in Section 13(d) and 14(d) of the Exchange Act) comprised solely of the Key Equity Group and its Affiliates 79 86 (it being understood that a "group" that includes any other Person shall not be a Permitted Holder) and (iii) any Person if (A) at least a majority of the total voting and economic power of the Common Stock in such Person is owned by at least a majority of the officers of KECC at the time of such transfer, (B) such Person has at least $50.0 million in cash funds available for investment, and (C) such Person is under no contractual restriction (whether pursuant to its charter documents or otherwise) to make further investments in the Company. "Permitted Indebtedness" means: (i) Indebtedness incurred pursuant to the Revolving Credit Facility in an aggregate principal amount at any time outstanding not to exceed the greater of (i) the sum of (x) 85.0% of the net book value of eligible accounts receivable of the Company and its Restricted Subsidiaries and (y) 65.0% of the net book value of eligible inventory of the Company and its Restricted Subsidiaries and (ii) $10.0 million, in each case, reduced by any required permanent repayments thereunder; (ii) Indebtedness under the Notes and the Guarantees, if applicable; (iii) Indebtedness not covered by any other clause of this definition which is outstanding on the date of the Indenture; (iv) Indebtedness of the Company to any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary to the Company or another Restricted Subsidiary; (v) Purchase Money Indebtedness and Capitalized Lease Obligations incurred to acquire property in the ordinary course of business which Indebtedness and Capitalized Lease Obligations do not in the aggregate exceed 5% of the Company's consolidated total assets; (vi) Interest Rate Agreements and Currency Agreements; (vii) Additional Indebtedness of the Company not to exceed $3.0 million in principal amount outstanding at any time; (viii) Refinancing Indebtedness; (ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of day-light overdrafts) drawn against insufficient funds in the ordinary course of business; (x) Indebtedness of the Company and any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (xi) Indebtedness arising from guarantees of loans and advances by third parties to employees and officers of the Company or its Subsidiaries in the ordinary course of business for bona fide business purposes, provided that the aggregate amount of such guarantees does not exceed $250,000; and (xii) Indebtedness arising from the repurchase of Capital Stock of Holding if otherwise permitted under "--Certain Covenants -- Limitation on Restricted Payments." "Permitted Investments" means, for any Person, Investments made on or after the date of the Indenture consisting of: (i) Investments by the Company, or by a Restricted Subsidiary thereof, in the Company or a Restricted Subsidiary; (ii) Temporary Cash Investments; (iii) Investments by the Company, or by a Restricted Subsidiary thereof, in a Person, if as a result of such Investment (a) such Person becomes a Restricted Subsidiary of the Company or (b) such Person 80 87 is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary thereof; (iv) reasonable and customary loans made to employees not to exceed $250,000 in the aggregate at any one time outstanding and other loans to Holding or employees of the Company to the extent the proceeds of such loans are used by such employees of the Company exclusively to purchase shares of Capital Stock of Holding pursuant to the terms of the Stockholders Agreement; (v) an Investment that is made by the Company or a Restricted Subsidiary thereof in the form of any stock, bonds, notes, debentures, partnership or joint venture interests or other securities that are issued by a third party to the Company or Restricted Subsidiary (i) solely as consideration for the consummation of an Asset Sale of Stir Melter or (ii) otherwise permitted under the covenant described under "-- Certain Covenants -- Limitation on Sale of Assets"; (vi) any Investment existing on the Issue Date; (vii) any Investment acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such Investment or accounts receivable or (b) as the result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (viii) Investments the payment for which consists of Capital Stock of the Company (exclusive of Disqualified Capital Stock); and (ix) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (ix) that are at that time outstanding, not to exceed $1.0 million. "Permitted Liens" means (i) Liens on property or assets of, or any shares of stock of or secured debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary of the Company or at the time such corporation is merged into the Company or any of its Restricted Subsidiaries, provided that such Liens are not incurred in connection with, or in contemplation of, such corporation becoming a Restricted Subsidiary of the Company or merging into the Company or any of its Restricted Subsidiaries, (ii) Liens securing Refinancing Indebtedness, provided that any such Lien does not extend to or cover any Property, shares or debt other than the Property, shares or debt securing the Indebtedness so refunded, refinanced or extended, (iii) Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens securing industrial revenue bonds, (v) Liens to secure Purchase Money Indebtedness that is otherwise permitted under the Indenture, provided that (a) any such Lien is created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including sales and excise taxes, installation and delivery charges and other direct costs of, and other direct expenses paid or charged in connection with, such purchase or construction) of such Property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such costs, and (c) such Lien does not extend to or cover any Property other than such item of Property and any improvements on such item, (vi) statutory liens or landlords', carriers', warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which do not secure any Indebtedness and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, (vii) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $1.0 million in the aggregate at any one time outstanding, (viii) Liens for taxes, assessments or governmental charges that either are not delinquent or are being contested in good faith by appropriate proceedings, (ix) Liens securing Capital Lease Obligations permitted to be incurred under clause (v) of the definition of "Permitted Indebtedness," provided that such Lien does not extend to any property other than that subject to the underlying lease, (x) Liens securing Indebtedness under the Revolving Credit Facility, (xi) Liens of the Company's customers encumbering property or assets under construction arising from the obligations of such 81 88 customers to make progress or partial payment relating to such construction, (xii) judgment Liens that otherwise would not give rise to an Event of Default, (xiii) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries, (xiv) Liens securing reimbursement obligations with respect to commercial letters of credit that encumber documents and other property relating to such letters of credit and products and proceeds thereof, (xv) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Subsidiaries, including rights of offset and set-off, (xvi) Liens existing on the Issue Date and (xvii) any extensions, substitutions, replacements or renewals of the foregoing. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof). "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of other Capital Stock issued by such Person. "Property" of any Person means all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent consolidated balance sheet of such Person and its Subsidiaries under GAAP. "Purchase Money Indebtedness" means any Indebtedness incurred in the ordinary course of business by a Person to finance the cost (including the cost of construction) of an item of Property, the principal amount of which Indebtedness does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and expenses of such Person incurred in connection therewith. "Qualified Equity Offering" means an offering by the Company or Holding of shares of its common stock (however designated and whether voting or non-voting) and any and all rights, warrants or options to acquire such common stock, whether registered or exempt from registration under the Securities Act; provided, however, that in connection with a Qualified Equity Offering of Holding, the net proceeds of such Qualified Equity Offering are contributed to the Company as common equity. "Refinancing Indebtedness" means Indebtedness that refunds, refinances or extends any Indebtedness of the Company outstanding on the Issue Date or other Indebtedness permitted to be incurred by the Company or its Restricted Subsidiaries pursuant to the terms of the Indenture, but only to the extent that (i) if the Indebtedness being refunded, refinanced or extended was subordinate to the Indebtedness represented by the Notes, then the Refinancing Indebtedness is subordinated to the Notes to at least the same extent, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness being refunded, refinanced or extended, or (b) after the maturity date of the Notes, (iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a weighted average life to maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the weighted average life to maturity of the portion of the Indebtedness being refunded, refinanced or extended that is scheduled to mature on or prior to the maturity date of the Notes, (iv) such Refinancing Indebtedness is in an aggregate principal amount that is equal to or less than the sum of (a) the aggregate principal amount then outstanding under the Indebtedness being refunded, refinanced or extended, (b) the amount of accrued and unpaid interest, if any, and premiums owed, if any, not in excess of preexisting prepayment provisions on such Indebtedness being refunded, refinanced or extended and (c) the amount of customary fees, expenses and costs related to the incurrence of such Refinancing Indebtedness, and (v) such Refinancing Indebtedness is incurred by the same Person that initially incurred the Indebtedness being refunded, refinanced or extended, except that the Company may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness of any Wholly-Owned Restricted Subsidiary of the Company; provided, however, that subclauses (ii) and (iii) of this definition will not apply to any refunding, refinancing or extension of any Indebtedness under the Revolving Credit Facility. "Restricted Payment" means any of the following: (i) the declaration or payment of any dividend or any other distribution or payment on Capital Stock of the Company or any Restricted Subsidiary of the Company 82 89 or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company or any Restricted Subsidiary of the Company (other than (x) dividends or distributions payable solely in Capital Stock (other than Disqualified Capital Stock) or in options, warrants or other rights to purchase Capital Stock (other than Disqualified Capital Stock), and (y) in the case of Restricted Subsidiaries of the Company, dividends or distributions payable to the Company or to a Wholly-Owned Restricted Subsidiary of the Company), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any of its Restricted Subsidiaries (other than Capital Stock owned by the Company or a Wholly-Owned Restricted Subsidiary of the Company, excluding Disqualified Capital Stock), (iii) the making of any principal payment on, or the purchase, defeasance, repurchase, redemption or other acquisition or retirement for value, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, of any Subordinated Indebtedness (other than Subordinated Indebtedness acquired in anticipation of satisfying a scheduled sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition), (iv) the making of any Investment or guarantee of any Investment in any Person other than a Permitted Investment, (v) any designation of a Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the Investment by the Company therein and (vi) forgiveness of any Indebtedness of an Affiliate of the Company to the Company or a Restricted Subsidiary. For purposes of determining the amount expended for Restricted Payments, cash distributed or invested shall be valued at the face amount thereof and property other than cash shall be valued at its fair market value. "Restricted Subsidiary" means a Subsidiary of the Company other than an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company existing as of the Issue Date. The Board of Directors of the Company may designate any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a Restricted Subsidiary if immediately after giving effect to such action (and treating any Acquired Indebtedness as having been incurred at the time of such action), the Company could have incurred at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "-- Certain Covenants -- Limitation on Additional Indebtedness" covenant. "Revolving Credit Facility" means the revolving credit facility by and among the Company, the lender named therein, and NationsBank, N.A., as agent, as amended, modified, replaced, renewed, refunded, refinanced or supplemented from time to time, and whether by the same or any other agent, lender or group of lenders. "Sale and Lease-Back Transaction" means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of the Company of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing. "Subordinated Indebtedness" means any Indebtedness of the Company which is expressly subordinated in right of payment to the Notes. "Subsidiary" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, (i) in the case of a corporation, of which more than 50% of the total voting power of the Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, officers or trustees thereof is held by such first-named Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint venture, association or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise or if in accordance with generally accepted accounting principles such entity is consolidated with the first-named Person for financial statement purposes. "Temporary Cash Investments" means (i) Investments in marketable, direct obligations issued or guaranteed by the United States of America, or of any governmental agency or political subdivision thereof, maturing within 365 days of the date of purchase; (ii) Investments in certificates of deposit issued by a bank organized under the laws of the United States of America or any state thereof or the District of Columbia, in each case having capital, surplus and undivided profits totaling more than $500,000,000 and rated at least A by Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc., maturing within 365 days of 83 90 purchase; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of Investment, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) repurchase obligations with a term of not more than seven days for the underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above; or (v) Investments not exceeding 365 days in duration in money market funds that invest substantially all of such funds' assets in the Investments described in the preceding clauses (i) and (ii). "Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted Subsidiary and (b) any Subsidiary of the Company which is classified after the Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of Directors of the Company; provided that a Subsidiary organized or acquired after the Issue Date may be so classified as an Unrestricted Subsidiary only if such classification is in compliance with the covenant set forth under "-- Certain Covenants -- Limitation on Restricted Payments." The Trustee shall be given prompt notice by the Company of each resolution adopted by the Board of Directors of the Company under this provision, together with a copy of each such resolution adopted. "Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares) of which are owned, directly or indirectly, by the Company. 84 91 BOOK-ENTRY, DELIVERY AND FORM The New Notes initially will be represented by one or more Notes in registered, global form without interest coupons (collectively, the "Global Note"). The Global Note will be deposited upon issuance with the Trustee, as custodian for DTC, in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant as described below. Notes sold to Accredited Investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) may be represented by the Global Note or, if such an investor may not hold an interest in the Global Note, a certificated Note. Except as set forth below, the Global Note may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Note may not be exchanged for Notes in certificated form except in the limited circumstances described below. See " -- Exchange of Book-Entry Notes for Certificated Notes." The Notes may be presented for registration of transfer and exchange at the offices of the Registrar of the Notes. Depository Procedures DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between the Participants through electronic book-entry changes in accounts of the Participants. The Participants include securities brokers and dealers (including the Initial Purchaser), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of the Participants and the Indirect Participants. DTC has also advised the Company that pursuant to procedures established by it (i) upon deposit of the Global Note, DTC will credit the accounts of Participants designated by the Exchange Agent with portions of the principal amount of the Global Note and (ii) ownership of such interests in the Global Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Note). The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in the Global Note to such persons may be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having beneficial interests in the Global Note to pledge such interests to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. For certain other restrictions on the transferability of the Notes, See " -- Exchange of Book-Entry Notes for Certificated Notes." EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Payments in respect of the principal of (and premium, if any) and interest on the Global Note registered in the name of DTC or its nominee will be payable to DTC or its nominee in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee will treat the 85 92 persons in whose names the Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for (i) any aspect or accuracy of DTC's records or any Participant's or Indirect Participant's records relating to our payments made on account of beneficial ownership interests in the Global Note, or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Note, or (ii) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. DTC has advised the Company that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security such as the Global Note as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will not be the responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by DTC or any of the Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee as the registered owner of the Notes for all purposes. Interest in the Global Note will trade in DTC's Same-Day Funds Settlement System and secondary market trading activity in such interests will therefore settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its participants. Transfers between Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. DTC has advised the Company that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more Participants to whose account will DTC interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given such direction. However, if any of the events described under " -- Exchange of Book Entry Notes for Certificated Notes" occur, DTC reserves the right to exchange the Global Note for Notes in certificated form, and to distribute such Notes to the relevant Participants. The information in this section concerning DTC and its book-entry system has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Note among accountholders in DTC, it is under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company, the Trustee nor any agent of the Company or Trustee will have any responsibility for the performance of DTC, or its respective accountholders, indirect participants or accountholders of their respective obligations under the rules and procedures governing their operations. Exchange of Book-Entry Notes for Certificated Notes The Global Note is exchangeable for definitive Notes in registered certificated form if (i) DTC (x) notifies the Company that it is unwilling or unable to continue as depositary for the Global Note and the Company thereupon fails to appoint a successor depositary or (y) has ceased to be a clearing agency registered under the Exchange Act; (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Notes in certificated form or (iii) there shall have occurred and be continuing a Default or an Event of Default with respect to the Notes. In all cases, certificated Notes delivered in exchange for the Global Note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures). 86 93 CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury Regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the "IRS") will not take a contrary view, and no ruling from the IRS has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the ta consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. The Company recommends that each holder consult such holder's own tax adviser as to the particular tax consequences of exchanging such holder's Old Notes for New Notes, including the applicability and effect of any state, local or foreign tax laws. The Company believes that the exchange of Old Notes for New Notes pursuant to the Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the New Notes will not be considered to differ materially in kind or extent from the Old Notes. Rather, the New Notes received by a holder will be treated as a continuation of the Old Notes in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging Old Notes for New Notes pursuant to the Exchange Offer. PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, until , 1997 (90 days after the commencement of the Exchange Offer), all dealers effecting transactions in the New Notes, whether or not participating in this distribution, may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of the New Notes by Participating Broker Dealers. New Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating BrokerDealer and/or the purchasers of any such New Notes. Any Participating Broker-Dealer that resells the New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. LEGAL MATTERS The validity of the New Notes will be passed upon for the Company by Baker & Hostetler LLP. 87 94 EXPERTS The consolidated financial statements of Glasstech, Inc. (and its predecessor Glasstech Industries, Inc., as applicable) as of June 30, 1997 and 1996 and for each of the periods in the three years ended June 30, 1997 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 88 95 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Auditors......................................................... F-2 Consolidated Balance Sheets at June 30, 1996 and 1997.................................. F-3 For the periods ended January 3 and June 30, 1995 and the years ended June 30, 1996 and 1997: Consolidated Statements of Income................................................. F-4 Consolidated Statements of Shareholders' Equity................................... F-5 Consolidated Statements of Cash Flows............................................. F-6 Notes to Consolidated Financial Statements............................................. F-7
F-1 96 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Glasstech, Inc. We have audited the accompanying consolidated balance sheets of Glasstech, Inc. as of June 30, 1997 and 1996, and the related consolidated statements of income, shareholders' equity, and cash flows for the years ended June 30, 1997 and 1996, and for the period from January 4, 1995 through June 30, 1995 and as to its predecessor (see Note 1) the period from July 1, 1994 through January 3, 1995. Our audits also included the financial statement schedule listed in item 21(b) of this Registration Statement. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as an evaluation of the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in the notes to the consolidated financial statements, effective January 3, 1995, the Company emerged from bankruptcy pursuant to a plan of reorganization confirmed by the Bankruptcy Court on December 6, 1994. In accordance with an American Institute of Certified Public Accountants' Statement of Position, the Company has adopted "fresh start" reporting whereby its assets, liabilities and new capital structure have been adjusted to reflect estimated fair values as of January 3, 1995. As a result, the consolidated financial statements as of June 30, 1997 and 1996 and for the years ended June 30, 1997 and 1996, and for the period from January 4, 1995 through June 30, 1995 reflect this basis of reporting and are not comparable to the Company's pre-reorganization consolidated financial statements. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Glasstech, Inc. at June 30, 1997 and 1996, and the consolidated results of its operations and its cash flows for the years ended June 30, 1997 and 1996, and for the period from January 4, 1995 through June 30, 1995, and the consolidated results of its predecessor's operations and its predecessor's cash flows for the period from July 1, 1994 through January 3, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 6 to the consolidated financial statements, effective July 1, 1994, the Company changed its method of accounting for post-retirement benefits other than pensions. ERNST & YOUNG LLP Toledo, Ohio August 15, 1997 F-2 97 GLASSTECH, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AS OF JUNE 30, ------------------ 1996 1997 ------- ------- ASSETS (NOTE 4) Current assets: Cash and cash equivalents............................................... $43,815 $51,805 Restricted cash......................................................... 1,418 1,529 Accounts receivable: Contracts: Uncompleted, including unbilled amounts of $3,041 and $2,188....... 4,902 3,652 Completed, less allowance of $138 and $101 for doubtful accounts... 1,588 1,676 Trade, less allowance of $40 for doubtful accounts................... 1,764 1,530 ------- ------- 8,254 6,858 Inventory: Replacement and service parts........................................ 1,607 2,083 Furnace contracts and other.......................................... 962 2,182 ------- ------- 2,569 4,265 Prepaid expenses........................................................ 315 481 ------- ------- Total current assets...................................................... 56,371 64,938 Property, plant and equipment, net (Note 3)............................... 8,882 8,390 Other assets: Patents, less accumulated amortization of $2,590 and $4,317............. 20,009 18,283 Reorganization value in excess of amounts allocable to identifiable assets, less accumulated amortization of $1,020 and $1,599........... 10,713 7,583 Other................................................................... 2 170 ------- ------- Total other assets........................................................ 30,724 26,036 ------- ------- $95,977 $99,364 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable........................................................ $ 3,863 $ 3,413 Billings in excess of costs and estimated earnings on uncompleted contracts............................................................ 15,637 10,720 Accrued liabilities: Salaries and wages................................................... 2,760 3,606 Contract costs....................................................... 2,701 3,780 Interest............................................................. 2,100 2,100 Other................................................................ 1,711 1,801 ------- ------- 9,272 11,287 ------- ------- Total current liabilities................................................. 28,772 25,420 Long-term debt (Note 4)................................................... 42,000 42,000 Non-pension post-retirement benefit obligation (Note 6)................... 2,553 2,712 Shareholders' equity (Note 5): Common stock $.01 par value; 10,000,000 shares authorized; 1,000,001 shares issued and outstanding........................................ 10 10 Additional capital...................................................... 20,295 20,377 Retained earnings....................................................... 2,347 8,845 ------- ------- Total shareholders' equity................................................ 22,652 29,232 ======= ======= $95,977 $99,364 ======= =======
See accompanying notes. F-3 98 GLASSTECH, INC. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS)
PREDECESSOR COMPANY REORGANIZED COMPANY ------------ ------------------------------------------------------- PERIOD FROM PERIOD FROM JULY 1, 1994 JANUARY 4, 1995 THROUGH THROUGH YEARS ENDED JUNE 30, JANUARY 3, JUNE 30, ----------------------------------- 1995 1995 1996 1997 ------------ --------------- --------------- --------------- Net revenue......................... $ 25,948 $27,854 $62,771 $76,433 Cost of goods sold.................. 16,576 17,036 39,024 45,603 ------- ------- ------- ------- Gross profit........................ 9,372 10,818 23,747 30,830 Selling, general and administrative expenses.......................... 3,430 5,105 10,723 12,866 Research and development expenses... 2,082 2,302 4,557 4,594 Amortization expense................ 2,512 1,203 2,407 2,306 ------- ------- ------- ------- Operating profit.................... 1,348 2,208 6,060 11,064 Interest expense.................... -- (2,077) (4,200) (4,200) Other income (expense) -- net....... 35 784 1,540 2,263 ------- ------- ------- ------- Income before items below........... 1,383 915 3,400 9,127 Reorganization items (Note 1)....... (1,164) -- -- -- ------- ------- ------- ------- Income before income taxes, extraordinary gain and change in method of accounting.............. 219 915 3,400 9,127 Income taxes not payable in cash (Note 7).......................... -- (445) (1,418) (2,551) Federal income taxes, current....... -- -- (105) (78) ------- ------- ------- ------- Income before extraordinary gain and change in method of accounting.... 219 470 1,877 6,498 Extraordinary gain (Note 1)......... 214,773 -- -- -- Cumulative effect on prior years of change in method of accounting for non-pension post-retirement benefits (Note 6)................. (1,906) -- -- -- ------- ------- ------- ------- Net income.......................... $213,086 $ 470 $ 1,877 $ 6,498 ======= ======= ======= =======
See accompanying notes. F-4 99 GLASSTECH, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
COMMON STOCK SHAREHOLDERS' RETAINED TREASURY STOCK -------------------- ADDITIONAL BASIS EARNINGS ------------------- SHARES AMOUNT CAPITAL REDUCTION (DEFICIT) SHARES AMOUNT --------- ------ ---------- ------------- --------- ------- ------- Balance, July 1, 1994................ 430,000 $ 4 $ 43,010 $ (46,705) $(189,158) 635 $ (63) Net income......................... -- -- -- -- 213,086 -- -- Cancellation of predecessor common stock.............................. (430,000) (4) (43,010) 46,705 (3,754) (635) 63 Issuance of reorganized company common stock....................... 1,000,001 10 (10) -- -- -- -- Record enterprise value of reorganized company................ -- -- 20,174 -- (20,174) -- -- --------- --- ------- -------- --------- ---- ---- Balance, January 3, 1995............. 1,000,001 10 20,164 -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net income......................... -- -- -- -- 470 -- -- --------- --- ------- -------- --------- ---- ---- Balance June 30, 1995................ 1,000,001 10 20,164 -- 470 -- -- Net income......................... -- -- -- -- 1,877 -- -- Issuance of common stock warrants........................ -- -- 131 -- -- -- -- --------- --- ------- -------- --------- ---- ---- Balance June 30, 1996................ 1,000,001 10 20,295 -- 2,347 -- -- Net income......................... -- -- -- -- 6,498 -- -- Issuance of common stock........... 4,118 -- 82 -- -- -- -- --------- --- ------- -------- --------- ---- ---- Balance June 30, 1997................ 1,004,119 $ 10 $ 20,377 $ -- $ 8,845 -- $ -- ========= === ======= ======== ========= ==== ==== TOTAL --------- Balance, July 1, 1994................ $(192,912) Net income......................... 213,086 Cancellation of predecessor common stock.............................. -- Issuance of reorganized company common stock....................... -- Record enterprise value of reorganized company................ -- --------- Balance, January 3, 1995............. 20,174 - ---------------------------------------------------------- Net income......................... 470 --------- Balance June 30, 1995................ 20,644 Net income......................... 1,877 Issuance of common stock warrants........................ 131 --------- Balance June 30, 1996................ 22,652 Net income......................... 6,498 Issuance of common stock........... 82 --------- Balance June 30, 1997................ $ 29,232 =========
See accompanying notes. F-5 100 GLASSTECH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
PREDECESSOR COMPANY REORGANIZED COMPANY ------------- --------------------------------------- PERIOD FROM PERIOD FROM JULY 1, 1994 JANUARY 4, THROUGH 1995 THROUGH YEARS ENDED JUNE 30, JANUARY 3, JUNE 30, ---------------------- 1995 1995 1996 1997 ------------- ------------ -------- --------- OPERATING ACTIVITIES Income before extraordinary gain and change in method of accounting......................... $ 219 $ 470 $ 1,877 $ 6,498 Adjustment to reconcile income before extraordinary item and change in method of accounting to net cash provided by (used in) operating activities: Depreciation and amortization................ 3,277 1,901 3,721 3,764 Income taxes not payable in cash............. -- 445 1,418 2,551 Non-pension post-retirement benefit obligation expense in excess of payments.................................. 135 135 377 159 Other........................................ (193) 33 13 11 Changes in assets and liabilities affecting operations: Restricted cash.............................. 3,384 1,051 1,095 (111) Accounts receivable.......................... (724) (4,056) 3,978 1,397 Inventory.................................... (181) (427) 246 (1,697) Prepaid expenses............................. 71 10 6 (166) Accounts payable............................. 531 (976) 817 (450) Billings in excess of costs and estimated earnings on uncompleted contracts......... 4,914 (2,153) 8,274 (4,917) Accrued liabilities.......................... 2,370 2,178 699 1,934 ------- ------- ------- ------- Net cash provided by (used in) operating activities................................... 13,803 (1,389) 22,521 8,973 INVESTING ACTIVITIES Additions to property, plant and equipment..... (480) (680) (2,152) (990) Proceeds on sale of prototype.................. -- 755 491 -- Other.......................................... 1 15 (2) 12 ------- ------- ------- ------- Net cash provided by (used in) investing activities................................... (479) 90 (1,663) (978) FINANCING ACTIVITIES Issuance of stock warrants..................... -- -- 131 -- Issuance of common stock....................... -- -- -- 82 Effective date payments to noteholders and other........................................ (6,200) (3,797) (6) (87) ------- ------- ------- ------- Net cash provided by (used in) financing activities................................... (6,200) (3,797) 125 (5) ------- ------- ------- ------- Increase (decrease) in cash and cash equivalents.................................. 7,124 (5,096) 20,983 7,990 Cash and cash equivalents at beginning of period....................................... 20,804 27,928 22,832 43,815 ------- ------- ------- ------- Cash and cash equivalents at end of period..... $27,928 $ 22,832 $ 43,815 $51,805 ======= ======= ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for the following: Interest.................................. $ -- $ -- $ 4,177 $ 4,200 ------- ------- ------- ------- Income taxes.............................. $ -- $ -- $ 105 $ 337 ======= ======= ======= =======
See accompanying notes. F-6 101 GLASSTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION Glasstech Industries, Inc. (Industries and Predecessor), a Delaware corporation, and its wholly-owned subsidiary, GLT Corp., were formed to acquire most of the assets and certain liabilities of Glasstech International L.P. (GILP), a Delaware limited partnership, in a leveraged buyout transaction. The acquisition was completed by GLT Corp. as of May 19, 1989 and thereafter it was merged into Glasstech, Inc. (Glasstech and Successor), a Delaware corporation. Prior to such date, Industries and GLT Corp. engaged only in activities related to the acquisition. Glasstech has two wholly-owned subsidiaries, Glasstech Ltd., a corporation in the United Kingdom, and Stir-Melter, Inc., a Delaware corporation. On May 24 and 25, 1993, respectively, Industries and Glasstech filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code (Reorganization). A Joint Second Amended Plan of Reorganization (the "Joint Plan") proposed by Industries and Glasstech on December 6, 1994, was confirmed by the Federal Bankruptcy Court in the District of Delaware and became effective on January 3, 1995 (the "Effective Date"). Industries was merged into Glasstech and the bankruptcy effectively ended on that date. Reorganization items included in the consolidated statements of income for the period from July 1, 1994 through January 3, 1995 consisted of approximately $1,341 of professional fees and related costs, $704 of incentive compensation, a $193 gain on fair value adjustments to the Company's assets and liabilities and $688 of interest earned on accumulated cash. Glasstech designs and assembles glass bending and tempering equipment and markets and sells such equipment worldwide to both automotive glass fabricators and architectural glass producers. Glasstech Ltd. provides engineering, sales, and service support in Europe, the Middle East, and Africa. Stir-Melter, Inc. designs and markets glass-melting equipment for the treatment of certain waste products. In accounting for the effects of emergence from bankruptcy, Glasstech implemented Statement of Financial Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," (SOP 90-7) issued by the American Institute of Certified Public Accountants. Accordingly, Glasstech adopted "fresh start" reporting; its assets and liabilities were adjusted to reflect their estimated fair value and the accumulated deficit as of January 3, 1995 was eliminated. Accordingly, the consolidated financial statements for periods prior to January 3, 1995 are not necessarily comparable to consolidated financial statements presented subsequent to that date. Black lines on the consolidated financial statements distinguish between pre-reorganization and post-reorganization activity. 2. SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION For financial reporting purposes, the Company includes in income the ratable portion of profits on uncompleted contracts determined in accordance with the stage of completion measured by the percentage of costs incurred to estimated total costs of each contract. For income tax purposes, contracts are accounted for on the inventory accrual basis whereby income is recognized when the equipment is accepted by the customer. Unbilled amounts included in uncompleted contract accounts receivable represent revenues recognized in excess of amounts billed. Billings in excess of costs and estimated earnings on uncompleted contracts represent amounts billed in excess of revenues recognized. Revenue from sales other than contracts is recognized when the products are shipped. F-7 102 GLASSTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CREDIT PRACTICES Credit terms are granted to customers and periodically revised based on evaluations of the customers' financial condition with collateral generally not being required. In certain instances, letters of credit may be obtained to secure payment. Credit losses relating to customers consistently have been within management's expectations. CASH AND CASH EQUIVALENTS The Company considers all unrestricted highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Restricted cash primarily represents cash collateral for outstanding standby letters of credit issued on behalf of the Company in support of the Company's performance obligations under various sales contracts. These funds become available upon performance under the applicable sales contracts or expiration of the underlying letter of credit, or both. INVENTORY Inventory is stated at the lower of cost or market determined by the first-in, first-out (FIFO) method. DEPRECIATION AND AMORTIZATION Depreciation is based on the estimated useful lives of the assets and is generally computed using accelerated methods. Amortization of leasehold improvements is provided on the straight-line basis over the estimated useful lives of the assets or the terms of the leases, whichever is shorter. The useful lives range from 10 to 40 years for building and leasehold improvements; 3 to 12 years for machinery and equipment; 7 to 12 years for prototype glass tempering furnaces; and 3 to 12 years for office equipment and other. Patents are being amortized on the straight-line basis over their estimated useful lives of 12 to 15 years. Reorganization value in excess of amounts allocable to identifiable assets is being amortized on the straight-line basis over 20 years. STOCK OPTIONS The Company accounts for employee stock options in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APBO No. 25). The disclosure requirements of Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" are not material. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-8 103 GLASSTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:
AS OF JUNE 30, ----------------- 1996 1997 ------- ------ Cost: Land..................................................................... $ 110 $ 110 Building and leasehold improvements...................................... 2,448 2,512 Machinery and equipment.................................................. 1,448 1,830 Prototype glass tempering furnaces....................................... 4,554 4,776 Office equipment......................................................... 2,165 2,456 Other.................................................................... 33 17 ------ ------- 10,758 11,701 Less accumulated depreciation and amortization........................... (1,876) (3,311) ------ ------- Net property, plant and equipment.......................................... $ 8,882 $8,390 ====== =======
4. LONG-TERM DEBT Long-term debt at June 30, 1996 and 1997 consists of $42,000 of senior notes. The senior notes have a maturity date of July 1, 2001 and bear interest, payable semi-annually, at the rate of 10%. The notes may be redeemed at the Company's option after December 31, 1996 at 110% of the principal amount, declining to 102% after December 31, 2000. Mandatory sinking fund requirements during the five fiscal years subsequent to June 30, 1997 are as follows: 1998-1999 -- $0; 2000 -- $10,000; 2001 -- $10,000; 2002 -- $22,000. The senior notes are secured by all assets of Glasstech. In addition, the Indenture pursuant to which the senior notes were issued contains numerous financial and other covenants which include the maintenance of certain levels of earnings as defined in the Indenture, a prohibition on the payment of dividends, and a restriction on additional indebtedness and obligations as well as certain types of business activities and investments. The Company is in compliance with all such covenants. At June 30, 1996 and 1997, the carrying value of the Company's long-term debt approximates its fair value based on the Company's incremental borrowing rates. 5. COMMON STOCK Effective January 5, 1995, the Company adopted a nonqualified stock option plan ("Plan") authorizing the issuance of up to 5% of the Company's outstanding Common Stock on a fully diluted basis. The Plan provides for granting options to officers and key employees to purchase shares of the Company's common stock at a price established by the Board of Directors, which approximates fair market value. Options have terms of ten years and become vested and exercisable in 20% increments beginning on the grant date and on each successive anniversary date of the grant. Options for 58,823 shares have been authorized and granted under the Plan at an exercise price of $20.00 per share. In addition, the Company granted options for an additional 181,646 shares under separate agreements. The options were granted at an exercise price of $20.00 per share with terms identical to those contained in the Plan. No options were exercised or cancelled through June 30, 1996. During 1997, options for 4,118 shares were exercised and options for 6,176 shares were cancelled. During 1996, the Company issued 65,290 common stock purchase warrants to certain directors for total proceeds of $131. Subject to certain anti-dilution provisions, each warrant entitles the holder to purchase one F-9 104 GLASSTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. COMMON STOCK (CONTINUED) share of the Company's common stock for $25.00 per share through January 5, 2001. No warrants have been exercised through June 30, 1997. 6. EMPLOYEE BENEFIT PLANS Glasstech has defined contribution retirement plans which cover substantially all employees. Contributions, which are based on participants' compensation, are funded and approximated $270, $189, $541 and $604, for the periods from July 1, 1994 through January 3, 1995, January 4, 1995 through June 30, 1995, and the years ended June 30, 1996 and 1997, respectively. In addition, Glasstech provides certain retiree health care insurance benefits to eligible retired employees. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. These benefits are provided at the discretion of Glasstech and are subject to revision or termination at any time. Effective July 1, 1994, Glasstech adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," on the immediate recognition basis. Previously, the Company had expensed the cost of such benefits on the pay-as-you-go (cash) basis. The cumulative effect as of July 1, 1995 of adopting SFAS No. 106 was to decrease net earnings by $1,906. The change resulted in a decrease in net income of approximately $135 for the period ended January 3, 1995 and $89 for the period ended June 30, 1995. The Company funds such costs as they are incurred. The components of the net periodic post-retirement benefit cost are as follows:
PREDECESSOR COMPANY REORGANIZED COMPANY --------------- --------------------------------- PERIOD FROM PERIOD FROM JULY 1, 1994 JANUARY 4, 1995 YEARS ENDED THROUGH THROUGH JUNE 30, JANUARY 3, JUNE 30, ------------- 1995 1995 1996 1997 --------------- --------------- ---- ---- Service cost (benefits earned during the period)........................................ $ 83 $ 79 $206 $117 Interest cost on accumulated post-retirement benefit obligation............................. 77 73 200 128 Net amortization and deferral.................... -- -- 9 (55) ---- ---- ---- Net periodic post-retirement benefit cost........ $ 160 $ 152 $415 $190 ==== ==== ====
The components of the accumulated post-retirement benefit obligation and amounts accrued at June 30 were as follows:
1996 1997 ------ ------ Actuarial present value of benefit obligations: Retirees and dependents.................................................. $ 214 $ 174 Eligible active employees................................................ 438 97 Other active employees................................................... 1,792 120 Unrecognized prior service credit.......................................... -- 2009 Unrecognized net gain...................................................... 109 312 ------ ------ Total accrued post-retirement benefits..................................... $2,553 $2,712 ====== ======
Effective February 1, 1997, the Company portion of the retiree health care insurance benefits was revised to a fixed monthly contribution amount. Prior to the date, the Company's monthly contribution was the actual F-10 105 GLASSTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. EMPLOYEE BENEFIT PLANS (CONTINUED) cost in excess of a fixed monthly contribution by each retiree. The effect of this amendment will reduce the Company's non-pension post-retirement benefit obligation by approximately $2,009 which is being amortized on the straight-line method over approximately 20 years. Assumed health care cost inflation was based on an initial rate of 8.6% declining ratably over 14 years to an ultimate rate of 5.5%. A one percentage point increase in these rates would have no impact on the accumulated post-retirement benefit obligation at June 30, 1997 and increased the net post-retirement benefit cost for 1997 by $51. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 8.25% at June 30, 1997 and 1996 (8.00% at June 30, 1995). 7. FEDERAL INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income tax liabilities and assets at June 30 are as follows:
1996 1997 ------- ------- Deferred income tax liabilities: Contract revenues..................................................... $(4,040) $(5,388) Property, plant and equipment......................................... (951) (892) Other................................................................. (205) -- -------- ------- Total deferred income tax liabilities................................... (5,196) (6,280) Deferred income tax assets: Federal income tax operating loss carryovers.......................... 8,178 7,155 Accrued liabilities and reserves...................................... 2,126 2,326 Excess tax basis on purchased assets.................................. 3,909 2,404 Other................................................................. 399 431 -------- ------- Total deferred income tax assets........................................ 14,612 12,316 Less valuation reserve.................................................. 9,416 6,036 -------- ------- Net deferred income tax assets.......................................... 5,196 6,280 -------- ------- Total deferred income taxes -- net...................................... $ -- $ -- ======== =======
The valuation allowance has been recorded against the Company's net deferred income tax assets due to the uncertainties surrounding the realization of any future tax benefit. F-11 106 GLASSTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. FEDERAL INCOME TAXES (CONTINUED) The consolidated effective income tax rate differs from the statutory U.S. federal tax rate for the following reasons and by the following percentages:
PREDECESSOR COMPANY REORGANIZED COMPANY ------------- ----------------------------------- PERIOD FROM PERIOD FROM JULY 1, JANUARY 4, 1994 1995 YEARS ENDED THROUGH THROUGH JUNE 30, JANUARY 3, JUNE 30, -------------------- 1995 1995 1996 1997 ------------- ------------ --------- -------- Statutory U.S. federal tax rate.................... 34.0% 34.0% 34.0% 34.0% Increase (reduction) in tax rate resulting from: Effect of reduction in valuation reserve for deferred income taxes......................... -- -- -- (8.6) Amortization of excess reorganization value...... -- 12.6 6.8 2.2 Effects of net operating losses.................. (187.0) -- -- -- Write-off on non-deductible intangible assets.... 147.6 -- -- -- Other............................................ 5.4 2.0 4.0 1.2 ------ ------- ------ Effective tax rate................................. --% 48.6% 44.8% 28.8% ====== ======= ====== ======
The "Effect of reduction in valuation reserve for deferred income taxes" represents the effect of change in post reorganization temporary differences fully reserved by the Company's valuation reserve. At June 30, 1997, the Company has net operating loss carryforwards for regular and alternative minimum tax purposes of approximately $21,045 and $17,517, respectively, which expire in the years 2009 through 2011. For regular and alternative minimum tax purposes, approximately $18,168 and $12,886 of each loss carryforward has an annual usage limitation of $1,378 which, if not utilized in a given year, may be utilized in subsequent years. Income taxes not payable in cash represent the tax effect of certain temporary differences existing prior to the reorganization and are recorded as a reduction to reorganization value in excess of amounts allocated to identifiable assets as required by SOP 90-7. 8. FOREIGN SALES AND SALES CONCENTRATION Revenues by geographic region are as follows:
PREDECESSOR REORGANIZED COMPANY COMPANY ------------------------------------ ------------ PERIOD FROM PERIOD FROM JANUARY 4, JULY 1, 1994 1995 1995 THROUGH THROUGH YEARS ENDED JUNE 30, JANUARY 3, JUNE 30, -------------------- 1995 1995 1996 1997 ------------ ------------ -------- -------- United States..................................... $ 9,924 $ 9,608 $ 18,794 $ 22,269 Asia-Pacific...................................... 5,341 10,261 20,101 39,371 Europe............................................ 3,250 5,351 9,827 5,030 Latin American.................................... 5,889 1,992 6,208 2,616 Other............................................. 1,544 642 7,841 7,147 -------- -------- -------- -------- $ 25,948 $ 27,854 $ 62,771 $ 76,433 ======== ======== ======== ========
Four customers accounted for approximately 48%, 34%, 41% and 51% of net sales during the periods, respectively. F-12 107 GLASSTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. LEASES The Company leases a manufacturing and office building under a long-term agreement with a partnership comprised of certain former shareholders of Industries. The minimum annual rental associated with this lease through its expiration on December 31, 1999 is approximately $300. The Company has the option to renew the lease for two additional five-year periods at slightly higher rates. Total rental expense amounted to approximately $150, $150, $300 and $300 for the periods from July 1, 1994 through January 3, 1995, January 4, 1995 through June 30, 1995, and the years ended June 30, 1996 and 1997, respectively. 10. LEGAL PROCEEDINGS On January 15, 1997, James E. Heider, a former executive officer of the Company, commenced an action against the Company and Mark Christman, the President of the Company, in the Common Pleas Court of Wood County, Ohio, relating to the nonrenewal of his employment agreement. In the amended complaint, Mr. Heider alleges that the Company breached his written employment agreement and breached implied and express employment agreements that, according to the complaint, were created pursuant to certain alleged oral statements. The complaint also alleges that Mr. Heider was terminated in retaliation for reporting on the conduct of certain employees and that Mr. Heider was wrongfully denied the ability to exercise certain stock options. Mr. Heider seeks compensation of approximately $9.5 million for lost wages, bonuses, back pay, vacation pay and the value of other fringe benefits he would have received through continued employment with the Company. The Company believes that this action is without merit and is barred by the provisions of Mr. Heider's written employment agreement with the Company. The Company intends to contest this action vigorously and does not believe that this action will have a material adverse effect on the Company's financial condition or operating results. 11. SALE OF COMPANY Effective July 2, 1997, a sale of the Company was completed to Key Equity Capital Corporation and certain members of management of the Company for approximately $76.2 million, subject to certain adjustments. The transaction resulted in the new company having substantial goodwill, an increase in long- term debt, original equity of approximately $15.8 million, and a significant reduction in cash. Also in connection with the proposed transaction all existing stock options and common stock warrants of the Company were deemed exercised and exchanged for their pro rata share of the purchase price. In addition, the Company incurred an extraordinary charge of $4.2 million relating to the early extinguishment of debt and other charges aggregating approximately $3.7 million to be reflected in its income statement for the period of July 1, 1997 through July 2, 1997. F-13 108 =============================================================== NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------ TABLE OF CONTENTS
PAGE ---- Available Information.............................. iv Prospectus Summary................................. 1 Risk Factors....................................... 14 The Transactions................................... 21 Use of Proceeds.................................... 22 Capitalization..................................... 22 Unaudited Pro Forma Financial Data................. 23 Selected Historical Consolidated Financial and Other Data....................................... 29 Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 31 Business........................................... 35 Management......................................... 46 Certain Transactions............................... 50 Ownership and Control.............................. 53 Description of the Revolving Credit Facility....... 54 The Exchange Offer................................. 55 Description of the Notes........................... 63 Certain U.S. Federal Income Tax Considerations..... 87 Plan of Distribution............................... 87 Legal Matters...................................... 87 Experts............................................ 88 Index to Consolidated Financial Statements......... F-1
UNTIL , 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. =============================================================== =============================================================== $70,000,000 GLASSTECH, INC. OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS SERIES B 12 3/4% SENIOR NOTES DUE 2004 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 12 3/4% SENIOR NOTES DUE 2004 THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: UNITED STATES TRUST COMPANY OF NEW YORK ---------------------------------- PROSPECTUS ---------------------------------- , 1997 =============================================================== 109 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Registrant's Certificate of Incorporation incorporates substantially the provisions of the General Corporation Law of the State of Delaware providing for indemnification of directors and officers of the Registrant against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact that such person is or was an officer or director of the Registrant or is or was serving at the request of the Registrant as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. As permitted by Section 102 of the Delaware General Corporation Law, the Registrant's Certificate of Incorporation contains provisions eliminating a director's personal liability for monetary damages to the Registrant and its stockholders arising from a breach of a director's fiduciary duty except for liability (a) for any breach of the director's duty of loyalty to the Registrant or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for any transaction from which the director derived an improper personal benefit. Section 145 of the Delaware General Corporation Law provides generally that a person sued as a director, officer, employee or agent of a corporation may be indemnified by the corporation for reasonable expenses, including attorney's fees, if in the case of other than derivative suits he has acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation (and, in the case of a criminal proceeding, had no reasonable cause to believe that his conduct was unlawful). In the case of a derivative suit, an officer, employee or agent of the corporation who is not protected by the Certificate of Incorporation may be indemnified by the corporation for reasonable expenses, including attorney's fees, if he has acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in the case of a derivative suit in respect of any claim as to which an officer, employee or agent has been adjudged to be liable to the corporation unless that person is fairly and reasonably entitled to indemnity for proper expenses. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits. 2.1 Agreement and Plan of Merger 2.2 Amendment to Agreement and Plan of Merger 3.1 Restated Certificate of Incorporation of the Registrant 3.2 By-laws of the Registrant 4.1 Indenture (including form of Note) 4.2 First Supplemental Indenture 5.1 Opinion of Baker & Hostetler LLP as to the legality of the securities being registered 10.1 Financing and Security Agreement between NationsBank, N.A. and the Registrant 10.2 Plant and Office Lease 10.3 Warehouse Lease 10.4 Advisory Agreement between the Registrant and Key Equity Capital Corporation 10.5 Form of Exchange Agent Agreement between United States Trust Company of New York and the Registrant 10.6 Employment Agreement among Glasstech Holding Co., the Registrant and John S. Baxter 10.7 Employment Agreement among Glasstech Holding Co., the Registrant and Mark D. Christman 10.8 Employment Agreement among Glasstech Holding Co., the Registrant and Larry E. Elliott
II-1 110 10.9 Employment Agreement among Glasstech Holding Co., the Registrant and Ronald A. McMaster 10.10 Employment Agreement among Glasstech Holding Co., the Registrant and James P. Schnabel, Jr. 10.11 Employment Agreement among Glasstech Holding Co., the Registrant and Diane S. Tymiak 10.12 Employment Agreement among Glasstech Holding Co., the Registrant and Kenneth H. Wetmore 10.13 Securities Purchase Agreement between the Registrant, as successor to Glasstech Sub Co., and CIBC Wood Gundy Securities Corp. 10.14 Registration Rights Agreement between the Registrant, as successor to Glasstech Sub Co., and CIBC Wood Gundy Securities Corp. 12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges 21.1 List of Subsidiaries 23.1 Consent of Ernst and Young LLP 23.2 Consent of Baker & Hostetler LLP (included in Exhibit 5.1) 24.1 Powers of Attorney (included on page II-4) 25.1 Statement of Eligibility and Qualification on Form T-1 Under the Trust Indenture Act of 1939 of United States Trust Company of New York, as Trustee Under the Indenture 27.1 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery
(b) Financial Statement Schedule.
SCHEDULE NUMBER DESCRIPTION OF DOCUMENT PAGE -------- ------------------------------------------------ ---- II Valuation and Qualifying Accounts S-1
(c) Report, Opinion or Appraisal. Not Applicable. ITEM 22. UNDERTAKINGS (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in the documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (c) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-2 111 (d) The undersigned Registrant hereby undertakes: 1. To file during any period in which offers and sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. 2. That for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-3 112 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PERRYSBURG, STATE OF OHIO, ON THE 26TH DAY OF AUGUST, 1997. GLASSTECH, INC. /s/ MARK D. CHRISTMAN -------------------------------------- Mark D. Christman President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Mark D. Christman, Kenneth H. Wetmore and Diane S. Tymiak or any one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------- --------------------------------------- ---------------- /s/ MARK D. CHRISTMAN Director, President and Chief Executive August 26, 1997 - ------------------------------------- Officer (Principal Executive Officer) Mark D. Christman /s/ DIANE S. TYMIAK Chief Financial Officer (Principal August 26, 1997 - ------------------------------------- Financial Officer and Principal Diane S. Tymiak Accounting Officer) /s/ JOHN S. BAXTER Director August 26, 1997 - ------------------------------------- John S. Baxter /s/ DAVID P. GIVEN Director August 26, 1997 - ------------------------------------- David P. Given
II-4 113 GLASSTECH, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT ADDITIONS BEGINNING CHARGED TO COSTS AMOUNT BALANCE AT DESCRIPTION OF PERIOD AND EXPENSES CHARGED OFF END OF PERIOD - ------------------------------------------------ ---------- ---------------- ----------- ------------- (IN THOUSANDS) Year ended June 30, 1997: Allowance for doubtful accounts............... $ 178 $ (37) $ -- $ 141 ====== ====== ======= ======= Year ended June 30, 1996: Allowance for doubtful accounts............... $ 281 $ (103) $ -- $ 178 ====== ====== ======= ======= Period from January 4, 1995 through June 30, 1995: Allowance for doubtful accounts............... $ 274 $ 7 $ -- $ 281 ====== ====== ======= ======= Period from July 1, 1994 through January 3, 1995: Allowance for doubtful accounts............... $ 372 $ (98) $ -- $ 274 ====== ====== ======= =======
S-1 114 EXHIBIT INDEX 2.1 Agreement and Plan of Merger 2.2 Amendment to Agreement and Plan of Merger 3.1 Restated Certificate of Incorporation of the Registrant 3.2 By-laws of the Registrant 4.1 Indenture (including form of Note) 4.2 First Supplemental Indenture 5.1 Opinion of Baker & Hostetler LLP as to the legality of the securities being registered 10.1 Financing and Security Agreement between NationsBank, N.A. and the Registrant 10.2 Plant and Office Lease 10.3 Warehouse Lease 10.4 Advisory Agreement between the Registrant and Key Equity Capital Corporation 10.5 Form of Exchange Agent Agreement between United States Trust Company of New York and the Registrant 10.6 Employment Agreement among Glasstech Holding Co., the Registrant and John S. Baxter 10.7 Employment Agreement among Glasstech Holding Co., the Registrant and Mark D. Christman 10.8 Employment Agreement among Glasstech Holding Co., the Registrant and Larry E. Elliott 10.9 Employment Agreement among Glasstech Holding Co., the Registrant and Ronald A. McMaster 10.10 Employment Agreement among Glasstech Holding Co., the Registrant and James P. Schnabel, Jr. 10.11 Employment Agreement among Glasstech Holding Co., the Registrant and Diane S. Tymiak 10.12 Employment Agreement among Glasstech Holding Co., the Registrant and Kenneth H. Wetmore 10.13 Securities Purchase Agreement between the Registrant, as successor to Glasstech Sub Co., and CIBC Wood Gundy Securities Corp. 10.14 Registration Rights Agreement between the Registrant, as successor to Glasstech Sub Co., and CIBC Wood Gundy Securities Corp. 12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges 21.1 List of Subsidiaries 23.1 Consent of Ernst and Young LLP 23.2 Consent of Baker & Hostetler LLP (included in Exhibit 5.1) 24.1 Powers of Attorney (included on page II-4) 25.1 Statement of Eligibility and Qualification on Form T-1 Under the Trust Indenture Act of 1939 of United States Trust Company of New York, as Trustee Under the Indenture 27.1 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery
EX-2.1 2 EXHIBIT 2.1 1 Exhibit 2.1 AGREEMENT AND PLAN OF MERGER AMONG GLASSTECH HOLDING CO. GLASSTECH SUB CO. AND GLASSTECH, INC. DATED JUNE 5, 1997 2
TABLE OF CONTENTS ----------------- Page ---- 1. The Merger............................................................................................. 1 1.1 The Merger.................................................................................... 1 1.2 Consummation of the Merger.................................................................... 1 1.3 Effects of the Merger......................................................................... 1 1.4 Certificate of Incorporation and Bylaws....................................................... 1 1.5 Directors and Officers........................................................................ 2 1.6 Conversion of Shares.......................................................................... 2 1.7 Conversion of Common Stock of the Sub......................................................... 2 1.8 Adjustment to Aggregate Merger Consideration.................................................. 2 1.9 Determination of Adjustment to Aggregate Merger Consideration................................................................................. 4 2. Dissenting Shares; Payment for Shares; Options......................................................... 5 2.1 Dissenting Shares............................................................................. 5 2.2 Payment for Shares............................................................................ 6 2.3 Closing of the Company's Transfer Books....................................................... 8 2.4 Options and Warrants.......................................................................... 8 3. Representations and Warranties of the Company.......................................................... 8 3.1 Authority; No Conflicts....................................................................... 8 3.2 Capitalization................................................................................ 9 3.3 Compliance with Applicable Laws............................................................... 10 3.4 Financial Statements.......................................................................... 10 3.5 Taxes......................................................................................... 10 3.6 Absence of Changes or Events.................................................................. 11 3.7 Employee Benefit Matters...................................................................... 11 3.8 Contracts..................................................................................... 14 3.9 Litigation.................................................................................... 15 3.10 Intellectual Property......................................................................... 15 3.11 Brokers....................................................................................... 16 3.12 Environmental Matters......................................................................... 16 3.13 Percentage Completion of Accounting; Accounts Receivable; Inventories....................................................................... 18 3.14 Backlog....................................................................................... 19 3.15 Customers and Suppliers....................................................................... 19 3.16 Product Warranties............................................................................ 19 3.17 Title to Assets; Liens........................................................................ 20 3.18 Labor Relations............................................................................... 20 3.19 Insurance..................................................................................... 20 3.20 Intercompany and Affiliate Transactions; Insider Interests..................................................................................... 20 3.21 Absence of Undisclosed Liabilities............................................................ 21 3.22 Officers and Directors........................................................................ 21 3.23 Bankruptcy Matters............................................................................ 21 3.24 Disclosure.................................................................................... 22 4. Representations and Warranties of the Parent and Sub................................................... 22 4.1 Authority; No Conflicts....................................................................... 22 4.2 Interim Operations of Parent and Sub.......................................................... 23 4.3 Brokers....................................................................................... 23 4.4 Financing..................................................................................... 23
-i- 3 5. Covenants.............................................................................................. 23 5.1 Capitalization................................................................................ 23 5.2 Access to Information......................................................................... 23 5.3 Reasonable Efforts............................................................................ 24 5.4 Antitrust Notification........................................................................ 24 5.5 Notification of Certain Matters............................................................... 24 5.6 Fees and Expenses............................................................................. 25 5.7 Employee Benefits............................................................................. 25 5.8 Indemnification; Directors' and Officers' Insurance..................................................................................... 25 5.9 Conduct of the Business of the Company........................................................ 27 5.10 Meeting of Company Shareholders............................................................... 28 5.11 No Negotiations............................................................................... 28 5.12 Financial Statements.......................................................................... 29 6. Conditions to Consummation of the Merger............................................................... 30 6.1 Conditions to Each Party's Obligations to Consummate the Merger......................................................................... 30 6.2 Conditions to the Parent's and Sub's Obligations to Effect the Merger.......................................................................... 30 6.3 Conditions to the Company's Obligations to Effect the Merger.................................................................................... 32 7. Termination; Amendment; Waiver......................................................................... 33 7.1 Termination................................................................................... 33 7.2 Effect of Termination......................................................................... 33 7.3 Amendment..................................................................................... 34 7.4 Extension; Waiver............................................................................. 34 8. Survival of Representations and Warranties; Indemnification........................................................................................ 34 8.1 Survival of Representations and Warranties.................................................... 34 8.2 Indemnification From Indemnification Escrowed Funds......................................................................................... 35 8.3 Limitation on Indemnity Obligation............................................................ 35 8.4. Procedure for Indemnification with Respect to Third-Party Claims............................................................................ 35 8.5. Procedure For Indemnification with Respect to Non- Third-Party Claims............................................................................ 36 9. Miscellaneous.......................................................................................... 37 9.1 Shareholders' Representative.................................................................. 37 9.2 Validity...................................................................................... 38 9.3 Notices....................................................................................... 38 9.4 Governing Law................................................................................. 39 9.5 Interpretation................................................................................ 39 9.6 Parties in Interest........................................................................... 40 9.7 Counterparts.................................................................................. 40 9.8 Press Releases; Confidentiality............................................................... 40 9.9 Entire Agreement.............................................................................. 40
-ii- 4 AGREEMENT AND PLAN OF MERGER Dated as of June 5, 1997 ------------------------ The parties to this agreement and plan of merger are Glasstech Holding Co., a Delaware corporation (the "Parent"), Glasstech Sub Co., a Delaware corporation and a wholly-owned subsidiary of the Parent (the "Sub"), and Glasstech, Inc., a Delaware corporation (the "Company"). The board of directors of each of the Parent, the Sub and the Company has determined it is in the best interests of its stockholders for the Parent to acquire the Company upon the terms and subject to the conditions set forth in this agreement. Accordingly, the parties agree as follows: 1. THE MERGER 1.1 THE MERGER. Upon the terms of this agreement and subject to the provisions of the Delaware General Corporation Law (the "DGCL"), the Sub shall be merged with and into the Company (the "Merger") as soon as practicable following the satisfaction or waiver, if permissible, of the conditions set forth in section 6. The Company shall be the surviving corporation in the Merger (the "Surviving Corporation") and shall continue its existence under the law of the State of Delaware. At the Effective Time (as defined in section 1.2), the separate corporate existence of the Sub shall cease. 1.2 CONSUMMATION OF THE MERGER. Subject to the provisions of this agreement, the parties shall cause the Merger to be consummated by filing with the secretary of state of the state of Delaware a duly executed certificate of merger, which certificate of merger shall be filed as soon as practicable on the date of the Closing and shall take all other action required by law to effect the Merger. At 9:00 a.m., New York time, on the second business day following the satisfaction or waiver of all of the conditions referred to in section 6, and prior to the filing referred to above, a closing (the "Closing") shall be held at the offices of Baker & Hostetler LLP, 3200 National City Center, 1900 East 9th Street, Cleveland, Ohio (or such other place, time or date as the parties may agree in writing) for the purpose of completing the foregoing. The time and date the Merger becomes effective in accordance with applicable law is referred to as the "Effective Time." 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the DGCL and this agreement. 1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the certificate 5 of incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable law; PROVIDED, HOWEVER, that the certificate of incorporation of the Surviving Corporation shall be amended to read in its entirety substantially as set forth on Exhibit 1.4. The bylaws of the Sub as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable law, except that the name in the heading shall be changed to "Glasstech," Inc. 1.5 DIRECTORS AND OFFICERS. The directors of the Sub immediately prior to the Effective Time and the officers of the Company immediately prior to the Effective Time shall be the directors and officers, respectively, of the Surviving Corporation, until their respective successors are duly elected and qualified. 1.6 CONVERSION OF SHARES. At the Effective Time, each share of common stock of the Company, par value $.01 per share, issued and outstanding immediately prior to the Effective Time (each, a "Share") (other than Shares owned by the Parent, the Sub or any subsidiary of the Parent or Sub or held in the treasury of the Company, all of which shall be cancelled and retired and no consideration shall be delivered or deliverable in exchange therefor, and other than Dissenting Shares (as defined in Section 2.1)) shall, by virtue of the Merger and without any action on the part of the Parent, the Sub, the Company or the holder, shall cease to exist and be converted into the right to receive in cash, without interest, an amount determined by dividing the amount of Seventy Eight Million Dollars ($78,000,000), as adjusted pursuant to Section 1.8 (the "Aggregate Merger Consideration") plus the exercise price of all outstanding Options ( as defined in Section 2.4) by the total number of Shares issued and outstanding immediately prior to the Effective Time (including Shares issued upon exercise of Options (as defined in Section 2.4), but excluding Shares owned by the Parent, the Sub or any subsidiary of the Parent or Sub or held in treasury of the Company) (the "Merger Consideration"), upon the surrender of certificates representing the Shares in accordance with Section 2.2. 1.7 CONVERSION OF COMMON STOCK OF THE SUB. At the Effective Time, each share of common stock, par value $.01 per share, of the Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the Parent, the Sub or the Company, be converted into and become one share of common stock of the Surviving Corporation. 1.8 ADJUSTMENT TO AGGREGATE MERGER CONSIDERATION. The Aggregate Merger Consideration shall be $78,000,000 (the "Merger Amount") as adjusted upward or downward dollar for dollar to the extent that Net Working Capital (as defined below) as of the -2- 6 Closing is more positive or more negative than NEGATIVE $6,320,000 (the "Adjustment Amount"). To the extent Net Working Capital at the Closing is (i) more positive than NEGATIVE $6,319,999 (I.E., negative $6,320,000 or more), the Aggregate Merger Consideration shall be increased dollar for dollar by the Adjustment Amount and (ii) more negative than NEGATIVE $6,320,000 (I.E., negative $6,320,001 or less), the amount of Aggregate Merger Consideration will be decreased dollar for dollar by the Adjustment Amount. "Unrestricted Cash" is cash other than Restricted Cash. "Restricted Cash" shall mean cash collateral for outstanding standby letters of credit issued on behalf of the Company in support of the Company's performance obligations under various sales contracts. Restricted Cash becomes Unrestricted Cash upon performance by the Company under the applicable sales contract and/or expiration of the underlying letter of credit. "Net Working Capital" shall mean the sum of the following items, each determined in accordance with generally accepted accounting principles, applied on a basis consistent with that used to prepare the Financial Statements (as defined in Section 3.4) after giving effect to the payments by the Company contemplated by Sections 3.11, 6.2(j), 6.2(k) and 6.2(n): (i) any Unrestricted Cash retained in the Company as of Closing; (ii) Restricted Cash; (iii) accounts receivable; (iv) inventories stated at their FIFO values; and (v) prepaid expenses; MINUS (A) the "Accounts Payable Amount" (as defined below); (B) billings in excess of costs and estimated earnings on uncompleted contracts; (C) accrued payroll, pension, contract and tax expenses, and items categorized as "Other Expenses" in the Financial Statements; PROVIDED, HOWEVER, that this item shall not include accrued incentive compensation which shall be discharged at Closing in accordance with Section 6.2; and (D) all amounts, including interest and prepayment penalties, required to pay off and discharge as of the date of the Closing all third-party indebtedness of the Company and its subsidiaries, including capitalized lease obligations (to the -3- 7 extent any such indebtedness remains outstanding as of the Closing), but excluding any indebtedness incurred in connection with the financing of the Merger. The anticipated Net Working Capital as of the date of the Closing is as set forth on Schedule 1.8. The Accounts Payable Amount shall be determined as follows, determined in accordance with generally accepted accounting principles, applied on a basis consistent with that used to prepare the Financial Statements, after giving effect to the payments contemplated by Sections 3.11, 6.2(j), 6.2(k) and 6.2(n): (x) if the accounts payable of the Company total between $3,000,000 and $3,800,000, the Accounts Payable Amount shall be $3,393,000; (y) if the accounts payable of the Company total greater than $3,800,000, the Accounts Payable Amount shall be the sum of (i) $3,393,000 and (ii) the excess of the accounts payable of the Company over $3,800,000; and (z) if the accounts payable of the Company total less than $3,000,000, the Accounts Payable Amount shall be $3,393,000 minus the difference between (i) $3,000,000 and (ii) the accounts payable of the Company. 1.9 DETERMINATION OF ADJUSTMENT TO AGGREGATE MERGER CONSIDERATION. No later than 14 days prior to the Closing, the Company shall provide Parent with the Company's good faith estimate of the Net Working Capital at Closing (based on signed contracts as of the date of such good faith estimate), determined in accordance with Section 1.8 (the "Estimated NWC") and, based on such Estimated NWC, a preliminary estimate of the Adjustment Amount and the Aggregate Merger Consideration (the "Preliminary Aggregate Merger Consideration"). Within 60 days of the Effective Date, an audit of the Company shall be completed by Ernst & Young LLP ("Ernst & Young"). Pursuant to such audit, Ernst & Young shall determine the Net Working Capital at Closing (the "NWC Calculation") in accordance with Section 1.8 and, based on such NWC Calculation, the final Adjustment Amount and the Aggregate Merger Consideration. Within 60 days of the Effective Date, Ernst & Young shall deliver to the Company, the Parent, Kaye, Scholer, Fierman, Hays & Handler, LLP (the "Shareholders' Representative") and the Paying Agent (as defined in Section 2.2), a report ("E&Y Report") setting forth the NWC Calculation and its calculation of the Adjustment Amount and the Aggregate Merger Consideration. Expenses of the audit shall be borne by the Company after the Effective Time and shall not be considered in the NWC Calculation. -4- 8 If within 30 days following delivery of the E&Y Report, the Shareholders' Representative has not given the Parent notice of its objection to the NWC Calculation, the Adjustment Amount and the Aggregate Merger Consideration (such notice must contain a reasonably detailed statement of the basis of Shareholders' Representative's objection), then the NWC Calculation, the Adjustment Amount and the Aggregate Merger Consideration set forth in the E&Y Report shall be considered accepted and binding on all parties. If the Shareholders' Representative gives such notice of objection, then the issues in dispute will be submitted to Deloitte & Touche, certified public accountants (the "Accountants"), for resolution. If issues in dispute are submitted to the Accountants for resolution, (i) each party will furnish to the Accountants such work papers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party or its subsidiaries (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants: (ii) the determination by the Accountants, as set forth in a notice delivered to both parties by the Accountants, will be binding and conclusive on the parties; and (iii) Shareholders' Representative and the Parent will each bear 50% of the fees of the Accountants for such determination. If the Aggregate Merger Consideration as determined pursuant to the preceding paragraph is greater than the Preliminary Aggregate Merger Consideration, Parent shall contribute the amount of such excess to the Working Capital Escrow (the "Excess Amount") and the entire amount of the Working Capital Escrow (including all earnings thereon) shall be paid to record holders of Shares and Options as of the Effective Time. The Parent also shall contribute to the Working Capital Escrow the amount of interest, at the average rate earned in the Working Capital Escrow, on the Excess Amount that would have been earned beginning on the Closing Date and ending on the date of payment thereof. If the Aggregate Merger Consideration is less than the Preliminary Aggregate Merger Consideration, the deficiency shall be paid to Parent out of the Working Capital Escrow (together with all earnings thereon) and the balance of the Working Capital Escrow (together with the earnings thereon) shall be paid to record holders of the Shares and Options as of the Effective Time. The parties will instruct the Paying Agent to pay the Working Capital Escrow in accordance with the previous paragraph. Payments must be made in immediately available funds. 2. DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS 2.1 DISSENTING SHARES. Notwithstanding anything in this agreement to the contrary, Shares issued and outstanding immediately prior to the Effective Time and held by any stockholder who did not vote in favor of the Merger or consent -5- 9 thereto in writing and comply with Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration, unless and until any such stockholder shall have failed to perfect or shall have effectively withdrawn or lost his or her rights to appraisal under the DGCL, but the holder of such Dissenting Shares shall be entitled to payment from the Surviving Corporation of the appraised value of such Shares in accordance with the provisions of the DGCL. If any such holder shall have failed to perfect or shall have effectively withdrawn or lost that right, that holder's Shares shall thereupon be converted into and become exchangeable for the right to receive, as of the Effective Time, the Merger Consideration without any interest. The Company shall give the Parent (a) prompt notice of any written demands for appraisal of any Shares, attempted withdrawals of such demand and any other instruments served pursuant to the DGCL and received by the Company relating to stockholders' rights of appraisal and (b) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of the Parent, voluntarily make any payment with respect to demands for appraisal of Shares, offer to settle or settle any demands or approve any withdrawal of any such demands. 2.2 PAYMENT FOR SHARES (a) At the Effective Time, the Parent shall cause the Sub to deposit with National City Bank (or another bank or trust company reasonably satisfactory to the Company) (the "Paying Agent") the Preliminary Aggregate Merger Consideration (such funds, the "Payment Fund"). Of the Payment Fund, (i) $3,000,000 (the "Indemnification Escrowed Fund") shall be held by the Paying Agent pursuant to the terms of an Escrow Agreement in substantially the form of Exhibit 2.2 attached hereto (the "Indemnification Escrow Agreement") in escrow for any Losses (as defined in Section 8.2); (ii) $500,000 (the "Working Capital Escrow" and collectively with the Indemnification Escrow Fund the "Escrow Funds") shall be held in escrow by the Paying Agent pursuant to the terms of an Escrow Agreement in substantially the form of Exhibit 2.2 attached hereto (the "Working Capital Escrow Agreement") and; (iii) $250,000 shall paid to the Shareholders' Representative (to be held in its escrow account) and shall be used to pay the fees and expenses of the Shareholders' Representative. The Paying Agent shall, pursuant to irrevocable instructions, make the payments provided for in this paragraph (a) out of the Payment Fund. The Payment Fund shall not be used for any other purpose, except as provided in this agreement. (b) The amount resulting from the following formula shall be the "Per Share Merger Amount": 1. (x) the excess of the Preliminary Aggregate Merger Consideration over the aggregate amount of the Escrow Funds plus (y) the exercise price of all outstanding Options (as defined in Section 2.4) -6- 10 divided by 2. (z) the number of Shares outstanding immediately prior to the Effective Time (counting as outstanding any Shares issued or issuable upon exercise or deemed exercise of Options). (c) Immediately after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each record holder of Shares and Options as of the Effective Time, a form of letter of transmittal and instructions for use in effecting the surrender of certificates that immediately prior to the Effective Time represented outstanding Shares and Options (the "Certificates") for payment. Immediately upon surrender to the Paying Agent of a Certificate, together with the letter of transmittal duly executed, and except as set forth below with respect to the holders of Options, the holder of Certificates representing Shares shall be paid in cash an amount equal to the product of the Per Share Merger Amount and the number of Shares represented by such Certificate. The holders of Certificates representing Options shall be paid in cash an amount equal to the product of the Per Share Merger Amount and the number of Options represented by such Certificate MINUS the aggregate exercise price of such Options. No interest shall be paid or accrued on the cash payable upon the surrender of a Certificate. If payment is to be made to a person other than the person in whose name a Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that the tax has been paid or is not applicable. From and after the Effective Time and until surrendered in accordance with this Section 2.2, each Certificate (other than Certificates representing Shares owned by the Parent or the Sub or any of their subsidiaries, treasury shares and Dissenting Shares) shall represent for all purposes solely the right to receive in cash an amount equal to the product of the Per Share Merger Amount and the number of Shares or Options evidenced by the Certificate, without interest. (d) Any portion of the Payment Fund (including the proceeds of any investments of the Payment Fund) that remains unclaimed by the former stockholders of the Company for six months after the Effective Time and that is not held in an Escrow Fund shall be repaid to the Surviving Corporation. Any former stockholders of the Company who have theretofore complied with Section 2.1 shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) for payment of their claim for the Per Share Merger Amount, without interest. Neither the Parent nor the Surviving -7- 11 Corporation shall be liable to any holder of Shares for any monies delivered from the Payment Fund or otherwise to a public official pursuant to any applicable abandoned property, escheat or similar law. 2.3 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Shares shall thereafter be made. If, on or after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be cancelled and exchanged for cash as provided in this Section 2, subject to applicable law in the case of Dissenting Shares. 2.4 OPTIONS AND WARRANTS. At the Effective Time of the Merger, the Company shall cause each option or warrant to purchase Shares outstanding on such date (an "Option") to be cancelled by virtue of the Merger, without consideration except as provided in this Section 2.4, and such Options shall cease to exist. Each holder of an Option at the Effective Time, whether or not then exercisable, shall be deemed to have exercised such Option at the Effective Time and thus entitled to receive by virtue of the Merger the amount set forth in Section 2.2(c). All Shares issuable upon exercise of Options pursuant to this Section 2.4 shall be deemed issued and outstanding at the Effective Time for purposes of the Merger. No payment, assumption or conversion shall occur in the Merger with respect to cancelled Options. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Parent and Sub as follows: 3.1 AUTHORITY; NO CONFLICTS. Each of the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the law its jurisdiction of incorporation. The Company and its subsidiaries are each duly qualified to do business and in good standing in each jurisdiction listed on Schedule 3.1 and neither the nature of the business conducted by the Company or its subsidiaries or the properties owned by it or its subsidiaries requires any of them to qualify to do business as a foreign corporation in any other jurisdiction, except where the failure to so qualify would not have a material adverse effect on the business and financial condition of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). This agreement and the transactions contemplated hereby have been duly authorized by the board of directors of the Company and, assuming this agreement has been approved by the shareholders of the Company and assuming this agreement constitutes a valid and binding obligation of each of the Parent and Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject to general principles of equity (whether considered in a proceeding in equity or at law). Except as set forth on Schedule 3.1, the -8- 12 execution and delivery of this agreement does not, and the consummation of the transactions contemplated by this agreement will not, (a) violate the Company's or any of its subsidiaries' certificate of incorporation or bylaws, (b) result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, any note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement or arrangement to which the Company or any of its subsidiaries is a party or by which the Company or any of its assets or subsidiaries may be bound or (c) violate any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its subsidiaries or any of their property or assets, other than, in the case of clauses (b) and (c) above, any such conflicts, violations and defaults that, in the aggregate, would not have a Material Adverse Effect. No consent, approval, order or authorization of, or filing with or notification to any court or governmental or regulatory authority is required to be obtained or made by or with respect to the Company or any of its subsidiaries in connection with the execution and delivery of this agreement or the consummation by the Company of the transactions contemplated by this agreement, except (A) as may be required to comply with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (B) the filing of a certificate of merger pursuant to the DGCL, and (C) tax and other filing requirements the absence of which will not effect the validity or enforceability of this Agreement. 3.2 CAPITALIZATION (a) The authorized and outstanding capital stock of the Company, and the record owners of capital stock of the Company, are as set forth on schedule 3.2(a) to this Agreement. All the outstanding Shares have been duly authorized and validly issued, are fully paid and nonassessable and are free of preemptive rights. Except as set forth on schedule 3.2(a), there are no outstanding subscriptions, options, warrants, puts, calls, rights or other agreements or commitments relating to the issuance, transfer, purchase or sale by the Company or any of its subsidiaries of any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company, or obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment. (b) Except as set forth on schedule 3.2(b), the Company is the record owner of all the outstanding shares of capital stock of each of its subsidiaries, free and clear of any adverse claim. There are no irrevocable proxies with respect to any such shares. There are no outstanding (i) securities of the Company or any of its subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any of its subsidiaries or (ii) options or -9- 13 other rights to acquire from the Company or any of its subsidiaries, or other obligations of the Company or any of its subsidiaries to issue capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable for any capital stock, voting securities or ownership interests in, any of its subsidiaries, or other obligations of the Company or any of its subsidiaries to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment. There are no outstanding obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any of the Company's or its subsidiaries' outstanding securities. 3.3 COMPLIANCE WITH APPLICABLE LAWS. The business of the Company and its subsidiaries is being conducted in compliance with all applicable laws, orders, ordinances, rules and regulations of any governmental authority, except to the extent noncompliance would not have a Material Adverse Effect. 3.4 FINANCIAL STATEMENTS. Schedule 3.4 sets forth the unaudited consolidated balance sheet and related income statement and statement of cash flow of the Company and its subsidiaries (the "Interim Financials") as of and for the nine months ended March 31, 1997 (the "Interim Financial Statement Date") and the audited consolidated balance sheets and related income statements and statements of cash flow of the Company and its subsidiaries of and for the year ended June 30, 1996, the period from January 4, 1995 through June 30, 1995, the period from July 1, 1994 though January 3, 1995 and the year ended June 30, 1994 (including the notes thereto, together with the Interim Financials, the "Financial Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied, except as may be indicated in the notes thereto and except that the Interim Financials (i) are subject to normal, recurring year-end adjustments and (ii) do not include notes in accordance with generally accepted accounting principles. The Financial Statements fairly present the financial position, results of operations, cash flows and shareholders' equity of the Company and its subsidiaries for the periods and at the dates presented. To the best knowledge of the Company, the Financial Statements are true and complete in all material respects. 3.5 TAXES. The Company has and each of its subsidiaries has (a) duly and timely filed with the appropriate taxing authorities all federal income tax returns and all other material federal, state, local and foreign income, franchise, excise, real and personal property and other tax returns and reports required to be filed by or with respect to it on or before the Closing Date (except for those for which an extension beyond the date of the Closing was properly obtained) (the "Returns"), and (b) paid in full or made adequate provision for the payment of all amounts owed to any taxing authority for all periods covered by such Returns. The Returns are true, correct and complete in all material respects and have been prepared from and in accordance -10- 14 with the Company's books and records. Neither the Company nor any of its subsidiaries has received any notice of deficiency or assessment from any federal, state or local taxing authority with respect to liabilities for taxes of the Company or any of its subsidiaries that have not been fully paid or finally settled. Schedule 3.5 sets forth the year and result of all audits of federal, state, local and foreign tax returns of the Company and each of its subsidiaries. There are no pending or, to the best knowledge of the Company, threatened tax audit, administrative proceeding or judicial proceeding being conducted with respect to the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries has executed or filed with the Internal Revenue Service or any other taxing authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any taxes. Attached hereto as Schedule 3.5 is correspondence to a predecessor of the Company from the Internal Revenue Service (the "IRS") relating to the recognition of income by the Company (the "IRS Letter"). The Company has received no other or further communication from the IRS relating to the subject matter of the IRS Letter and the Company knows of no facts or circumstances which might jeopardize its continued reliance on the IRS Letter. 3.6 ABSENCE OF CHANGES OR EVENTS. Since June 30, 1996, the business of the Company and its subsidiaries has been conducted in all material respects in the ordinary course and there has not been any material adverse change in the business or financial condition of the Company and its subsidiaries taken as a whole, other than changes relating to the United States economy or foreign economies in general or the Company's industry in general, provided, however, that solely with regard to the period between the date of this Agreement and the date of the Closing, disruptions to the Company's business as a result of the announcement of the Merger and changes attributable solely thereto shall not constitute such a material adverse change. 3.7 EMPLOYEE BENEFIT MATTERS (a) Schedule 3.7 sets forth a true and complete list of all written bonus, incentive, stock purchase, stock option, severance, deferred compensation, medical, pension, life or other insurance, profit-sharing or retirement plans or arrangements sponsored or maintained, or that have been sponsored or maintained, or contributed to by the Company, any of its subsidiaries or by any trade or business, whether or not incorporated, that, together with the Company, would be deemed a "single employer" within the meaning of section 414(b), (c), (m) or (o) of the Internal Revenue Code or section 4001 of the Employee Retirement Income Security Act of 1974 ("ERISA") (a "Company ERISA Affiliate") (collectively, the "Company Plans"). The Company has delivered to the Parent true and complete copies of all written Company Plan documents, insurance contracts and other financing vehicles, and administrative service agreements, as they may have been amended to the date hereof, embodying or relating to the Company Plans; and with respect to each "employee benefit plan," -11- 15 within the meaning of Section 3(3) of ERISA, listed in Schedule 3.7, the Company has delivered to the Parent true and complete copies of (A) the last filed Form 5500 Series, including all schedules and attachments, (B) the summary plan description, and all modifications thereto, and (C) the most recent annual accountings related to plan assets and liabilities, each of which shall be correct in all material respects. Each Company Plan which is a "pension plan" within the meaning of Section 3(2) of ERISA has received a favorable determination letter from the Internal Revenue Service with respect to its qualification under Section 401(a) of the Internal Revenue Code, and the related trusts have been determined to be exempt from taxation under Section 501(a) of the Internal Revenue Code. A copy of the most recent determination letter with respect to each such plan has been delivered to the Parent and, nothing has occurred since the date of such letter that would cause the loss of or vacation of such exemption. (b) Each Company Plan is and has been operated and administered in all material respects in accordance with the terms of such Company Plan and in accordance with the applicable requirements prescribed by all applicable statutes and governmental rules and regulations, including without limitation ERISA and the Internal Revenue Code. The Company has performed all material obligations required to be performed by it under, and is not in material default under or in material violation of, any Company Plan. Full payment has been made, in a timely manner, of all amounts which the Company or any of its subsidiaries is required to pay under the terms of each of the Company Plans and none of the Company Plans nor any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in ERISA), whether or not waived. The Financial Statements reflect an accrual of all amounts of employer contributions accrued but unpaid under each of the Company Plans, including without limitation the unpaid benefit expense for each of the Company Plans for any portion of the fiscal year of each of the Company Plans ending on the Closing. (c) Except as disclosed on Schedule 3.7, neither the Company nor any Company ERISA Affiliate nor any predecessors of the Company or any Company ERISA Affiliate maintains, has maintained, contributes to or has contributed to a plan subject to section 412 of the Internal Revenue Code or Title IV of ERISA within the five years preceding this year. No Company Plan is a multiemployer plan (within the meaning of sections 3(37) or 4003(a)(3) of ERISA or section 414(f) of the Internal Revenue Code) ("Multiemployer Plan") and no Company Plan is a multiple employer plan as defined in section 413 of the Internal Revenue Code ("Multiple Employer Plan). Neither the Company nor any ERISA Affiliate is or was obligated to contribute to any Multiemployer Plan or Multiple Employer Plan. Between the date of the most recent Financial Statement and the date hereof, no material funding changes have been made to the Company Plans, except as expressly noted in Schedule 3.7. -12- 16 (d) Neither the Company nor any other "disqualified person" or "party in interest" (as defined in Section 4975 of the Internal Revenue Code and Section 3(14) of ERISA, respectively) has engaged in any "prohibited transaction," as such term is defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA, which could subject any Company Plan (or its related trust), any officer, director or employee of the Company, or any trustee, administrator or other fiduciary of any Company Plan to the penalty imposed under Section 4975 of the Internal Revenue Code or Section 502(i) or ERISA. (e) The Company hereby represents, covenants and warrants that all Company Plans are and remain fully terminable by the Company at any time (subject only to the payment of benefits accrued to date of such plan termination), and that no written or oral statements or representations have been made to any current or former employees of the Company (or to such current or former employees' beneficiaries), which are in any way inconsistent therewith. (f) To the best knowledge of the Company, the "administrator" (as described in Section 3(16)(A) of ERISA) of each of the Company Plans (as described in Section 3(3) of ERISA) of the Company has complied, in all material respects, with all applicable reporting and disclosure requirements of Part 1 of Title 1 of ERISA and the Internal Revenue Code in a timely manner, and no material penalties have been or will be imposed on the Company or the administrator with respect thereto. With respect to such Company Plans, and any trust(s), contracts or policies related thereto, the Company has no accrued or contingent liability, including without limitation, liabilities for federal, state or local taxes, other than routine administrative expenses. Moreover, to the best knowledge of the Company, there is no material pending litigation, arbitration, or disputed claim settlement or adjudication proceeding, and the Company is not aware of any material pending, threatened or anticipated litigation, arbitration or disputed claim, or any governmental or other proceeding, or investigation with respect to any of the Company Plans or related trust(s), or with respect to any fiduciary, administrator, or sponsor thereof (in their capacities as such), or any party-in-interest thereof, (other than routine claims for benefits). (g) Except as disclosed on Schedule 3.7, or as reflected on the Financial Statements, the Company has no material liability for unpaid compensation or fringe benefits, including without limitation accrued vacation, sick leave, post employment medical or other benefits, severance pay or "excess parachute payments" (within the meaning of Section 280(G) of the Code). (h) Except as set forth in Schedule 3.7, no Company Plan provides benefits, including death or medical benefits (whether or not insured), with respect to current or former employees after retirement or other termination of service other -13- 17 than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any "employee pension plan", as that term is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on the books of the Company or a Company ERISA Affiliate, or (iv) benefits, the full cost of which is borne by the current or former employee (or his beneficiary). (i) With respect to each Company Plan that is funded wholly or partially through an insurance policy, there will be no liability of the Company or a Company ERISA Affiliate, as of the Effective Date, under any such insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other material actual or contingent liability arising wholly or partially out of events occurring prior to the Effective Date. (j) Except as set forth in Schedule 3.7, the consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee or officer of the Company to severance pay, unemployment compensation or any other similar payment other than as provided under applicable law, except as expressly provided in this Agreement, (ii) accelerate the time of payment or vesting, or increase the amount of, any compensation due to any such employee or officer, or (iii) result in any prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code for which an exemption is not available. 3.8 CONTRACTS. Schedule 3.8 sets forth a list of all legally binding contracts, leases, agreements, purchase orders, obligations and undertakings, whether verbal or written, material to the business or financial condition of the Company and its subsidiaries, taken as a whole ("Contracts") (it being understood that the following shall not be deemed to be material: (i) any contract or agreement that involves an aggregate commitment by the Company or any of its subsidiaries of not more than $100,000; (ii) any contract or agreement for the sale of goods in the ordinary course of business that involves an aggregate commitment by the Company or any of its subsidiaries of less than $250,000; (iii) any contract or agreement terminable by the Company by notice of not more than 60 days for a cost of less than $100,000; or (iv) executive compensation and bonus arrangements that will terminate on or before the Effective Time.) Each Contract is a valid and binding obligation of the Company or the subsidiary of the Company that is a party to it and is in full force and effect and is enforceable against the Company or -14- 18 such subsidiary, as the case may be, in accordance with its provisions. Except as set forth on Schedule 3.8, neither the Company nor any of its subsidiaries has assigned, mortgaged, pledged or otherwise encumbered its interest in any Contract. Except as set forth on Schedule 3.8, neither the Company nor any of its subsidiaries nor, to the best knowledge of the Company and its subsidiaries any other party thereto, is in violation of, or in default under, any Contract, nor has there occurred any event or condition which, with the passage of time or giving of notice (or both) would constitute a violation of or default under any Contract which could lead to termination of the Contract and/or damages in excess of $100,000 plus the amounts reserved for or reflected on the Financial Statements for the cost of completion for such Contract. No notice has been received by the Company or any of its subsidiaries claiming any such default by the Company or any of its subsidiaries, or indicating the desire or intention of the other party thereto to amend rescind or terminate the Contract. 3.9 LITIGATION. Except as disclosed on Schedule 3.9, there are no actions, suits, arbitrations, investigations or proceedings (adjudicatory, rulemaking or otherwise) pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries (or any Company Plan), or any property of the Company or any such subsidiary (including Intellectual Property as defined in Section 3.10), in any court or before any arbitrator of any kind or before or by any governmental entity or authority, except actions, suits, arbitrations, investigations or proceedings which, individually or in the aggregate, have not had and could not reasonably be expected to have a Material Adverse Effect. 3.10 INTELLECTUAL PROPERTY. All patents, trademarks and service marks (registered or unregistered), and trade names, including pending applications for any of the foregoing, that are owned, licensed or used by the Company or any of its subsidiaries in the United States or abroad, are listed on Schedule 3.10 (the "Intellectual Property"; U.S. patents, U.S. trademarks and U.S. servicemarks (registered or unregistered) and U.S. trade names, including pending applications for any of the foregoing included in Intellectual Property are "Domestic Intellectual Property." Intellectual Property other than Domestic Intellectual Property is "Foreign Intellectual Property." Except as disclosed on Schedule 3.10, the Company is the sole and exclusive owner of all right, title and interest in and to the Domestic Intellectual Property free and clear of all liens, claims, charges, rights of use, encumbrances, and restrictions whatsoever and to the best of its knowledge the Company is the sole and exclusive owner of all right, title and interest in and to the Foreign Intellectual Property free and clear of all liens, claims, charges, rights of use, encumbrances, and restrictions whatsoever (in all cases without payment to any other person or entity, except as set forth in the Sales Contracts in the ordinary course of business, and except for -15- 19 maintenance fees payable to governmental entities in the ordinary course of business). Except as disclosed on Schedule 3.10, to the best of the Company's knowledge, the business of the Company, or any of its subsidiaries, as conducted prior to the Closing, and the consummation of the transactions contemplated by this agreement was not, is not, and will not be in contravention of any patent, trademark, service mark, trade name, copyright, or other proprietary right of any third party. Except as disclosed on Schedule 3.10, to the best of the Company's knowledge, the Intellectual Property rights are not infringed by any person or other entity. Except as provided in the sales Contracts in the ordinary course of business and as disclosed on Schedule 3.10, neither the Company nor any of its subsidiaries has indemnified any person or other entity with respect to any claim by any third party of patent, trademark, or copyright infringement arising from the use of equipment, materials, or products or processes produced, licensed or sold by the Company. To the best of the Company's knowledge, no product, process, method or operation presently sold, engaged in or employed by the Company or any of its subsidiaries infringes upon any rights owned by any other person, firm, corporation or other legal entity. 3.11 BROKERS. No broker, finder or other investment banker (other than CIBC Wood Gundy Securities Corp. ("CIBC") and Salomon Brothers) is entitled to receive any brokerage, finder's or other fee or commission in connection with this agreement or the transactions contemplated by this agreement based upon agreements made by or on behalf of the Company. The advisory fees due to CIBC and Salomon Brothers in connection with the Merger and legal fees due to Kaye, Scholer, Fierman, Hays & Handler, LLP in connection with the Merger, as well as all other fees and expenses incurred by the Company in connection with the Merger shall be paid at or prior to the Closing, and such payment shall not diminish the assets of the Company. Fees and expenses due to CIBC in connection with the financing arrangements for the transactions contemplated by this agreement shall be paid by Parent. 3.12 ENVIRONMENTAL MATTERS. For purposes of this section the following definitions shall apply: "Environmental Laws" shall mean all applicable federal, state, foreign, and local law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent order, judgment, decree, injunction, or agreement with any Governmental Authority, relating to: the protection of human health; the protection, preservation, or restoration of the environment (including, without limitation, ambient air, surface -16- 20 water, ground water, land surface, or subsurface strata); and the exposure to, or the emission, discharge, generation, use, manufacture, storage, treatment, processing, handling, labeling, production, transportation, distribution, release or threatened release into the environment, or disposal of Hazardous Substances, as herein defined. The term Environmental Laws includes, without limitation, the federal statutes the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act, the Occupational Health and Safety Acts, each as amended, and the regulations promulgated under them, and their state and local counterparts. "Governmental Authority" shall mean any federal, state, local, agency; or any department, commission, court, judiciary, board, bureau, or other instrumentality. "Hazardous Substances" shall mean any material listed, defined, designated or classified or which could be construed to be, by type and/or quantity as hazardous or toxic or injurious to public health under any applicable Environmental Laws. "Property" means the Real Property and all structures, fixtures, and other assets that could be contaminated thereon. "Real Property" means the land owned, leased, or occupied by the Company or any of its subsidiaries. Except as disclosed in Schedule 3.12 hereto: - ------------------------------------------- (a) The Company and each of its subsidiary's operation and use of its Property are in compliance with all applicable Environmental Laws except to the extent noncompliance would not have a Material Adverse Effect; (b) The Company and each of its subsidiaries have obtained all environmental, health and safety permits necessary for the operation of the business of the Company and its subsidiaries as presently conducted, and all such permits are in full force and effect and the Company and each of its subsidiaries is in compliance in all material respects with the terms and conditions of each such permit except for such permits the lack of which or noncompliance with the terms and conditions of which would not have a Material Adverse Effect; (c) Neither the Company nor any of its subsidiaries has received any notice of any material violation of any Environmental Laws that has not been resolved without prospective effect and there are no civil, criminal or administrative actions, suits, hearings, proceedings, written notices of violation, claims or demands pending, with respect to any material violation, alleged or proven, of Environmental Laws by the Company or any such subsidiary; -17- 21 (d) Neither the Company nor any of its subsidiaries are aware of any potential claims, damages, liabilities or costs associated with the condition of the Property including, without limitation, air, soil, and groundwater conditions that would have a Material Adverse Effect. (e) Neither the Company nor any of its subsidiaries has been involved in any activity in, upon, about, or under the Property in connection with the generation, use, handling, treatment, removal, storage, clean up, transport, or disposal of any Hazardous Substances which (i) has resulted in a release or threat or release of Hazardous Substances in material violation of any Environmental Law or (ii) has given or may give rise to any claims, losses, damages, liabilities, penalties, expenses, demands, fines or cleanup or monitoring cost which would have a Material Adverse Effect; (f) All Hazardous Substances which have been removed from the Property, have been removed, stored, cleaned-up, transported, and disposed of in compliance with all applicable Environmental Laws. Neither the Company nor any of its subsidiaries have been notified in writing that they are potentially liable, and have not received any written requests for information or other correspondence concerning the Real Property or off-site properties or facilities and, to the Company's knowledge, neither the Company nor its subsidiaries are considered potentially liable under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, or any equivalent state law which liabilities or potential liabilities would have a Material Adverse Effect. (g) To the best knowledge of the Company, there are no areas in, upon, or under the Property which are required to be permitted as treatment, storage, or disposal facilities under the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ.; and (h) To the best knowledge of the Company, there are no underground storage tanks (as the term is defined in 40 CFR ss. 280.12) in, or under, any of the Real Property. 3.13 PERCENTAGE COMPLETION OF ACCOUNTING; ACCOUNTS RECEIVABLE; INVENTORIES. The Company utilizes the percentage of completion method of accounting. The methodology used by the Company in estimating total contract costs and profits, including the nature of judgments and estimations, at March 31, 1997 is consistent with the methodology utilized at June 30, 1995 and June 30, 1996. As such, the Company believes that contract gross profit through March 31, 1997 has been recorded on a basis consistent with contract gross profit recognized in the periods ended June 30, 1995 and June 30, 1996. The Company has no knowledge of any factors which would require material adjustment to the estimated profit on uncompleted contracts at March 31, 1997. -18- 22 All of the accounts receivable of the Company and its subsidiaries as of March 31, 1997 are set forth in Schedule 3.13. The accounts receivable reflected on the Interim Financials, net of (i) estimated costs of materials and services supplied by customers and (ii) contract adjustments in the ordinary course of business, will be collectible as billed in accordance with the terms of the underlying contracts. All of the inventories of the Company and its subsidiaries as reflected in the Financial Statements (the "Inventories") and each of its subsidiaries consist of a quality and quantity usable and saleable in the ordinary course of business, except for items of obsolete materials and materials of below-standard quality, all of which have been written off or written down to net realizable value. 3.14 BACKLOG. All unfilled orders to purchase goods of the Company and its subsidiaries at a purchase price in excess of $100,000 are firm and binding commitments of the respective purchasers (assuming that such purchaser has properly authorized by all requisite corporate action and has properly executed and delivered such purchase order, which, to the best knowledge of the Company, is the case) to purchase the goods indicated. Set forth on Schedule 3.14 are the amounts of OEM architectural, OEM automotive and aftermarket backlog on a percent completion basis at June 30, 1996, June 30, 1995 and March 31, 1997. 3.15 CUSTOMERS AND SUPPLIERS. Set forth on Schedule 3.15(a) is a list of all customers of the Company, transactions with any of whom represented more than 5% of the Company's revenue in any of the preceding three fiscal years ("Customers"). Set forth on Schedule 3.15(b) is a list of all suppliers of raw material or equipment to the Company who, in the preceding year, were paid more than $250,000 ("Suppliers"). The Company's relationship with each of the Customers and Suppliers is generally good and the Company knows of no plans by any Customer or Supplier to terminate or alter its relationship with the Company in a manner materially adverse to the Company. 3.16 PRODUCT WARRANTIES. Schedule 3.16 sets forth all losses and expenses incurred by reason of liabilities arising under any warranties during each of the three years ended June 30, 1994, 1995 and 1996 and the nine month period ended March 31, 1997. There has been no material adverse change in that experience since March 31, 1997. 3.17 TITLE TO ASSETS; LIENS. Except as disclosed in Schedule 3.17, the Company and its subsidiaries have good and marketable title, insurable and indefeasible fee simple title in the case of owned Real Property, to all of their respective property, equipment and other assets, and such assets are free and clear of any mortgages, liens, security interests, charges, encumbrances or title defects of any nature whatsoever other than Permitted Liens (as hereinafter defined). Schedule 3.17(a) -19- 23 contains a complete and accurate legal description of each parcel of real property owned by each of the Company and its subsidiaries in the conduct of its business. Schedule 3.17(b) contains a complete and accurate description of all material tangible personal property owned or used by the Company or any subsidiary in the conduct of its business. There are no pending or, to the best knowledge of the Company, threatened zoning, condemnation or eminent domain proceedings, building, utility or other moratoria, or injunctions or court orders which would materially effect such continued operation. The current use of the owned Real Property is permissible and in material compliance with applicable zoning ordinances. Permitted Liens shall mean: (A) statutory liens; (B) rights of way disclosed on an ALTA survey of the property; and (C) items listed on Schedule 3.17(a). 3.18 LABOR RELATIONS. Neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement covering any of their respective employees and no such agreement is currently contemplated by the Company or any of its subsidiaries. There is no unfair labor practice complaint against the Company or any of its subsidiaries pending before the National Labor Relations Board and there is no labor strike, dispute, slowdown or stoppage, or any union-organizing campaign, actually pending or, to the best knowledge of the Company, threatened against or involving the Company or any of its subsidiaries. 3.19 INSURANCE. Schedule 3.19 lists all material insurance policies of the Company and its subsidiaries with respect to their respective businesses and/or assets. All such insurance policies are in full force and effect and all premiums due thereon have been paid. No written notice of termination or premium increase has been received under any such insurance policy. 3.20 INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS. Schedule 3.20 lists all intercompany agreements or arrangements of any kind between or among the Company and/or any of its subsidiaries, on the one hand, and the Company's officers, directors or stockholders owning more than 5% of the Shares of the Company, on the other hand. Except as set forth in Schedule 3.20, none of the Company's officers has any direct or indirect interest either by way of stock ownership or otherwise, in any firm, corporation, association or business enterprise which competes with the Company or any of its subsidiaries; is a supplier, client, customer, agent or broker of the Company or any of its subsidiaries; or is otherwise engaged in the business engaged in by the Company and such subsidiaries. Except as set forth on Schedule 3.20, none of the Company's directors has any direct or indirect interest either by way of stock ownership or otherwise, in any firm, corporation, association or business enterprise -20- 24 which competes with the Company or any of its subsidiaries. Ownership of capital stock listed on a national securities exchange or traded in the over-the-counter market of any corporation shall not be deemed a violation of this Section, provided the owner thereof and his affiliates do not own more than an aggregate of 5% of the capital stock of such corporation. 3.21 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Schedule 3.21, neither the Company nor any of its subsidiaries has any liabilities or obligations (whether choate or inchoate, absolute or contingent, or otherwise) except (i) liabilities which are reflected and reserved against or disclosed on the Financial Statements, (ii) liabilities incurred in the ordinary course of business and consistent with past practice since June 30, 1996 and which have not resulted in, and could not reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect; (iii) liabilities and obligations under any matter listed on a schedule to this agreement and contracts not required to be listed on Schedule 3.8. 3.22 OFFICERS AND DIRECTORS. Schedule 3.22 sets forth the names of all directors and officers of the Company and each of its subsidiaries. 3.23 BANKRUPTCY MATTERS. Predecessors to the Company, Glasstech Industries, Inc. and Glasstech, Inc., filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") on May 24 and May 25, 1993, respectively, in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The Company is the substantively consolidated, reorganized debtor pursuant to the plan of reorganization and confirmation order of the Bankruptcy Court. The Company has fully performed in all material respects all conditions precedent to confirmation and effectiveness of the plan of reorganization approved by the Bankruptcy court on or about December 6, 1994, with the technical amendments thereto (the "Plan of Reorganization") has become effective. Except as set forth in Schedule 3.23, the Company has satisfied in all material respects all terms of the Plan of Reorganization, including, but not limited to, payment in full of claims in Classes 1 through 4, inclusive, payment to claims in Classes 5 through 8, inclusive, as specified in the Plan of Reorganization, and treatment of Classes 9 and 10, inclusive, as specified in the Plan of Reorganization. Except as set forth in Schedule 3.23, the Company has assumed obligations for health and welfare plans, pension plans, and executory contracts as specified in the Plan or Reorganization (the "Assumed Obligations") and is current and no default exists with respect to all such Assumed Obligations and payment of such Assumed Obligations are reflected on the Financial Statements. The Company represents that no further orders to approve this Agreement and Plan of Merger are required to be obtained from the Bankruptcy Court. The Company is current on its payments to Senior Noteholders as defined in the Plan of Reorganization as -21- 25 Class 5 creditors and there is presently no default in the terms of the notes to the Senior Noteholders and the balance outstanding, including both principal and interest, is set forth in Schedule 3.23. 3.24 DISCLOSURE. None of this Agreement or any certificate or other document delivered by the Company contains any untrue statement of a material fact or omits any statement of a material fact necessary to make any statement contained herein or therein not misleading. 4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND SUB. The Parent and Sub jointly and severally represent and warrant to the Company as follows: 4.1 AUTHORITY; NO CONFLICTS. Each of the Parent and Sub is a corporation duly organized, validly existing and in good standing under the law of its jurisdiction of incorporation. All the issued and outstanding capital stock of the Sub is owned of record directly by the Parent. This agreement and the transactions contemplated hereby have been duly authorized by the board of directors of each of the Parent and Sub and by the Parent, as the sole stockholder of the Sub, and, assuming this agreement constitutes a valid and binding obligation of the Company, this agreement constitutes a valid and binding obligation of each of the Parent and Sub, enforceable against each of the Parent and Sub in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency and similar laws affecting creditors rights generally and subject to general principles of equity (whether considered in a proceeding in equity or at law). The execution and delivery of this agreement does not, and the consummation of the transactions contemplated by this agreement will not, (a) conflict with the Parent's or the Sub's certificate of incorporation or by-laws; (b) result in any violation of or default (with or without notice or lapse of time or both) under, any material note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment, agreement or arrangement to which the Parent or Sub is a party or (c) violate any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Parent, the Sub or any of their property or assets, other than, in the case of clauses (b) and (c) above, any such conflicts, violations and defaults that, in the aggregate, would not have a Material Adverse Effect. No material consent, approval, order or authorization of or filing with or notification to, any court or governmental or regulatory authority is required to be made by or with respect to the Parent or Sub in connection with the execution and delivery of this agreement or the consummation by the Parent and Sub of the transactions contemplated by this agreement, except (A) in as may be required to comply with the HSR Act and (B) the filing of a certificate of merger pursuant to the DGCL. 4.2 INTERIM OPERATIONS OF PARENT AND SUB. Each of the Parent and the Sub was formed solely for the purpose of engaging -22- 26 in the transactions contemplated by this agreement, and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated by this agreement. 4.3 BROKERS. No broker, finder or other investment banker (other than CIBC in connection with the financing of the transaction contemplated hereby) is entitled to any brokerage, finder's or other similar fee or commission in connection with this agreement or the transactions contemplated by this agreement based upon agreements made by or on behalf of the Parent or Sub. 4.4 FINANCING. The Parent and the Sub shall use all reasonable efforts to obtain financing for the Merger through a sale of $70,000,000 of senior notes of Sub in a Rule 144A offering. Key Equity Capital and certain members of the management of the Company have agreed, subject to the availability of such financing, to provide an aggregate equity investment in the Parent equal to $15,000,000. 5. COVENANTS 5.1 CAPITALIZATION. The Company shall not, and shall not allow any of its subsidiaries to, on or before the Effective Time, issue any shares of capital stock (other than pursuant to the exercise or conversion of options or warrants outstanding on the date of this agreement) or options, warrants, rights or other instruments to acquire capital stock of the company or any of its subsidiaries, make any material changes in its capitalization, declare dividends or enter into any transaction not in the ordinary course of business without the prior written consent of the Parent. 5.2 ACCESS TO INFORMATION (a) Subject to any limitations imposed by applicable law, between the date of this Agreement and the Effective Time, the Company shall (i) give the Parent and Sub and their authorized representatives all reasonable access (during regular business hours upon reasonable notice) to all employees, plants, properties, offices, warehouses and other facilities and to all books and records (including, without limitation, tax returns) documents, and subject to the Company's reasonable approval and in a manner arranged by the Company, customers, employees and lenders of the Company and its subsidiaries and cause the Company's and its subsidiaries' independent accountants to provide access to their work papers and such other information as the Parent or Sub may reasonably request, (ii) permit the Parent and Sub to make such inspections as they may reasonably require and (iii) cause its officers and those of its subsidiaries to meet with and furnish the Parent and Sub with such financial and operating data and other information with respect to the business, properties and personnel of the Company and its subsidiaries as the Parent or Sub may from time to time reasonably request. The rights of Parent under this Section -23- 27 5.2(a) shall not be exercised in such a manner as to interfere unreasonably with the conduct of the business of the Company. (b) Prior to the Effective Time, the Parent and Sub shall keep confidential all information obtained pursuant to this section 5.2, in accordance with the Confidentiality Agreement dated March 18, 1997 between Key Equity Capital and the Company (the "Confidentiality Agreement") to the same extent as if the Parent and the Sub were the parties to the Confidentiality Agreement; provided, however, that Key Equity Capital and Parent may, in connection with obtaining financing for the transactions contemplated by this Agreement and with the prior approval of the Company, which shall not be unreasonably withheld or delayed, disclose such information to lenders and other entities as is reasonably required to obtain such financing. 5.3 REASONABLE EFFORTS. Each party shall use its reasonable best efforts to cause the fulfillment at or prior to the Closing of all the conditions to such other party's obligation to consummate the Merger. 5.4 ANTITRUST NOTIFICATION. Each of the Company and Parent shall, as promptly as practicable, but in no event later than ten business days following the execution and delivery of this agreement, determine if the Company and Parent are required to file with the United States Federal Trade Commission (the "FTC") and the United States Department of Justice (the "DOJ") the notification and report form required for the transactions contemplated by this agreement and if such filing is required to make such filing and thereafter shall promptly file any supplemental information requested in connection with the filing pursuant to the HSR Act. Any such notification and report form and supplemental information shall be in substantial compliance with the requirements of the HSR Act. Each of the parties shall furnish the other(s) such necessary information and reasonable assistance as may reasonably be requested in connection with a party's preparation of any filing or submission under the HSR Act. The parties shall keep each other apprised of the status of any communications with, and inquiries or requests for additional information from, the FTC and the DOJ and shall comply promptly with any such inquiry or request. Each of the Company and Parent shall use its reasonable best efforts to obtain any clearance required under the HSR Act for the Merger at the earliest date practicable. 5.5 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to the Parent and Sub, and the Parent or Sub, as the case may be, shall give prompt notice to the Company, of (a) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which is likely to cause any representation or warranty of that party in this agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time and (b) any failure of that party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this agreement; PROVIDED, HOWEVER, that the -24- 28 delivery of any notice pursuant to this Section 5.5 shall not limit or otherwise affect the remedies available under this agreement to any of the parties receiving such notice. 5.6 FEES AND EXPENSES. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this agreement and the transactions contemplated by this agreement shall be paid by the party incurring the cost or expense, subject to Sections 3.11 and 4.3. 5.7 EMPLOYEE BENEFITS. The Parent and Sub agree that, for a period of at least two years following the Effective Time, the Surviving Corporation shall maintain benefit plans or arrangements for the employees of the Company and its subsidiaries with terms that, in the aggregate, are substantially equivalent or better than those of the Company Plans covering such employees immediately preceding the Effective Time, to the extent permitted under laws and regulations in force from time to time. 5.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) From and after the Effective Time, the Parent and the Surviving Corporation shall indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof or who becomes prior the Effective Time, an officer, director or employee of the Company or any of its subsidiaries (the "Indemnified Parties") against (i) all losses, claims, damages, costs, expenses (including attorneys' fees and expenses), liabilities or judgments or amounts that are paid in settlement of or in connection with any claim, action, suit, proceeding or investigation based in whole or in part on or arising in whole or in part out of the fact that such person is or was a director, officer or employee of the Company or any subsidiary of the Company, whether pertaining to any matter existing or occurring at or prior to the Effective Time and whether asserted or claimed prior to, or at or after, the Effective Time (the "Indemnified Liabilities") and (ii) all Indemnified Liabilities based in whole or in part on, or arising in whole or in part out of, or pertaining to this agreement, the transactions contemplated hereby or the financing thereof, in each case to the full extent the Company is permitted under Delaware law and would have been permitted under its Certificate of Incorporation and By-laws as they existed prior to the Effective Time to indemnify such person (and the Surviving Corporation shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the full extent permitted by law upon receipt of any undertaking required by Section 145(e) of the DGCL), provided that neither the Parent not the Surviving Corporation shall be liable for any settlement of any claim effected without its written consent, which consent, however, shall not be unreasonably withheld. Without limiting the foregoing, in the event any such claim, action, suit, proceeding or investigation is brought against any Indemnified Parties (whether arising -25- 29 before or after the Effective Time), (i) any counsel retained by the Indemnified Parties for any period after the Effective Time must be reasonably satisfactory to the Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received, and (iii) after the Effective Time, the Parent and the Surviving Corporation shall use all reasonable efforts to assist in the vigorous defense of any such matter. Any Indemnified Party wishing to claim indemnification under this Section 5.8 shall within 20 days of becoming aware of such claim, action, suit, proceeding or investigation, notify the Parent and the Surviving Corporation and shall deliver to the Surviving Corporation the undertaking, if any, required by Section 145(e) of the DGCL; provided, however, that the rights of the Indemnified Party to be indemnified hereunder shall not be adversely affected by its failure to give notice pursuant to the foregoing unless and only to the extent that the Parent and the Surviving Corporation are prejudiced thereby. The Parent and the Surviving Corporation shall be liable for the fees and expenses hereunder with respect to only one law firm, in addition to local counsel in each applicable jurisdiction, to represent the Indemnified Parties as a group with respect to each such matter unless there is, under applicable standards of professional conduct, a conflict between the positions of any two or more Indemnified Parties that would preclude or render inadvisable joint or multiple representation of such parties. (b) For a period of six years after the Effective Time, the Parent shall cause the Surviving Corporation to maintain in effect the current policies of directors' and officers' liability insurance maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the Indemnified Parties and underwritten by an insurance carrier of at least as favorable a financial rating) with respect to claims arising from facts or events which occurred before the Effective Time. (c) In the event the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Surviving Corporation assume the obligations set forth in this Section 5.8. (d) The provisions of this Section 5.8: (i) are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his heirs and his representatives; and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have contract or otherwise. -26- 30 5.9 CONDUCT OF THE BUSINESS OF THE COMPANY. During the period from the date of this agreement to the Effective Time, except as otherwise agreed to in writing by the Company and Parent: (i) the Company will, and will cause each of its subsidiaries to, conduct its business only in, and the Company will not take, and will cause each of its subsidiaries not to take, any material action except in, the ordinary course consistent with past practice, (ii) the Company will not, and the Company will cause each of its subsidiaries not to, enter into any material transaction other than in the ordinary course of business consistent with past practice, and (iii) to the extent consistent with the foregoing, with no less diligence and effort than would be applied in the absence of this Agreement, the Company will, and will cause each of its subsidiaries to, preserve intact its current business organizations and reputation, use its reasonable best efforts to preserve its relationships with customers, suppliers and others having business dealings with it with the objective that their goodwill and ongoing businesses shall be unimpaired at the Effective Time, and comply in all material respects with all laws, rules, regulations and orders of all governmental entities or regulatory authorities applicable to it. Without limiting the generality of the foregoing and except as otherwise expressly permitted in this Agreement, prior to the Effective Time, the Company will not and will not permit any of its Subsidiaries to, without the prior written consent of the Parent: (a) (i) increase the compensation of any of its directors, officers or employees, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company and its subsidiaries taken as a whole, (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated by any of the Company Plans, to any director, officer or employee, whether past or present, (iii) enter into any new or amend any existing employment agreement with any director, officer or employee, (iv) enter into any new or amend any existing severance agreement with any director, officer or employee, (v) except as may be required to comply with applicable law, become obligated under any new pension plan or arrangement, welfare plan or arrangement, multiemployer plan or arrangement, employee benefit plan or arrangement, severance plan or arrangement, benefit plan or arrangement, or similar plan or arrangement, which was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof; (b) enter into any contract or amend any existing contract, or engage in any new transaction outside the ordinary course of business consistent with past practice or not on an arm's-length basis, with any affiliate of the Company or any of its subsidiaries; -27- 31 (c) except to the extent required by applicable law, (i) permit any material change in (A) accounting, financial reporting, inventory, allowance or tax practice or policy or (B) any method of calculating any bad debt, contingency or other reserve for accounting, financial reporting or tax purposes or (ii) make any material tax election or settle or compromise any material income tax liability with any governmental entity or regulatory authority; (d) take any action that would cause any representations set forth in Article 3 not to be true in all material respects from and after the date hereof until the Effective Time; (e) fail to maintain in full force the insurance policies in effect on the date hereof or change any self- insurance program in effect in any material respect; (f) do any act or omit to do any act, or permit any act or omission to act, which will cause a breach of any contract or commitment of the Company or any of its subsidiaries, except to the extent that such breach would not have a Material Adverse Effect. 5.10 MEETING OF COMPANY SHAREHOLDERS. The Company will take all action necessary in accordance with applicable law and its Certificate of Incorporation and Bylaws to convene a meeting of its stockholders or solicit shareholder consents as promptly as practicable to consider and vote upon the approval of the Merger and the other transactions contemplated hereby (the "Company's Stockholders' Approval") and (ii) the Board of Directors of the Company shall recommend and declare advisable such approval and shall not modify or revoke such recommendation and declaration and the Company shall take all lawful action to solicit, and use all reasonable efforts to obtain, such approval. Each of the Parent and the Sub agrees to cooperate in all reasonable respects with the Company in the Company's efforts to obtain the Company Stockholders' Approval. 5.11 NO NEGOTIATIONS. From the date hereof until the Effective Time or the termination of this agreement, neither the Company nor any of its subsidiaries shall directly or indirectly, through any officer, director, agent, employee, representative or otherwise, make, solicit, initiate or knowingly encourage the submission of proposals or offers from any person or entity (including any of its officers or employees) relating to any recapitalization, merger, consolidation or other business combination involving the Company or any of its subsidiaries, any sale of all or a substantial portion of the assets of the Company or any of its subsidiaries, or the sale of any material equity interest in the Company or any of its subsidiaries (any of the foregoing, a "Competing Transaction"). During the term hereof, neither the Company nor any of its subsidiaries shall, directly -28- 32 or indirectly, participate in any negotiations regarding, furnish to any other person or entity any information with respect to, or otherwise cooperate, assist or participate in any effort or attempt by any third party to propose or effect any Competing Transaction. The Company shall immediately notify the Parent of any proposal relating to a possible Competing Transaction and shall, if legally permissible, immediately deliver to the Parent any information furnished to or by any such third party. 5.12 FINANCIAL STATEMENTS. The Company covenants and agrees that it will deliver to the Parent, within 30 days after the end of each month from the date hereof until the Closing, unaudited consolidated statements of operations and cash flows for the business of the Company and each of its subsidiaries for the month then ended, along with a consolidated balance sheet of the business of the Company and each of its subsidiaries as of the end of such month. All financial statements furnished pursuant to this Section shall fairly present the financial position, results of operations, cash flows and shareholders' equity as of the dates and for the periods covered by such statements. To the best knowledge of the Company, such financial statements shall be true and complete in all material respects. 5.13 NON-CONTRACT INVENTORY. As the inventory set forth on Schedule 5.13 (the "Non-Contract Inventory") is sold, the Company shall pay to the shareholders set forth on a schedule to be delivered prior to the Closing, at the addresses and in the percentages specified on such schedule (the "Shareholders") an amount equal to 50% of the Company's gross profit resulting from such sales, calculated in a manner consistent with that used to prepare the Financial Statements. Such payments shall be made within 45 days following the end of each fiscal quarter in which such sales is recognized and any accounts receivable attributed to such gross profit are collected, and shall be accompanied by a schedule setting forth in reasonable detail the calculation of such gross profit (the "Gross Profit Schedule"). A copy of the Gross Profit Schedule shall concurrently be delivered to the Shareholders' Representative. If within 30 days following delivery of the Gross Profit Schedule, the Shareholders' Representative has not given the Parent notice of its objection to the Gross Profit Schedule (such notice must contain a reasonably detailed statement of the basis of such objection), then the Gross Profit Schedule shall be considered accepted and binding on all parties. If the Shareholders' Representative gives such notice, the issues in dispute will be submitted to the Accountants for resolution in accordance with the procedures set forth in the third paragraph of Section 1.9. 5.14. NO DISTRIBUTIONS. Between the date of this Agreement and the Closing, the Company shall make no distributions, whether by way of dividends or otherwise, to any holder of Shares, Options or warrants. 5.15. ASSISTANCE IN FINANCING. Parent and Sub acknowledge that Sub currently intends that payment of the Merger -29- 33 Consideration will be financed by an offering of securities and the arranging of senior bank debt financing. The Company will provide customary assistance in connection with Parent and Sub's efforts to raise such financing, including, without limitation, making senior management reasonably available for meetings with prospective lenders and investors and cooperating in the preparation of offering documents and necessary financial and business information to enable documents, including the financial statements of the Company, to comply with the rules and regulations of the Securities and Exchange Commission, it being recognized that (a) neither the Company or any of the stockholders of the Company will have any responsibility with respect to such compliance, (b) it is contemplated that the indemnification described at Section 5.8 will apply to such efforts, and (c) Parent and Sub will pay any travel expenses incurred by the Company's executive officers in connection therewith. 6. CONDITIONS TO CONSUMMATION OF THE MERGER. 6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE MERGER. The obligation of each party to effect the Merger is subject to the satisfaction or waiver, prior to the Closing, of the following conditions: (a) all necessary waiting periods under the HSR Act applicable to the Merger shall have expired or been terminated; and (b) no statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced by any court or governmental authority against the Parent, the Sub or the Company and be in effect that prohibits or restricts the consummation of the Merger or makes such consummation illegal (each party agreeing to use all reasonable efforts to have such prohibition or restriction lifted or vacated). 6.2 CONDITIONS TO THE PARENT'S AND SUB'S OBLIGATIONS TO EFFECT THE MERGER. The obligations of the Parent and Sub to effect the Merger shall be subject to the satisfaction or waiver, prior to the Closing, of the following conditions: (a) since the date of this agreement, there shall not have been occurred any material adverse change in the business or financial condition of the Company and its subsidiaries, other than changes relating to the Company's industry or the economy in general and not specifically relating to the Company and its subsidiaries. Each of the Parent and Sub acknowledges that there may be disruptions to the Company's business as a result of the announcement of the Merger and changes attributable solely thereto shall not constitute a Material Adverse Change. Except as scheduled the Company knows of no disruptions or changes which will be attributed to the announcement of the Merger; -30- 34 (b) the representations and warranties of the Company in this agreement shall be true and correct in all material respects as of the Closing as if made again on and as of the Closing, and all the covenants in this agreement to be complied with or performed by the Company or waived by Parent or Sub at or before the Closing shall have been complied with and performed; and (c) the Parent shall have received an opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP addressed to the Parent and Sub and dated the Closing, reasonably satisfactory in form and substance to counsel for the Parent and Sub, covering the first and third sentences of section 3.1, clause (a) of the fourth sentence of section 3.1 as to the Company only, the first sentence of section 3.2(a) and, to the best of the knowledge of such counsel based solely on a certificate of an officer of the Company as to the existence of the matters to be opined and the absence of any contrary knowledge on the part of attorneys performing work for the Company, clauses (b) and (c) of the fourth sentence of section 3.1, the second sentence of section 3.2(a) and the first sentence and last two sentences of section 3.2(b); (d) the Company shall not have received notice from the holder or holders of more than 10% of the Shares that such holder or holders have exercised or intend to exercise its or their appraisal rights under the DGCL, and the Company shall have obtained approval of the Merger from the requisite holders of Shares in accordance with applicable law and the Certificate of Incorporation and Bylaws of the Company. (e) the Company shall have furnished the Parent with a certificate dated the Closing signed on its behalf by its Chairman, President or any Vice President to the effect that the conditions set forth in paragraphs (a), (b) and (d) above have been satisfied. (f) the Company and each of the individuals listed on the Schedule 6.2(f) shall have entered into employment and/or noncompetition agreements reasonably satisfactory in form and substance to the Parent. (g) the Company shall have delivered to the Parent its balance sheet as at March 31, 1997, and the related statements of operations and shareholders' equity and cash flows for the nine month period then ended. (h) the Parent shall be satisfied with the results of its legal and business due diligence review of the Company, Stir-Melter and [UK Sub] and their respective properties and assets including, without limitation, a review of the Company's financial results for fiscal 1997 year to date. (i) the Company shall have delivered to Parent a certificate of the Secretary of State of the State of Delaware, -31- 35 as of a recent date, certifying as to the good standing of the Company in the State of Delaware. (j) the Company shall have paid all incentive compensation costs attributable to the period prior to the Closing; (k) all third party debt of the Company and any accrued interest and any pre-payment penalties thereon, and any capitalized lease obligations of the Company shall have been paid; (l) all required authorizations, consents or approvals of any third party, the failure to obtain which could have a Material Adverse Effect; (m) the Parent shall have obtained debt and/or equity financing to acquire the Shares on terms and conditions reasonably satisfactory to it; and (n) the Company shall have delivered to Parent an owners policy of title insurance on ALTA Form B-1970 (amended) from Chicago Title Insurance Company (the "Title Company") in an amount acceptable to Parent (with each of the Title Company's standard printed exceptions deleted) insuring indefeasible fee simple title to the Real Property owned by the Company to be good in the Company from and after the Effective Time, subject only to: (i) zoning ordinances and regulations which do not prohibit or restrict the present use of such Real Property; (ii) real estate taxes and assessments both general and special which are a lien but not yet due and payable at the Effective Time; and (iii) mortgages, liens, easements, covenants, conditions, reservations and restrictions of record, if any, as have been approved in writing by Parent prior to Closing. With regard to such title policy, the Company shall bear the cost of the title commitment and the cost of the issuance of a title guaranty in the amount of $2,500,000, and Parent shall bear the difference between the cost of the title guaranty and the cost of the title policy. (p) Holders of a majority of the outstanding Shares shall have voted for the adoption of this agreement. 6.3 CONDITIONS TO THE COMPANY'S OBLIGATIONS TO EFFECT THE MERGER. The obligations of the Company to effect the Merger is subject to the satisfaction or waiver, prior to the Closing, of the following conditions: (a) the representations and warranties of the Parent and Sub in this agreement shall be true and correct in all material respects as of the Closing as if made again on and as of the Closing, and all the covenants in this agreement to be complied with or performed by the Parent and Sub at or before the Closing shall have been complied with and performed; -32- 36 (b) the Company shall have received an opinion of Baker & Hostetler LLP, counsel for the Parent and Sub, addressed to the Company and dated the Closing, reasonably satisfactory in form and substance to counsel for the Company, covering the first three sentences and clause (a) of the fourth sentence of section 4.1 and, to the best of the knowledge of such counsel, clauses (b) and (c) of the fourth sentence of Section 4.1; and (c) the holders of a majority of the authorized and outstanding Shares shall have voted for the adoption of this agreement. 7. TERMINATION; AMENDMENT; WAIVER 7.1 TERMINATION. This agreement may be terminated and the Merger abandoned at any time, notwithstanding approval of the Merger by the stockholders of the Company or the Sub, but prior to the Effective Time: (a) by mutual written action of the respective boards of directors of the Company and Parent; (b) by the Parent or Company, if such terminating party is not in material breach of its obligations under this agreement, if the Merger has not been consummated on or after September 30, 1997; (c) by the Parent or Company, if any court of competent jurisdiction shall have issued an order (other than a temporary restraining order), decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger; PROVIDED, HOWEVER, that the party seeking to terminate this agreement shall have used its reasonable best efforts to remove or lift such order, decree or ruling; (d) by the Parent, if events occur that render impossible compliance with one or more of the conditions set forth in section 6.1 or 6.2 that are not waived by the Parent or Sub, or by the Company, if events occur that render impossible one or more of the conditions set forth in sections 6.1 or 6.3 that are not waived by the Company; or (e) by either the Parent or the Company if this agreement shall fail to receive the requisite vote for approval and adoption by the shareholders of the Company. 7.2 EFFECT OF TERMINATION. If this agreement is terminated and the Merger abandoned pursuant to section 7.1, this agreement, except for section 5.2(b) and 5.6 and (to the extent applicable to the foregoing sections) section 8, shall forthwith become void and have no effect, without any liability on the part of any party or its directors, officers or stockholders. Nothing in this section 7.2 shall relieve any party of liability for breach of this agreement. -33- 37 7.3 AMENDMENT. To the extent permitted by applicable law, this agreement may be amended by action by or on behalf of the boards of directors of the Company, the Parent and the Sub, at any time before or after adoption of this Agreement by the stockholders of the Company, but no amendment shall be made that decreases the amount or form of the Merger Consideration or adversely affects the rights of the Company's stockholders under this Agreement, without the approval of the stockholders of the Company. This Agreement may not be amended, except by an instrument in writing signed on behalf of all the parties. 7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by or on behalf of the boards of directors of the Company, the Parent and the Sub may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties in this agreement, (b) waive any inaccuracies in the representations and warranties by any other party or in any document, certificate or writing delivered pursuant to this agreement by any other party or (c) waive compliance with any of the agreements or conditions in this agreement. Any agreement by any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of that party. 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in this agreement or in any certificate, document or instrument delivered pursuant to this agreement shall survive the Closing provided that, except as set forth below with respect to claims relating to tax matters, there shall be no liability with respect to any representation or warranty nor any rights to indemnification hereunder, except to the extent that the Shareholders' Representative is given notice of a claim with respect thereto within 18 months of the Effective Time specifying the factual basis for the claim in reasonable detail, and provided further that the Shareholders' aggregate liability with respect thereto shall be satisfied solely from to the Indemnification Escrowed Funds and no shareholder shall have any personal liability therefor. Any investigation by or on behalf of any party hereto shall not constitute a waiver as to enforcement of any representation or warranty. Any such claims relating to tax liabilities for a period (including any extensions provided of such statutory period) prior to Closing, whether or not arising prior to Closing, must be brought prior to the expiration of the statutory period of limitations for such period, and Losses (as defined below) for such claim shall include but not be limited to any tax paid, interest, legal costs, penalties and the tax equivalent of any net operating losses utilized. Upon the expiration of the final period during which claims may be brought, the parties shall direct the Escrow Agent to pay to the Shareholders (as defined in the Indemnification Escrow Agreement) the amounts remaining in the Indemnification Escrow Fund. -34- 38 8.2 INDEMNIFICATION FROM INDEMNIFICATION ESCROWED FUNDS. Notwithstanding the Closing and subject to the limitations set forth herein, the Parent and the Surviving Corporation shall be entitled to be indemnified and held harmless from the amount of the Indemnification Escrowed Funds from and against, and pay or reimburse each such person for, any and all claims, liabilities, obligations, losses, fines, costs, proceedings or damages (whether absolute, accrued, conditional or otherwise, and whether or not resulting from third party claims), including out-of-pocket expenses and reasonable attorneys' and accountants' fees incurred in the investigation or defense of any of the same or in asserting any of their respective rights hereunder (collectively, "Losses") resulting from or arising out of: (a) any breach or inaccuracy of any representation or warranty (or the schedules relating thereto) or nonperformance of any covenant of the Company; and (b) any claim, liability or obligation arising with respect to or relating to any holder of Shares' exercise of his, her or its appraisal rights under Section 262 of the DGCL; provided, however, that the amount of indemnification hereunder shall be limited to the difference between the price per share for each outstanding Share held by such shareholder that such shareholder would have received under this Agreement and the amount such shareholder is entitled to as a result of such shareholder's exercise of his, her or their appraisal rights under Section 262 of the DGCL. 8.3 LIMITATION ON INDEMNITY OBLIGATION. Notwithstanding anything in this agreement to the contrary, indemnification sought under Article 8 shall be satisfied solely from the Indemnification Escrowed Funds. The Parent and the Surviving Corporation shall not be entitled to indemnification hereunder with respect to an Indemnifiable Claim (as defined below) (or, if more than one Indemnifiable Claim is asserted, with respect to all Indemnifiable Claims) until the aggregate amount of Losses with respect to such Indemnifiable Claim or Claims exceeds $10,000, in which event the indemnity provided for in this Article 8 shall be with respect to the entire amount of Losses without regard to the limitations set forth above, and further provided, that prior to termination of the Indemnification Escrow, the Parent and the Surviving Corporation shall be entitled to indemnification with respect to all Indemnifiable Claims, regardless of the aggregate amount of such Claims. 8.4. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY CLAIMS. (a) If the Parent determines to seek indemnification under this Article with respect to Losses resulting from the assertion of liability by third parties (an "Indemnifiable Claim"), it shall give notice to the Shareholders' Representative as provided in Section 9.3, within 20 days of the Parent becoming aware of any such Indemnifiable Claim or of facts upon which any -35- 39 such Indemnifiable Claim will be based; the notice shall set forth such information with respect thereto as is then reasonably available to the Parent. If the Parent so notifies the Shareholders' Representative thereof, the Shareholders' Representative will be entitled, if the Shareholders' Representative so elects by written notice delivered to the Parent within 20 days after receiving the Parent's notice, to assume the defense thereof with counsel reasonably satisfactory to the Parent. Notwithstanding the foregoing (i) the Parent shall also have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Parent; and (ii) the rights of the Parent to be indemnified hereunder in respect of Losses resulting from the assertion of liability by third parties shall not be adversely affected by its failure to give notice pursuant to the foregoing unless, and, if so, only to the extent that, the Holders are materially prejudiced thereby. With respect to any assertion of liability by a third party that results in Losses, the parties hereto shall make available to each other all relevant information in their possession material to any such assertion. (b) In the event that the Shareholders' Representative, within 20 days after receipt of the aforesaid notice of Losses, fail to assume the defense of the Parent against such Losses, the Parent shall have the right to undertake the defense, compromise or settlement of such action on behalf of and for the account and risk of the Indemnification Escrowed Funds. (c) Notwithstanding anything in this Section to the contrary, (i) if there is a reasonable probability that Losses may materially and adversely affect the Parent or the Surviving Corporation, other than as a result of money damages or other money payments, the Parent shall have the right, at its own cost and expense, to defend, compromise or settle such Losses, provided that the Shareholders' Representative shall not be bound by any such defense, compromise or settlement made without the consent of the Shareholders' Representative; and (ii) the Shareholders' Representative shall not, without the Parent's written consent (which consent shall not be unreasonably withheld), settle or compromise any Loss or consent to entry of any judgment in respect thereof unless such settlement, compromise or consent includes as an unconditional term thereof providing for the giving by the claimant or the plaintiff to the Parent or the Company, as the case may be, and all affiliates of the Parent and the Company a release from all liability in respect of such Loss. 8.5. PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD-PARTY CLAIMS. In the event that the Parent asserts the existence of a Loss (but excluding claims resulting from the assertion of liability by third parties), it shall give written notice to the Shareholders' Representative specifying the nature and amount of the claim asserted. If the Shareholders' Representative, within 30 days after receiving the notice from -36- 40 the Parent, shall not give written notice to the Parent announcing its intent to contest such assertion by the Parent, such assertion shall be deemed accepted, and the amount of the Losses shall be paid to Parent out of the Indemnification Escrowed Funds. 9. MISCELLANEOUS 9.1 SHAREHOLDERS' REPRESENTATIVE. (a) The Company hereby designates Kaye, Scholer, Fierman, Hays & Handler, LLP (the "Shareholders' Representative"), as the representative of the shareholders of the Company. The Shareholders' Representative shall have, among others, the following powers and duties: (i) to take such actions and to incur such costs and expenses as the Shareholders' Representative in its sole discretion deems necessary or advisable to safeguard the interests of the shareholders in the [Escrow Accounts], including, but not limited to, contesting any claim for Losses and commencing or defending litigation and settling any such claim or litigation; (ii) to employ accountants, attorneys and such other agents as the Shareholders' Representative may deem advisable and to pay reasonable compensation for such services; (iii) to maintain a register of the shareholders; and (iv) to take all actions which the Shareholders' Representative deems necessary or advisable in order to carry out the foregoing and the consummation and completion of the transactions contemplated hereby. (b) The Shareholders' Representative may resign at any time at its sole and absolute discretion. The shareholders may, at any time, by a majority vote (one vote for each Share held by a shareholder at the Effective Time and assuming all Options outstanding at the Effective Time shall have been exercised), remove, replace or appoint as necessary, the Shareholders' Representative. (c) The Shareholders' Representative shall be compensated for its services on the basis of its customary fees and shall be reimbursed for out-of-pocket expenses from the Shareholders' Representative's Escrow Fund). The Shareholders' Representative shall direct the Paying Agent to pay expenses incurred by it in performing its duties under this Section 9.1 out of the Shareholders' Representative's Escrow Fund. Upon a determination by the Shareholders' Representative that it will not incur any additional expenses, the Shareholders' Representative shall direct the Paying Agent to pay any remaining balance of the Shareholders' Representative's Fund proportionally to the shareholders (other than to the holders of Dissenting Shares). (d) The Shareholders' Representative shall not be liable to any shareholder or by reason of any error of judgment or for any act done or step taken or omitted by the Shareholders' Representative or for any mistake of fact or law or anything which the Shareholders' Representative may do or refrain from doing in connection herewith, unless caused by or arising out of -37- 41 willful misconduct. The Shareholders' Representative shall have full and complete authorization and protection for any action taken or suffered by the Shareholders' Representative hereunder in good faith and in accordance with the advice of attorneys, accountants, experts or other agents engaged by the Shareholders' Representative. The shareholders agree to indemnify and hold the Shareholders' Representative harmless against any and all liabilities, obligations, losses or expenses arising from the Shareholders' Representative's actions in its capacity as a representative of the shareholders. The Shareholders' Representative may, in its sole discretion, request instructions from the shareholders at any time the Shareholders' Representative determines such instructions are necessary or advisable prior to the execution of any act or decision and shall have full and complete protection for any action taken in good faith in reliance upon the instructions received by a majority of shareholders responding to such request. It is a condition to the agreement by the Shareholders' Representative to act in such capacity that a majority of the shareholders confirm, in the letter of transmittal or other similar document, their agreement to the provisions of this Section 9.1. 9.2 VALIDITY. The invalidity or unenforceability of any provision of this agreement shall not affect the validity or enforceability of any other provision of this agreement, which shall remain in full force and effect, unless the invalidity or unenforceability of such provision would (a) result in such a material change to this agreement as to be unreasonable, or (b) materially or adversely frustrate the obligations of the parties in this agreement as originally written. 9.3 NOTICES. All notices, requests, claims, demands and other communications under this agreement shall be in writing and shall be deemed to have been duly given when delivered in person, by facsimile transmission with confirmation of receipt, or by nationally recognized overnight delivery service, or five business days after the date of mailing if sent registered or certified mail (postage prepaid, return receipt requested) to the respective parties as follows: if to the Parent or Sub: Glasstech Holding Co. 127 Public Square, 6th Floor Cleveland, Ohio 44114-1306 Telecopier: (216) 689-3204 Attention: David P. Given -38- 42 with a copy to: Baker & Hostetler LLP 3200 National City Center 1900 E. 9th Street Cleveland, Ohio 44114-3485 Telecopier: (216) 696-0740 Attention: R. Steven Kestner if to the Company: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Telecopier: 419-661-9366 Attention: General Counsel with copies to: Balfour Investors, Inc. 620 Fifth Avenue 7th Floor New York, New York 10020 Telecopier: 212-265-8049 Attention: Mr. Harry Freund Kaye, Scholer, Fierman, Hays & Handler, LLP 425 Park Avenue New York, New York 10022 Telecopier: 212-836-7149 Attention: Joel I. Greenberg if to Shareholders' Representative: Kaye, Scholer, Fierman, Hays & Handler, LLP 425 Park Avenue New York, New York 10022 Telecopier 212-836-7149 Attention: Joel I. Greenberg or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt of notice of the change). 9.4 GOVERNING LAW. This agreement shall be governed by and construed in accordance with the law of the state of Delaware, without giving effect to principles of conflicts of laws applicable thereto. 9.5 INTERPRETATION. Whenever a reference is made in this agreement to Sections, such reference shall be to a Section of this agreement unless otherwise indicated. The headings in this agreement are for convenience of reference only and are not -39- 43 intended to be part of or to affect the meaning or interpretation of this agreement. 9.6 PARTIES IN INTEREST. This agreement shall be binding upon and inure solely to the benefit of each party to this agreement, and nothing in this agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature under or by reason of this agreement (other than sections 5.7 and 5.8). 9.7 COUNTERPARTS. This agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. 9.8 PRESS RELEASES; CONFIDENTIALITY. The Parent, the Sub and the Company shall consult with each other before issuing any press release or otherwise making any public statement with respect to the transactions contemplated by this agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law. Except in connection with the financing of the transactions contemplated hereby, no party shall discuss or otherwise disclose to an unrelated third party the terms and conditions of this agreement and the transactions contemplated hereby prior to the Effective Time. 9.9 ENTIRE AGREEMENT. This agreement, together with the Confidentiality Agreement, constitutes the entire agreement among the parties with respect to its subject matter and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to that subject matter. GLASSTECH HOLDING CO. By:/s/ David P. Given --------------------------------- Name: David P. Given Title: Vice President GLASSTECH SUB CO. By:/s/ David P. Given --------------------------------- Name: David P. Given Title: Vice President GLASSTECH, INC. By:/s/ Mark D. Christman --------------------------------- President, Chief Operating Officer -40- EX-2.2 3 EXHIBIT 2.2 1 Exhibit 2.2 AMENDMENT TO AGREEMENT AND PLAN OF MERGER This Amendment to Agreement and Plan of Merger dated as of July 2, 1997 is by and among Glasstech Holding Co., a Delaware corporation (the "Parent"), Glasstech Sub Co., a Delaware corporation and a wholly-owned subsidiary of the Parent (the "Sub"), and Glasstech, Inc., a Delaware corporation (the "Company"). WHEREAS, the parties entered into an Agreement and Plan of Merger dated as of June 5, 1997, pursuant to which Sub Co. will be merged with and into the Company, with the Company as the surviving entity (the "Merger"); WHEREAS, pursuant to the Merger, all outstanding Shares of Glasstech shall be cancelled and, except for Shares owned by the Parent, the Sub, any subsidiary of the Parent or the Sub, or held in the treasury of the Company, shall be converted into the right to receive the Merger Consideration; WHEREAS, certain stockholders of the Company set forth on Exhibit A hereto (the "Management Stockholders") are desirous of contributing their Shares of the Company (the "Management Shares") to the Parent in exchange for stock of the Parent prior to the Effective Time of the Merger; WHEREAS, such a contribution and exchange would result in the Parent owning Shares of the Company at the Effective Time; WHEREAS, pursuant to the Merger Agreement such Shares of the Company will not be entitled to participate in the Merger Consideration; 2 WHEREAS, the parties are desirous of facilitating the exchange of the Management Shares by the Management Stockholders for shares of the Parent; WHEREAS, to facilitate such exchange, the parties are desirous of amending the Merger Agreement to adjust the Merger Consideration to reflect the exclusion of the Management Shares from participation in the Merger Consideration; WHEREAS, the parties are desirous of effecting certain other changes to the Merger Agreement; NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and in the Merger Agreement, the parties hereto hereby agree as follows: 1. DEFINED TERMS. All defined terms used herein and not otherwise defined shall have the meanings ascribed to them in the Merger Agreement. 2. AMENDMENT TO SECTION 1.9. The fourth paragraph of Section 1.9 shall be amended by the addition at the end thereof of the following sentence: The amount, if any, payable to record holders of Shares and Options pursuant to the foregoing provisions of this paragraph shall be paid (x) to the extent not exceeding $30,160 to Shareholders' Representative to be held and used as provided in clause (iii) of the second sentence of Section 2.2(a) and (y) the balance, if any, to record holders of the Shares and Options as of the Effective Time. 3. AMENDMENT TO MERGER AGREEMENT FOR MANAGEMENT SHARES. Sections 2.2(a) and 2.2(b) and the first paragraph of Section 2.2(c) of the Merger Agreement shall be deleted in their entirety and the following inserted in lieu thereof: -2- 3 (a) At the Effective Time, the Parent shall cause the Sub to deposit with The Bank of New York (or another bank or trust company reasonably satisfactory to the Company) (the "Paying Agent") the excess of (i) the Preliminary Aggregate Merger Consideration over (ii) the sum of (x) the product of the Per Share Merger Amount (as defined in subparagraph (b) below) and the number of Management Shares (as defined in subparagraph (e) below) and (y) the aggregate amount payable by the Surviving Corporation with respect to Options pursuant to paragraph (c) (such funds, the "Payment Fund"). Of the Payment Fund, (i) $3,000,000 (the "Indemnification Escrowed Fund") shall be held by the Paying Agent pursuant to the terms of an Escrow Agreement in substantially the form of Exhibit 2.2 attached thereto (the "Indemnification Escrow Agreement") in escrow for any Losses (as defined in Section 8.2); (ii) $500,000 (the "Working Capital Escrow" and collectively with the Indemnification Escrow Fund the "Escrow Funds") shall be held in escrow by the Paying Agent pursuant to the terms of an Escrow Agreement in substantially the form of Exhibit 2.2 attached hereto (the "Working Capital Escrow Agreement") and; (iii) $219,840 shall be paid to the Shareholders' Representative (to be held in its escrow account) and shall be used to pay the fees and expenses of the Shareholders' Representative. The Paying Agent shall, pursuant to irrevocable instructions, make the payments provided for in this paragraph (a) out of the Payment Fund. The Payment Fund shall not be used for any other purpose, except as provided in this agreement. (b) The amount resulting from the following formula shall be the "Per Share Merger Amount": 1. (x) the excess of the Preliminary Aggregate Merger Consideration over the aggregate amount of the Escrow Funds plus (y) the exercise price of all outstanding Options (as defined in Section 2.4) divided by -3- 4 2. (z) the number of Shares outstanding immediately prior to the Effective Time (counting as outstanding any Shares issues or issuable upon exercise or deemed exercise of Options). (c) Immediately after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each record holder of Shares as of the Effective Time, a form of letter of transmittal and instructions for use in effecting the surrender of certificates that immediately prior to the Effective Time represented outstanding Shares (the "Certificates") for payment. Immediately upon surrender to the Paying Agent of a Certificate representing Shares, together with the letter of transmittal duly executed, the holder shall be paid in cash from the Payment Fund an amount equal to the product of the Per Share Merger Amount and the number of Shares represented by such Certificate. At the Effective Time, the Surviving Corporation shall pay in cash to each holder of Options listed on Schedule 3.2(a), pursuant to instructions provided to the Surviving Corporation by such holder, an amount equal to the product of the Per Share Merger Amount and the number of such holder's Options as set forth on such Schedule MINUS the aggregate exercise price of such Options and applicable withholding taxes, if any. 4. FURTHER AMENDMENT TO MERGER AGREEMENT FOR MANAGEMENT SHARES. The following language shall be added to the end of Section 2.2 of the Merger Agreement: (e) "Management Shares" shall mean the Shares contributed to Parent by the former stockholders of the Company as set forth on Schedule 2.2(e). For purposes of paragraphs (c) and (d) of this Section, Management Shares shall not be considered Shares. 5. PAYMENTS FROM ESCROWS. The Parent shall be included on the list of Shareholders set forth as Schedule 2 to -4- 5 the Indemnification Escrow Agreement and Schedule 2 to the Working Capital Escrow Agreement, and the percentage attributable to the Parent on such schedules shall be the percentage the Management Shares bear to the total number of Shares outstanding immediately prior to the Effective Time (including Shares issued or issuable upon exercise or deemed exercise of Options). 6. AMENDMENT TO MERGER AGREEMENT FOR NON-CONTRACT INVENTORY PAYMENTS. Section 5.13 of the Merger Agreement shall be deleted in its entirety. 7. AMENDMENT TO MERGER AGREEMENT FOR AGGREGATE MERGER CONSIDERATION. The words "Seventy Eight Million Dollars ($78,000,000) in Section 1.6 of the Merger Agreement shall be changed to "Seventy Six Million Two Hundred Thousand Dollars ($76,200,000)." In Section 1.8 of the Merger Agreement, the words "$78,000,000" shall be changed to "$76,200,000." -5- 6 8. NO FURTHER CHANGES. Except as expressly set forth herein, the Merger Agreement shall remain unchanged in all respects and shall remain in full force and effect. GLASSTECH HOLDING CO. By:/S/ Mark D. Christman ---------------------------------------- Title:President ------------------------------------- GLASSTECH SUB CO. By:/S/ Mark D. Christman ---------------------------------------- Title:President ------------------------------------- GLASSTECH, INC. By:/S/ Mark D. Christman ---------------------------------------- Title:President ------------------------------------- -6- 7 Schedule 2.2(e) --------------- Management Shares ----------------- John S. Baxter 1100 Ron A. McMaster 2000 Diane S. Tymiak 1500 Kenneth H. Wetmore 1000 James P. Schnabel 150 Larry E. Elliott 100 Mark D. Christman 17508 -7- EX-3.1 4 EXHIBIT 3.1 1 Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF GLASSTECH, INC. FIRST: The name of the corporation (the "Corporation") is Glasstech, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: 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. FOURTH: The total number of shares which the Corporation shall have authority to issue is One Thousand (1,000) shares of Common Stock, par value $.01 per share. FIFTH: The Board of Directors is authorized to make, alter or repeal the By-laws of the Corporation. SIXTH: Meetings of stockholders shall be held at such place, within or without the State of Delaware, as may be designated by or in the manner provided in the By-Laws of the Corporation, or, if not so designated, at the registered office of the Corporation in the State of Delaware. Elections of directors need not be by written ballot except and to the extent provided in the By-Laws of the Corporation. 2 SEVENTH: Any one or more directors may be removed with or without cause, by the vote or written consent of the holders of a majority of the issued and outstanding shares of stock of the Corporation entitled to be voted at an election of directors. EIGHTH: The Corporation reserves the right to amend, alter or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights of the stockholders herein are subject to this reservation. NINTH: To the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws presently or hereafter in effect, no director of the Corporation shall be personally liable to the Corporation or its stockholders for or with respect to any acts or omissions in the performance of his or her duties as a director of the Corporation. Any repeal or modification of this Article Tenth shall not adversely affect any right or protection of a director of the Corporation existing immediately prior to such repeal or modification. TENTH: Each person who is or was or had agreed to become a director or officer of the Corporation, or each such person who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Corporation as an employee or agent of the Corporation or as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), -2- 3 shall be indemnified by the Corporation to the full extent permitted by the General Corporation Law of the State of Delaware or any other applicable laws as presently or hereafter in effect. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Article Eleventh. Any repeal or modification of this Article Eleventh shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification. -3- EX-3.2 5 EXHIBIT 3.2 1 EXHIBIT 3.2 GLASSTECH, INC. BY-LAWS Adopted as of June 4, 1997 2 GLASSTECH, INC. BY-LAWS (Adopted as of June 4, 1997) ARTICLE I MEETINGS OF STOCKHOLDERS Section 1. TIME AND PLACE OF MEETING. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, within or without the State of Delaware, as may be designated by the Board of Directors, or by the President, the Vice President or the Secretary in the absence of a designation 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 MEETING. An annual meeting of the stockholders, commencing with the year 1998, shall be held on the second Tuesday in May if not a legal holiday, and if a legal holiday, then on the next business day following, at 1:30 p.m., or at such other date and time as shall be designated from time to time by the Board of Directors, at which meeting the stockholders shall elect by a plurality vote the directors to succeed those whose terms expire and shall transact such other business as may properly be brought before the meeting. Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by law or by Certificate of Incorporation, may be called by the Board of Directors, the President or the Vice President, and shall be called by the President or the Secretary at the request in writing of stockholders owning twenty-five percent or more of the Common Stock of the Corporation issued and outstanding and entitled to vote. Such request shall be sent to the President and the Secretary and shall state the purpose or purposes of the proposed meeting. Section 4. NOTICE OF MEETINGS. Written notice of every meeting of the stockholders, stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting, except as otherwise provided herein or by law. When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty days, or if after the adjournment a new record date is -1- 3 fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 5. QUORUM. The holders of fifty-five percent of the 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 except as otherwise provided by law or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. Section 6. VOTING. Except as otherwise provided by law or by the Certificate of Incorporation, each stockholder shall be entitled at every meeting of the stockholders to one vote for each share of stock having voting power standing in the name of such stockholder on the books of the Corporation on the record date for the meeting and such votes may be cast either in person or by written proxy. Every proxy must be duly executed and filed with the Secretary of the Corporation. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. The vote upon any question brought before a meeting of the stockholders may be by voice vote, unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. Every vote taken by written ballot shall be counted by one or more inspectors of election appointed by the Board of Directors. When a quorum is present at any meeting, the vote of the holders of a majority of the stock which has voting power present in person or represented by proxy shall decide any question properly brought before such meeting, unless the question is one upon which by express provision of law, the Certificate of Incorporation or these By-Laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. ARTICLE II DIRECTORS Section 1. POWERS. The business and affairs of the Corporation shall be managed by or under the direction of its -2- 4 Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation directed or required to be exercised or done by the stockholders. Section 2. NUMBER AND TERM OF OFFICE. The Board of Directors shall consist of one or more members. The number of directors shall be fixed by resolution of the Board of Directors or by the stockholders at the annual meeting or a special meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3 of this Article, and each director elected shall hold office until his successor is elected and qualified, except as required by law. Any decrease in the authorized number of directors shall not be effective until the expiration of the term of the directors then in office, unless, at the time of such decrease, there shall be vacancies on the Board which are being eliminated by such decrease. Section 3. VACANCIES AND NEW DIRECTORSHIPS. Vacancies and newly created directorships resulting from any increase in the authorized number of directors which occur between annual meetings of the stockholders may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so elected shall hold office until the next annual meeting of the stockholders and until their successors are elected and qualified, except as required by law. Section 4. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors. Section 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President on one day's written notice to each director by whom such notice is not waived, given either personally or by mail or telegram. Section 6. QUORUM. At all meetings of the Board of Directors, a majority of the total number of directors then in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. 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 to another place, time or date, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. WRITTEN ACTION. 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 -3- 5 members of the Board of Directors or Committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes or proceedings of the Board of Directors or Committee. Section 8. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any 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 such participation in a meeting shall constitute presence in person at the meeting. Section 9. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation and each to have such lawfully delegable powers and duties as the Board may confer. Each such committee shall serve at the pleasure of the Board of Directors. Unless otherwise prescribed by the Board of Directors, a majority of the members of the committee shall constitute a quorum for the transaction of business, and the act of a majority of the members present at a meeting at which there is a quorum shall be the act of such committee. Each committee shall prescribe its own rules for calling and holding meetings and its method of procedure, subject to any rules prescribed by the Board of Directors, and shall keep a written record of all actions taken by it. ARTICLE III NOTICES Section 1. GENERALLY. Whenever by law or under the provisions of the Certificate of Incorporation or these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram or telephone. Section 2. WAIVERS. Whenever any notice is required to be given by law or under the provisions of the Certificate of Incorporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express -4- 6 purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE IV OFFICERS Section 1. GENERALLY. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a President, a Secretary and a Treasurer. The Board of Directors may also elect any or all of the following: a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers and such other officers as the Board of Directors may deem necessary. Any number of offices may be held by the same person. Section 2. COMPENSATION. The compensation of all officers and agents of the Corporation who are also directors of the Corporation shall be fixed by the Board of Directors. The Board of Directors may delegate the power to fix the compensation of other officers and agents of the Corporation to an officer of the Corporation. Section 3. SUCCESSION. The officers of the Corporation shall hold office until their successors are elected and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the directors. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. Section 4. AUTHORITY AND DUTIES. Each of the officers of the Corporation shall have such authority and shall perform such duties as are customarily incident to their respective offices, or as may be specified from time to time by the Board of Directors in a resolution which is not inconsistent with these By-Laws. Section 5. EXECUTION OF DOCUMENTS AND ACTION WITH RESPECT TO SECURITIES OF OTHER ENTITIES. Each of the President and any Vice President shall have and is hereby given, full power and authority, except as otherwise required by law or directed by the Board of Directors, (a) to execute, on behalf of the Corporation, all duly authorized contracts, agreements, deeds, conveyances or other obligations of the Corporation, applications, consents, proxies and other powers of attorney, and other documents and instruments, and (b) to vote and otherwise act on behalf of the corporation, in person or by proxy, at any meeting of stockholders (or with respect to any action of such stockholders) of any other corporation, partnership or other entity in which the Corporation may hold securities and otherwise to exercise any -5- 7 and all rights and powers which the Corporation may possess by reason of its ownership of securities of such other corporation, partnership or other entity. ARTICLE V STOCK Section 1. CERTIFICATES. Certificates representing shares of stock of the Corporation shall be in such form as shall be determined by the Board of Directors, subject to applicable legal requirements. Such certificates shall be numbered and their issuance recorded in the books of the Corporation, and such certificate shall exhibit the holder's name and the number of shares and shall be signed by, or.in the name of the Corporation by the President or the Vice President and the Treasurer or Secretary or Assistant Secretary of the Corporation. Any or all of the signatures upon such certificates may be facsimiles, engraved or printed. Section 2. FRACTIONAL SHARES. The Corporation may issue fractions of a share of any of the classes of its stock. Section 3. TRANSFER. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue, or to cause its transfer agent to issue, a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Secretary or Assistant Secretary may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact, satisfactory to the Secretary or Assistant Secretary, by the person claiming the certificate of stock to be lost, stolen or destroyed. As a condition precedent to the issuance of a new certificate or certificates the Secretary or Assistant Secretary may require the owner of such lost, stolen or destroyed certificate or certificates to give the Corporation a bond in such sum and with such surety or sureties as the Secretary or Assistant Secretary may direct as indemnity against any claims that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of the new certificate. -6- 8 ARTICLE VI GENERAL PROVISIONS Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be fixed from time to time by the Board of Directors. Section 2. CORPORATE SEAL. The Board of Directors may adopt a corporate seal and use the same by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each member of a committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person as to matters the director, committee member or officer believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation. Section 4. TIME PERIODS. In applying any provision of these By-Laws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded and the day of the event shall be included. Section 5. AMENDMENTS. These By-Laws may be altered, amended or repealed, or new by-laws may be adopted, by the holders of fifty-five percent of the stock issued and outstanding and entitled to vote or by the Board of Directors. [End Of Document] -7- EX-4.1 6 EXHIBIT 4.1 1 Exhibit 4.1 ================================================================================ GLASSTECH SUB CO., as Issuer and UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee --------------------- INDENTURE Dated as of July 2, 1997 --------------------- Up to $70,000,000 12 3/4% Senior Notes due 2004 ================================================================================ 2 CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- ------- 310 (a)(1)......................................................................... 7.10 (a)(2)......................................................................... 7.10 (a)(3)......................................................................... N.A. (a)(4)......................................................................... N.A. (b)............................................................................ 7.08; 7.10; 11.02 (b)(1)......................................................................... 7.10 (b)(9)......................................................................... 7.10 (c)............................................................................ N.A. 311 (a)............................................................................ 7.11 (b)............................................................................ 7.11 (c)............................................................................ N.A. 312 (a)............................................................................ 2.04 (b)............................................................................ 11.03 (c)............................................................................ 11.03 313 (a)............................................................................ 7.06 (b)(1)......................................................................... 7.06 (b)(2)......................................................................... 7.06 (c)............................................................................ 11.02 (d)............................................................................ 7.06 314 (a)............................................................................ 4.02; 4.04 11.02 (b)............................................................................ N.A. (c)(1)......................................................................... 11.04; 11.05 (c)(2)......................................................................... 11.04; 11.05 (c)(3)......................................................................... N.A. (d)............................................................................ (e)............................................................................ 11.05 (f)............................................................................ N.A. 315 (a)............................................................................ 7.01; 7.02 (b)............................................................................ 7.05; 11.02 (c)............................................................................ 7.01 (d)............................................................................ 6.05; 7.01; 7.02 (e)............................................................................ 6.11 316 (a) (last sentence)............................................................ 11.06 (a)(1)(A)...................................................................... 6.05 (a)(1)(B)...................................................................... 6.04 (a)(2)......................................................................... 8.02 (b)............................................................................ 6.07 (c)............................................................................ 8.04 317 (a)(1)......................................................................... 6.08 (a)(2)......................................................................... 6.09 (b)............................................................................ 7.12 318 (a)............................................................................ 11.01
N.A. means Not Applicable - -------------------- NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS -----------------
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions................................................................... 1 Section 1.02. Other Definitions............................................................. 24 Section 1.03. Incorporation by Reference of Trust Indenture Act......................................................... 25 Section 1.04. Rules of Construction......................................................... 26 ARTICLE 2 THE NOTES Section 2.01. Form and Dating............................................................... 26 Section 2.02. Execution and Authentication.................................................. 27 Section 2.03. Registrar and Paying Agent.................................................... 28 Section 2.04. Paying Agent To Hold Money in Trust........................................... 29 Section 2.05. Noteholder Lists.............................................................. 30 Section 2.06. Transfer and Exchange......................................................... 30 Section 2.07. Replacement Notes............................................................. 31 Section 2.08. Outstanding Notes............................................................. 31 Section 2.09. Treasury Notes................................................................ 32 Section 2.10. Temporary Notes............................................................... 33 Section 2.11. Cancellation.................................................................. 33 Section 2.12. Defaulted Interest............................................................ 33 Section 2.13. CUSIP Number.................................................................. 34 Section 2.14. Deposit of Moneys............................................................. 34 Section 2.15. Book-Entry Provisions for Global Notes........................................ 34 Section 2.16. Special Transfer Provisions................................................... 37 Section 2.17. Computation of Interest....................................................... 39 ARTICLE 3 REDEMPTION Section 3.01. Election to Redeem; Notices to Trustee........................................ 39 Section 3.02. Selection by Trustee of Notes To Be Redeemed.............................................................. 40 Section 3.03. Notice of Redemption.......................................................... 40 Section 3.04. Effect of Notice of Redemption................................................ 41 Section 3.05. Deposit of Redemption Price................................................... 42 Section 3.06. Notes Redeemed in Part........................................................ 42 ARTICLE 4 COVENANTS Section 4.01. Payment of Notes.............................................................. 42 Section 4.02. SEC Reports................................................................... 43
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Page ---- Section 4.03. Waiver of Stay, Extension or Usury Laws.................................................................. 44 Section 4.04. Compliance Certificate........................................................ 44 Section 4.05. Taxes......................................................................... 45 Section 4.06. Limitation on Additional Indebtedness................................................................ 45 Section 4.07. Limitation on Preferred Stock of Restricted Subsidiaries..................................................... 46 Section 4.08. Limitation on Capital Stock of Restricted Subsidiaries..................................................... 46 Section 4.09. Limitation on Restricted Payments............................................. 46 Section 4.10. Limitation on Certain Asset Sales............................................. 49 Section 4.11. Limitation on Transactions with Affiliates.................................................................. 51 Section 4.12. Limitations on Liens.......................................................... 52 Section 4.13. Limitations on Investments.................................................... 53 Section 4.14. Limitation on Creation of Subsidiaries........................................ 53 Section 4.15. Limitation on Sale and Lease-Back Transactions................................................................ 53 Section 4.16. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries...................................................... 54 Section 4.17. Payments for Consent.......................................................... 55 Section 4.18. Legal Existence............................................................... 55 Section 4.19. Change of Control............................................................. 55 Section 4.20. Maintenance of Properties; Insurance; Books and Records; Compliance with Law......................................................................... 58 Section 4.21. Further Assurance to the Trustee.............................................. 59 ARTICLE 5 SUCCESSOR CORPORATION Section 5.01. Limitation on Consolidation, Merger and Sale of Assets................................................... 59 Section 5.02. Successor Person Substituted.................................................. 60 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01. Events of Default............................................................. 60 Section 6.02. Acceleration.................................................................. 62 Section 6.03. Other Remedies................................................................ 63 Section 6.04. Waiver of Past Defaults and Events of Default........................................................... 63 Section 6.05. Control by Majority........................................................... 64 Section 6.06. Limitation on Suits........................................................... 64
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Page ---- Section 6.07. No Personal Liability of Directors, Officers, Employees and Stockholders........................................ 65 Section 6.08. Rights of Holders To Receive Payment..................................................................... 65 Section 6.09. Collection Suit by Trustee.................................................... 65 Section 6.10. Trustee May File Proofs of Claim.............................................. 65 Section 6.11. Priorities.................................................................... 66 Section 6.12. Undertaking for Costs......................................................... 66 Section 6.13. Restoration of Rights and Remedies............................................ 67 ARTICLE 7 TRUSTEE Section 7.01. Duties of Trustee............................................................. 67 Section 7.02. Rights of Trustee............................................................. 69 Section 7.03. Individual Rights of Trustee.................................................. 70 Section 7.04. Trustee's Disclaimer.......................................................... 70 Section 7.05. Notice of Defaults............................................................ 70 Section 7.06. Reports by Trustee to Holders................................................. 70 Section 7.07. Compensation and Indemnity.................................................... 71 Section 7.08. Replacement of Trustee........................................................ 72 Section 7.09. Successor Trustee by Consolidation, Merger, etc................................................................. 73 Section 7.10. Eligibility; Disqualification................................................. 73 Section 7.11. Preferential Collection of Claims Against Company............................................................. 73 Section 7.12. Paying Agents................................................................. 74 ARTICLE 8 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 8.01. Without Consent of Holders.................................................... 74 Section 8.02. With Consent of Holders....................................................... 75 Section 8.03. Compliance with Trust Indenture Act........................................... 76 Section 8.04. Revocation and Effect of Consents............................................. 76 Section 8.05. Notation on or Exchange of Notes.............................................. 77 Section 8.06. Trustee To Sign Amendments, etc............................................... 77 ARTICLE 9 DISCHARGE OF INDENTURE; DEFEASANCE Section 9.01. Discharge of Indenture........................................................ 78 Section 9.02. Legal Defeasance.............................................................. 78 Section 9.03. Covenant Defeasance........................................................... 79
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Page ---- Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance......................................................... 80 Section 9.05. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions.................................................... 82 Section 9.06. Reinstatement................................................................. 82 Section 9.07. Moneys Held by Paying Agent................................................... 83 Section 9.08. Moneys Held by Trustee........................................................ 83 ARTICLE 10 GUARANTEE OF NOTES Section 10.01. Guarantee..................................................................... 84 Section 10.02. Execution and Delivery of Guarantees.................................................................. 86 Section 10.03. Limitation of Guarantee....................................................... 86 Section 10.04. Additional Guarantors......................................................... 86 Section 10.05. Release of Guarantor.......................................................... 87 ARTICLE 11 MISCELLANEOUS Section 11.01. Trust Indenture Act Controls ................................................. 87 Section 11.02. Notices....................................................................... 87 Section 11.03. Communications by Holders with Other Holders.......................................................... 89 Section 11.04. Certificate and Opinion as to Conditions Precedent..................................................... 90 Section 11.05. Statements Required in Certificate and Opinion..................................................... 90 Section 11.06. Rules by Trustee and Agents................................................... 90 Section 11.07. Business Days; Legal Holidays................................................. 91 Section 11.08. Governing Law................................................................. 91 Section 11.09. No Adverse Interpretation of Other Agreements............................................................ 91 Section 11.10. No Recourse Against Others.................................................... 91 Section 11.11. Successors.................................................................... 92 Section 11.12. Multiple Counterparts......................................................... 92 Section 11.13. Table of Contents, Headings, etc.............................................. 92 Section 11.14. Separability.................................................................. 92
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EXHIBITS - -------- Exhibit A. Form of Note....................................................................... A-1 Exhibit B. Form of Legend and Assignment for 144A Note........................................................................ B-1 Exhibit C. Form of Legend and Assignment for Regulation S Note............................................................ C-1 Exhibit D. Form of Legend for Global Note..................................................... D-1 Exhibit E. Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors..................................................... E-1 Exhibit F. Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S......................................................... F-1 Exhibit G. Form of Guarantee.................................................................. G-1
-v- 8 INDENTURE, dated as of July 2, 1997, by and between GLASSTECH SUB CO., a Delaware corporation (the "COMPANY"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York trust company (the "TRUSTEE") Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Notes: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. ------------ "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (including an Unrestricted Subsidiary) existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with the acquisition of assets from such Person. "ADDITIONAL INTEREST" means additional interest on the Notes which the Company agrees to pay to the Holders pursuant to Section 4 of the Registration Rights Agreement. "ADJUSTED NET ASSETS" of a Guarantor at any date means the lesser of the amount by which (x) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities), but excluding liabilities under the Guarantee of such Guarantor at such date and (y) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under the Guarantee) excluding Indebtedness in respect of the Guarantee, as they become absolute and matured. "AFFILIATE" of any specified Person means any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by," and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether 9 -2- through the ownership of voting securities, by agreement or otherwise; PROVIDED that the term "Affiliate" shall not include any portfolio company of KECC so long as such portfolio company does not own or control any shares of capital stock of the Company or Holding and the Company or Holding does not own or control any shares of the capital stock of such portfolio company. "AGENT" means any Registrar, Paying Agent, or agent for service of notices and demands. "ASSET SALE" means the sale, transfer or other disposition (other than to the Company or any of its Restricted Subsidiaries) in any single transaction or series of related transactions of (a) any Capital Stock of or other equity interest in any Restricted Subsidiary of the Company, (b) all or substantially all of the assets of the Company or of any Restricted Subsidiary thereof, (c) real property, other than the lease thereof in the ordinary course of business, or (d) all or substantially all of the assets of any business owned by the Company or any Restricted Subsidiary thereof, or a division, line of business or comparable business segment of the Company or any Restricted Subsidiary thereof; PROVIDED that Asset Sales shall not include sales, leases, conveyances, transfers or other dispositions to the Company or to a Restricted Subsidiary or to any other Person if after giving effect to such sale, lease, conveyance, transfer or other disposition such other Person becomes a Restricted Subsidiary. "ASSET SALE PROCEEDS" means, with respect to any Asset Sale, (i) cash received by the Company or any Restricted Subsidiary from such Asset Sale (including cash received as consideration for the assumption of liabilities incurred in connection with or in anticipation of such Asset Sale), after (a) provision for all income or other taxes measured by or resulting from such Asset Sale, (b) payment of all brokerage commissions, underwriting and other fees and expenses related to such Asset Sale, (c) provision for minority interest holders in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of appropriate amounts to be provided by the Company or a Restricted Subsidiary as a reserve, in accordance with GAAP, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by the Company or a Restricted Subsidiary after such Asset Sale, including, without limitation, pension and other post employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale, and 10 -3- (ii) promissory notes and other noncash consideration received by the Company or any Restricted Subsidiary from such Asset Sale or other disposition upon the liquidation or conversion of such notes or noncash consideration into cash. "ATTRIBUTABLE INDEBTEDNESS" under this Indenture in respect of a Sale and Lease-Back Transaction means, as at the time of determination, the greater of (i) the fair value of the property subject to such arrangement (as determined by the Board of Directors) and (ii) the present value (discounted according to GAAP at the cost of indebtedness implied in the lease) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease-Back Transaction (including any period for which such lease has been extended). "AVAILABLE ASSET SALE PROCEEDS" means, with respect to any Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not been applied or committed in accordance with clauses (iii)(a) or (iii)(b), and which has not yet been the basis for an Excess Proceeds Offer in accordance with clause (iii)(c), of the first paragraph of Section 4.10. "BOARD OF DIRECTORS" with respect to any Person means the board of directors of such Person or any committee authorized to act therefor. "BOARD RESOLUTION" means a copy of a resolution certified pursuant to an Officers' Certificate to have been duly adopted by the Board of Directors of the Company and to be in full force and effect, and delivered to the Trustee. "CAPITAL STOCK" means, with respect to any Person, any and all shares or other equivalents (however designated) of capital stock, partnership interests or any other participation, right or other interest in the nature of an equity interest in such Person or any option, warrant or other security convertible into any of the foregoing. "CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "CASH EQUIVALENTS" means (i) direct obligations of the United States of America or any agency thereof, or obligations 11 -4- guaranteed or insured by the United States of America, PROVIDED that in each case such obligations mature within one year from the date of acquisition thereof, (ii) certificates of deposit maturing within one year from the date of creation thereof issued by any U.S. national or state banking institution having capital, surplus and undivided profits aggregating at least $250,000,000 and at the time of investment rated at least A-1 by S&P and P-1 by Moody's, (iii) commercial paper with a maturity of 180 days or less issued by a corporation (except an Affiliate of the Company) organized under the laws of any state of the United States or the District of Columbia and at the time of investment rated at least A-1 by S&P or at least P-1 by Moody's and (iv) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by an agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of acquisition; PROVIDED that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency and (v) tax-exempt auction rate securities and municipal preferred stock, in each case, subject to reset no more than 35 days after the date of acquisition and having a rating of at least AA by S&P or AA by Moody's at the time of investment. A "CHANGE OF CONTROL" will be deemed to have occurred at such time as (i) the Permitted Holders, individually or in the aggregate, cease to beneficially own (as defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act), directly or indirectly, 50.1% or more of the Common Equity Interests of the Company or Holding, (ii) there shall be consummated any consolidation or merger of the Company or Holding in which the Company or Holding, as the case may be, is not the continuing or surviving corporation or pursuant to which the Common Equity Interests of the Company or Holding, as the case may be, would be converted into cash, securities or other property, other than a merger or consolidation of the Company in which the holders of the Common Equity Interests of the Company or Holding, as the case may be, outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the Common Equity Interests of the surviving corporation immediately after such consolidation or merger, (iii) there is a sale, lease or transfer of all or substantially all of the assets of the Company or Holding to any Person or group (as such term is defined in Section 13(d)(3) of the Exchange Act), other than a Permitted Holder or (iv) the replacement of a majority of the Board of Directors of Holding 12 -5- over a two-year period from the directors who constituted the Board of Directors of Holding at the beginning of such period, and such replacement shall not have been approved or recommended by a vote of at least a majority of the Board of Directors of Holding then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved. "COMMON EQUITY INTERESTS" of any Person means all Equity Interests of such Person that are generally entitled to (i) vote in the election of directors of such person or (ii) if such person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. "COMMON STOCK" of any Person means all Capital Stock of such Person that is generally entitled to (i) vote in the election of directors of such Person or (ii) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. "COMPANY" means the party named as such in the first paragraph of this Indenture until a successor replaces such party pursuant to of this Indenture and thereafter means the successor. "COMPANY REQUEST" means any written request signed in the name of the Company by the Chairman of the Board of Directors, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer or the Treasurer of the Company and attested to by the Secretary or any Assistant Secretary of the Company. "CONSOLIDATED FIXED CHARGES" means, with respect to any Person the sum of a Person's (i) Consolidated Interest Expense, plus (ii) the product of (x) the aggregate amount of all dividends paid on Disqualified Capital Stock of the Company or on each series of preferred stock of each Subsidiary of such Person (other than dividends paid or payable in additional shares of preferred stock or to the Company or any of its Wholly-Owned Restricted Subsidiaries) times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective combined federal, state and local tax rate of such Person (expressed as a decimal), in each case, for such four-quarter period. 13 -6- "CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for any period, the aggregate amount of interest which, in conformity with GAAP, would be set forth opposite the caption "interest expense" or any like caption on an income statement for such Person and its Subsidiaries on a consolidated basis, imputed interest included in Capitalized Lease Obligations, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, the net costs associated with hedging obligations, amortization of other financing fees and expenses, the interest portion of any deferred payment obligation, amortization of discount or premium, if any, and all other non-cash interest expense (other than interest amortized to cost of sales) plus, without duplication, all net capitalized interest for such period and all interest incurred or paid under any guarantee of Indebtedness (including a guarantee of principal, interest or any combination thereof) of any Person. "CONSOLIDATED NET INCOME" means, with respect to any Person, for any period, the aggregate of the Net Income (before preferred stock dividends) of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided, however, that (a) the Net Income of any Person (the "other Person") in which the Person in question or any of its Subsidiaries has less than a 100% interest (which interest does not cause the net income of such other Person to be consolidated into the net income of the Person in question in accordance with GAAP) shall be included only to the extent of the amount of dividends or distributions paid to the Person in question or the Subsidiary, (b) the Net Income of any Subsidiary of the Person in question that is subject to any restriction or limitation on the payment of dividends or the making of other distributions (other than pursuant to the Notes or this Indenture) shall be excluded to the extent of such restriction or limitation, (c)(i) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition and (ii) any net gain (but not loss) resulting from an Asset Sale by the Person in question or any of its Subsidiaries other than in the ordinary course of business shall be excluded, and (d) extraordinary, unusual and non-recurring gains and losses shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person at any date, the consolidated stockholder's equity of such Person less the amount of such stockholder's equity attributable to Disqualified Capital Stock of such Person and its Subsidiaries, as determined in accordance with GAAP. 14 -7- "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 114 West 47th Street, New York, New York 10036-1532. "CURRENCY AGREEMENT" means, for any Person, any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in currency values. "DEFAULT" means any event that is, or with the passing of time or giving of notice or both would be, an Event of Default. "DEPOSITORY" means, with respect to the Notes issued in the form of one or more Global Notes, The Depository Trust Company or another Person designated as Depository by the Company, which Person must be a clearing agency registered under the Exchange Act. "DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the Company or a Restricted Subsidiary thereof which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the maturity date of the Notes, for cash or securities constituting Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of the Company and (ii) any Preferred Stock of the Company, with respect to either of which, under the terms of such Preferred Stock, by agreement or otherwise, such Restricted Subsidiary or the Company is obligated to pay current dividends or distributions in cash during the period prior to the maturity date of the Notes; PROVIDED, HOWEVER, that Preferred Stock of the Company or any Restricted Subsidiary thereof that is issued with the benefit of provisions requiring a change of control offer to be made for such Preferred Stock in the event of a change of control of the Company or Restricted Subsidiary, which provisions have substantially the same effect as the provisions of this Indenture described in Section 4.19, shall not be deemed to be Disqualified Capital Stock solely by virtue of such provisions. "EBITDA" means, for any Person, for any period, an amount equal to (a) the sum of (i) Consolidated Net Income for 15 -8- such period, plus (ii) the provision for taxes for such period based on income or profits to the extent such income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net Income for such period, plus, minus (b) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP, except that with respect to the Company each of the foregoing items shall be determined on a consolidated basis with respect to the Company and its Restricted Subsidiaries only; and PROVIDED, HOWEVER, that, for purposes of calculating EBITDA during any fiscal quarter, cash income from a particular Investment of such Person shall be included only (x) if cash income has been received by such Person with respect to such Investment during each of the previous four fiscal quarters, or (y) if the cash income derived from such Investment is attributable to Temporary Cash Investments. "EQUITY CONTRIBUTION" means the equity contribution of $15,000,000 from Holding to the Company. "EQUITY INTERESTS" means, with respect to any Person, any and all shares or other equivalents (however designated) of capital stock, partnership interests or any other participation, right or other interest in the nature of an equity interest in such Person or any option, warrant or other security convertible or exchangeable for any of the foregoing. "ESCROW ACCOUNTS" means certain escrow accounts established in connection with the Merger to secure any payment for losses incurred as a result of any breach of certain representations and warranties made in the Merger Agreement. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" has the meaning provided in the Registration Rights Agreement. "EXECUTIVE MANAGEMENT" means the management group initially comprised of Mark D. Christman, John S. Baxter, Kenneth H. Wetmove, Ronald A. McMaster, Diane S. Tymiak, Larry E. Elliot and James P. Schnabel. 16 -9- "FIXED CHARGE COVERAGE RATIO" of any Person means, with respect to any determination date, the ratio of (i) EBITDA for such Person's prior four full fiscal quarters for which financial results have been reported immediately preceding the determination date, to (ii) Consolidated Fixed Charges of such Person. For purposes of computing the Fixed Charge Coverage Ratio, (A) if the Indebtedness which is the subject of a determination under this provision is Acquired Indebtedness, or Indebtedness incurred in connection with the simultaneous acquisition (by way of merger, consolidation or otherwise) of any Person, business, property or assets (an "Acquisition"), then such ratio shall be determined by giving effect to (on a PRO FORMA basis, as if the transaction had occurred at the beginning of the four-quarter period used to make such calculation) to both the incurrence or assumption of such Acquired Indebtedness or such other Indebtedness and the inclusion in the Company's EBITDA of the EBITDA of the acquired Person, business, property or assets, (B) if any Indebtedness outstanding or to be incurred (x) bears a floating rate of interest, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account on a PRO FORMA basis any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term as at the date of determination in excess of 12 months), (y) bears, at the option of the Company or a Restricted Subsidiary, a fixed or floating rate of interest, the interest expense on such Indebtedness shall be computed by applying, at the option of the Company or such Restricted Subsidiary, either a fixed or floating rate and (z) was incurred under a revolving credit facility, the interest expense on such Indebtedness shall be computed based upon the average daily balance of such Indebtedness during the applicable period, (C) for any quarter prior to the date hereof included in the calculation of such ratio, such calculation shall be made on a PRO FORMA basis, giving effect to the issuance of the Notes and the use of the net proceeds therefrom as if the same had occurred at the beginning of the four-quarter period used to make such calculation and (D) for any quarter included in the calculation of such ratio prior to the date that any Asset Sale was consummated, or that any Indebtedness was incurred, or that any Acquisition was effected, by the Company or any of its Subsidiaries, such calculation shall be made on a PRO FORMA basis, giving effect to each Asset Sale, incurrence of Indebtedness or Acquisition, as the case may be, and the use of any proceeds therefrom, as if the same had occurred at the beginning of the four quarter period used to make such calculation. 17 -10- "GAAP" means generally accepted accounting principles consistently applied as in effect in the United States on the Issue Date. "GLASSTECH" means Glasstech, Inc., a Delaware corporation. "GUARANTEE" means, as the context may require, individually, a guarantee, or collectively, any and all guarantees, of the Obligations of the Company with respect to the Notes by each Guarantor, if any, pursuant to the terms of Article 10 hereof, substantially in the form set forth in Exhibit G. "GUARANTOR" means each Restricted Subsidiary that hereinafter becomes a Guarantor pursuant to Section 4.14, and "Guarantors" means such entities, collectively. "HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered on the Registrar's books. "HOLDING" means Glasstech Holding Co., a Delaware corporation, the Company's parent and the owner of 100% of the capital stock of the Company. "INCUR" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings correlative to the foregoing); provided that a change in GAAP that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an incurrence of such Indebtedness. "INDEBTEDNESS" means (without duplication), with respect to any Person, any indebtedness at any time outstanding, secured or unsecured, contingent or otherwise, which is for 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), or evidenced by bonds, notes, debentures or similar instruments or representing the balance deferred and unpaid of the purchase price of any property (excluding, without limitation, any balances that constitute accounts payable or trade payables, and other accrued liabilities (including long-term pension and healthcare liabilities) arising in the ordinary 18 -11- course of business) if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and shall also include, to the extent not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations secured by a lien to which the property or assets owned or held by such Person is subject, whether or not the obligation or obligations secured thereby shall have been assumed, (iii) guarantees of items of other Persons which would be included within this definition for such other Persons, (iv) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (v) in the case of the Company, Disqualified Capital Stock of the Company or any Restricted Subsidiary thereof, and (vi) obligations of any such Person under any Interest Rate Agreement applicable to any of the foregoing (if and to the extent such Interest Rate Agreement obligations would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP). The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, PROVIDED (i) that the amount outstanding at any time of any Indebtedness issued with original issue discount, including the Notes, is the principal amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP and (ii) that Indebtedness shall not include any liability for federal, state, local or other taxes. Notwithstanding any other provision of the foregoing definition, any trade payable arising from the purchase of goods or materials or for services obtained in the ordinary course of business shall not be deemed to be "Indebtedness" of the Company or any Restricted Subsidiaries for purposes of this definition. Furthermore, guarantees of (or obligations with respect to letters of credit supporting) Indebtedness otherwise included in the determination of such amount shall not also be included. "INDENTURE" means this Indenture as amended, restated or supplemented from time to time. "INITIAL PURCHASER" means CIBC Wood Gundy Securities Corp. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3) or (7) promulgated under the Securities Act. 19 -12- "INTEREST PAYMENT DATE" means the stated maturity of an installment of interest on the Notes. "INTEREST RATE AGREEMENT" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement designed to protect the party indicated therein against fluctuations in interest rates. "INVESTMENTS" means, directly or indirectly, any advance, account receivable (other than an account receivable arising in the ordinary course of business), loan or capital contribution to (by means of transfers of property to others, payments for property or services for the account or use of others or otherwise), the purchase of any stock, bonds, notes, debentures, partnership or joint venture interests or other securities of, the acquisition, by purchase or otherwise, of all or substantially all of the business or assets or stock or other evidence of beneficial ownership of, any Person or the making of any investment in any Person. Investments shall exclude (i) extensions of trade credit on commercially reasonable terms in accordance with normal trade practices and (ii) the repurchase of securities of any Person by such Person. "ISSUE DATE" means July 2, 1997. "KECC" means Key Equity Capital Corporation, a wholly-owned subsidiary of Key Bank, N.A., which is a wholly-owned subsidiary of KeyCorp., a bank holding corporation. "KEP 97" means Key Equity Partners 97, an Affiliate of KECC. "KEY EQUITY GROUP" means, as of the Issue Date, KECC, KEP 97 and Executive Management. "LIEN" means, with respect to any property or assets of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement, encumbrance, preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any Capitalized Lease Obligation, conditional sales, or other title retention agreement having substantially the same economic effect as any of the foregoing). "MATURITY DATE" means July 1, 2004. 20 -13- "MERGER" means the merger of the Company with and into Glasstech. "MERGER AGREEMENT" means the merger agreement dated June 5, 1997 by and between the Company, Holding and Glasstech, as amended. "MOODY'S" means Moody's Investors Service, Inc. and its successors. "NET INCOME" means, with respect to any Person for any period, the net income (loss) of such Person determined in accordance with GAAP. "NET PROCEEDS" means (a) in the case of any sale of Capital Stock by Holding or the Company, the aggregate net proceeds received by such Person, after payment of expenses, commissions and the like incurred in connection therewith, whether such proceeds are in cash or in property (valued at the fair market value thereof, as determined in good faith by the board of directors, at the time of receipt), (b) in the case of any exchange, exercise, conversion or surrender of outstanding securities of any kind for or into shares of Capital Stock of the Company which is not Disqualified Capital Stock, the net book value of such outstanding securities on the date of such exchange, exercise, conversion or surrender (plus any additional amount required to be paid by the holder to the Company upon such exchange, exercise, conversion or surrender, less any and all payments made to the holders, e.g., on account of fractional shares and less all expenses incurred by the Company in connection therewith) and (c) in the case of any issuance of any Indebtedness by the Company or any Restricted Subsidiary, the aggregate net cash proceeds received by such Person after the payment of expenses, commissions, underwriting discounts and the like incurred in connection therewith. "NON-U.S. PERSON" means a Person who is not a U.S. person, as defined in Regulation S. "NOTES" means the securities issued by the Company, including, without limitation, the Private Exchange Notes, if any, and the Exchange Notes, treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "OBLIGATIONS" means, with respect to any Indebtedness, any principal, premium, interest, penalties, fees, 21 -14- indemnifications, reimbursements, damages and other expenses payable under the documentation governing such Indebtedness. "OFFERING" means the offering of the Notes as described in the Offering Memorandum. "OFFERING MEMORANDUM" means the Offering Memorandum dated June 27, 1997 pursuant to which the Notes issued on the Issue Date were offered. "OFFICER", with respect to any Person (other than the Trustee), means the Chairman of the Board of Directors, Chief Executive Officer, Chief Operating Officer, the President, any Vice President and the Chief Financial Officer, the Treasurer or the Secretary of such Person, or any other officer of such Person designated by the Board of Directors of such Person and set forth in an Officers' Certificate delivered to the Trustee. "OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate signed by the Chief Executive Officer, the Chief Operating Officer, the President or any Vice President and the Chief Financial Officer and Treasurer of such Person that shall comply with applicable provisions of this Indenture. "OPINION OF COUNSEL" means a written opinion reasonably satisfactory in form and substance to the Trustee from legal counsel which counsel is reasonably acceptable to the Trustee, stating the matters required by Section 11.05 and delivered to the Trustee. "PERMITTED HOLDERS" means (i) KECC and its Affiliates, (ii) any "group" (as such term is used in Section 13(d) and 14(d) of the Exchange Act) comprised solely of the Key Equity Group and its Affiliates (it being understood that a "group" that includes any other Person shall not be a Permitted Holder) and (iii) any Person if (A) at least a majority of the total voting and economic power of the Common Stock in such Person is owned by at least a majority of the officers of KECC at the time of such transfer, (B) such Person has at least $50.0 million in cash funds available for investment, and (C) such Person is under no contractual restriction (whether pursuant to its charter documents or otherwise) to make further investments in the Company. "PERMITTED INDEBTEDNESS" means: (i) Indebtedness incurred pursuant to the Revolving Credit Facility in an aggregate principal amount at any time 22 -15- outstanding not to exceed the greater of (i) the sum of (x) 85.0% of the net book value of eligible accounts receivable of the Company and its Restricted Subsidiaries and (y) 65.0% of the net book value of eligible inventory of the Company and its Restricted Subsidiaries and (ii) $10.0 million, in each case, reduced by any required permanent repayments thereunder; (ii) Indebtedness under the Notes and the Guarantees, if applicable; (iii) Indebtedness not covered by any other clause of this definition which is outstanding on the date of this Indenture; (iv) Indebtedness of the Company to any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary to the Company or another Restricted Subsidiary; (v) Purchase Money Indebtedness and Capitalized Lease Obligations incurred to acquire property in the ordinary course of business which Indebtedness and Capitalized Lease Obligations do not in the aggregate exceed 5% of the Company's consolidated total assets; (vi) Interest Rate Agreements and Currency Agreements; (vii) additional Indebtedness of the Company not to exceed $3.0 million in principal amount outstanding at any time; (viii) Refinancing Indebtedness; (ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of day-light overdrafts) drawn against insufficient funds in the ordinary course of business; (x) Indebtedness of the Company and any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; 23 -16- (xi) Indebtedness arising from guarantees of loans and advances by third parties to employees and officers of the Company or its Subsidiaries in the ordinary course of business for bona fide business purposes, provided that the aggregate amount of such guarantees does not exceed $250,000; and (xii) Indebtedness arising from the repurchase of Capital Stock of Holding if otherwise permitted under Section 4.09. "PERMITTED INVESTMENTS" means, for any Person, Investments made on or after the date of this Indenture consisting of: (i) Investments by the Company, or by a Restricted Subsidiary thereof, in the Company or a Restricted Subsidiary; (ii) Temporary Cash Investments; (iii) Investments by the Company, or by a Restricted Subsidiary thereof, in a Person, if as a result of such Investment (a) such Person becomes a Restricted Subsidiary of the Company or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary thereof; (iv) reasonable and customary loans made to employees not to exceed $250,000 in the aggregate at any one time outstanding and other loans to Holding or employees of the Company to the extent the proceeds of such loans are used by such employees of the Company exclusively to purchase shares of Capital Stock of Holding pursuant to the terms of the Stockholders Agreement; (v) an Investment that is made by the Company or a Restricted Subsidiary thereof in the form of any stock, bonds, notes, debentures, partnership or joint venture interests or other securities that are issued by a third party to the Company or Restricted Subsidiary (i) solely as consideration for the consummation of an Asset Sale of Stir Melter or (ii) otherwise permitted under Section 4.10; (vi) any Investment existing on the Issue Date; 24 -17- (vii) any Investment acquired by the Company or any of its Restricted Subsidiaries (a) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such Investment or accounts receivable or (b) as the result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (viii) Investments the payment for which consists of Capital Stock of the Company (exclusive of Disqualified Capital Stock); and (ix) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (ix) that are at that time outstanding, not to exceed $1.0 million. "PERMITTED LIENS" means (i) Liens on property or assets of, or any shares of stock of or secured debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary of the Company or at the time such corporation is merged into the Company or any of its Restricted Subsidiaries, PROVIDED that such Liens are not incurred in connection with, or in contemplation of, such corporation becoming a Restricted Subsidiary of the Company or merging into the Company or any of its Restricted Subsidiaries, (ii) Liens securing Refinancing Indebtedness, PROVIDED that any such Lien does not extend to or cover any Property, shares or debt other than the Property, shares or debt securing the Indebtedness so refunded, refinanced or extended, (iii) Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens securing industrial revenue bonds, (v) Liens to secure Purchase Money Indebtedness that is otherwise permitted under this Indenture, PROVIDED that (a) any such Lien is created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including sales and excise taxes, installation and delivery charges and other direct costs of, and other direct expenses paid or charged in connection with, such purchase or construction) of such Property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such costs, and (c) such Lien does not extend to or cover any Property other than such item of Property and any improvements on such item, (vi) statutory liens or landlords', carriers', warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in the ordinary course of 25 -18- business which do not secure any Indebtedness and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, (vii) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $1.0 million in the aggregate at any one time outstanding, (viii) Liens for taxes, assessments or governmental charges that either are not delinquent or are being contested in good faith by appropriate proceedings, (ix) Liens securing Capital Lease Obligations permitted to be incurred under clause (v) of the definition of "Permitted Indebtedness," PROVIDED that such Lien does not extend to any property other than that subject to the underlying lease, (x) Liens securing Indebtedness under the Revolving Credit Facility, (xi) Liens of the Company's customers encumbering property or assets under construction arising from the obligations of such customers to make progress or partial payment relating to such construction, (xii) judgment Liens that otherwise would not give rise to an Event of Default, (xiii) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries, (xiv) Liens securing reimbursement obligations with respect to commercial letters of credit that encumber documents and other property relating to such letters of credit and products and proceeds thereof, (xv) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Subsidiaries, including rights of offset and set-off, (xvi) Liens existing on the Issue Date and (xvii) any extensions, substitutions, replacements or renewals of the foregoing. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof). "PHYSICAL NOTES" means certificated Notes in registered form in substantially the form set forth in EXHIBIT A. "PREFERRED STOCK" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of other Capital Stock issued by such Person. 26 -19- "PRIVATE EXCHANGE" has the meaning set forth in the Registration Rights Agreement. "PRIVATE EXCHANGE NOTES" has the meaning set forth in the Registration Rights Agreement. "PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the Rule 144A Notes in the form set forth in EXHIBIT B. "PROPERTY" of any Person means all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent consolidated balance sheet of such Person and its Subsidiaries under GAAP. "PURCHASE AGREEMENT" means the Securities Purchase Agreement dated as of June 27, 1997 by and among the Company and the Initial Purchaser. "PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred in the ordinary course of business by a Person to finance the cost (including the cost of construction) of an item of Property, the principal amount of which Indebtedness does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and expenses of such Person incurred in connection therewith. "QUALIFIED EQUITY OFFERING" means an offering by the Company or Holding of shares of its common stock (however designated and whether voting or non-voting) and any and all rights, warrants or options to acquire such common stock, whether registered or exempt from registration under the Securities Act; PROVIDED, HOWEVER, that in connection with a Qualified Equity Offering of Holding, the net proceeds of such Qualified Equity Offering are contributed to the Company as common equity. "QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning specified in Rule 144A promulgated under the Securities Act. "REDEMPTION DATE" when used with respect to any Note to be redeemed means the date fixed for such redemption pursuant to the terms of the Notes. "REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances or extends any Indebtedness of the Company outstanding on the Issue Date or other Indebtedness permitted to be incurred by the Company or its Restricted Subsidiaries pursuant to the terms of this Indenture, but only to the extent 27 -20- that (i) if the Indebtedness being refunded, refinanced or extended was subordinate to the Indebtedness represented by the Notes, then the Refinancing Indebtedness is subordinated to the Notes to at least the same extent, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness being refunded, refinanced or extended, or (b) after the maturity date of the Notes, (iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a weighted average life to maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the weighted average life to maturity of the portion of the Indebtedness being refunded, refinanced or extended that is scheduled to mature on or prior to the maturity date of the Notes, (iv) such Refinancing Indebtedness is in an aggregate principal amount that is equal to or less than the sum of (a) the aggregate principal amount then outstanding under the Indebtedness being refunded, refinanced or extended, (b) the amount of accrued and unpaid interest, if any, and premiums owed, if any, not in excess of preexisting prepayment provisions on such Indebtedness being refunded, refinanced or extended and (c) the amount of customary fees, expenses and costs related to the incurrence of such Refinancing Indebtedness, and (v) such Refinancing Indebtedness is incurred by the same Person that initially incurred the Indebtedness being refunded, refinanced or extended, except that the Company may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness of any Wholly-Owned Restricted Subsidiary of the Company; PROVIDED, HOWEVER, that subclauses (ii) and (iii) of this definition will not apply to any refunding, refinancing or extension of any Indebtedness under the Revolving Credit Facility. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of the Issue Date by and between the Company and the Initial Purchaser, as amended from time to time. "REGULATION S" means Regulation S promulgated under the Securities Act. "RESPONSIBLE OFFICER" when used with respect to the Trustee, means an officer or assistant officer assigned to the corporate trust department of the Trustee (or any successor group of the Trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. 28 -21- "RESTRICTED NOTE" has the same meaning as "Restricted Security" set forth in Rule 144(a)(3) promulgated under the Securities Act; PROVIDED, that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Note is a Restricted Note. "RESTRICTED PAYMENT" means any of the following: (i) the declaration or payment of any dividend or any other distribution or payment on Capital Stock of the Company or any Restricted Subsidiary of the Company or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company or any Restricted Subsidiary of the Company (other than (x) dividends or distributions payable solely in Capital Stock (other than Disqualified Capital Stock) or in options, warrants or other rights to purchase Capital Stock (other than Disqualified Capital Stock), and (y) in the case of Restricted Subsidiaries of the Company, dividends or distributions payable to the Company or to a Wholly-Owned Restricted Subsidiary of the Company), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any of its Restricted Subsidiaries (other than Capital Stock owned by the Company or a Wholly-Owned Restricted Subsidiary of the Company, excluding Disqualified Capital Stock), (iii) the making of any principal payment on, or the purchase, defeasance, repurchase, redemption or other acquisition or retirement for value, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, of any Subordinated Indebtedness (other than Subordinated Indebtedness acquired in anticipation of satisfying a scheduled sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition), (iv) the making of any Investment or guarantee of any Investment in any Person other than a Permitted Investment, (v) any designation of a Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the Investment by the Company therein and (vi) forgiveness of any Indebtedness of an Affiliate of the Company to the Company or a Restricted Subsidiary. For purposes of determining the amount expended for Restricted Payments, cash distributed or invested shall be valued at the face amount thereof and property other than cash shall be valued at its fair market value. "RESTRICTED SUBSIDIARY" means a Subsidiary of the Company other than an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company existing as of the Issue Date. The Board of Directors of the Company may designate any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a Restricted Subsidiary if immediately after giving 29 -22- effect to such action (and treating any Acquired Indebtedness as having been incurred at the time of such action), the Company could have incurred at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the Section 4.06 of this Indenture. "REVOLVING CREDIT FACILITY" means the revolving credit facility by and among the Company, the lender named therein, and NationsBank, N.A., as agent, as amended, modified, replaced, renewed, refunded, refinanced or supplemented from time to time, and whether by the same or any other agent, lender or group of lenders. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "SALE AND LEASE-BACK TRANSACTION" means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of the Company of any real or tangible personal Property, which Property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing. "S&P" means Standard & Poor's Ratings Services and its successors. "SEC" means the United States Securities and Exchange Commission as constituted from time to time or any successor performing substantially the same functions. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the Company that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(v) of Regulation S-X under the Securities Act. "STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated July 2, 1997 by and among KECC, KEP 97, Holding and the members of Executive Management. "SUBSIDIARY" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or 30 -23- acquired, (i) in the case of a corporation, of which more than 50% of the total voting power of the Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, officers or trustees thereof is held by such first-named Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint venture, association or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise or if in accordance with GAAP such entity is consolidated with the first-named Person for financial statement purposes. "SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company which is expressly subordinated in right of payment to the Notes. "TEMPORARY CASH INVESTMENTS" means (i) Investments in marketable, direct obligations issued or guaranteed by the United States of America, or of any governmental agency or political subdivision thereof, maturing within 365 days of the date of purchase; (ii) Investments in certificates of deposit issued by a bank organized under the laws of the United States of America or any state thereof or the District of Columbia, in each case having capital, surplus and undivided profits totaling more than $500,000,000 and rated at least A by Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc., maturing within 365 days of purchase; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of Investment, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) repurchase obligations with a term of not more than seven days for the underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above; or (v) Investments not exceeding 365 days in duration in money market funds that invest substantially all of such funds' assets in the Investments described in the preceding clauses (i) and (ii). "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in Section 8.03 hereof). "TRANSACTIONS" means the Merger, the Offering, the Equity Contribution and the Revolving Credit Facility. 31 -24- "TRUSTEE" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor. "UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an Unrestricted Subsidiary and (b) any Subsidiary of the Company which is classified as an Unrestricted Subsidiary by a resolution adopted by the Board of Directors of the Company; PROVIDED that a Subsidiary organized or acquired after the Issue Date may be so classified as an Unrestricted Subsidiary only if such classification is in compliance with the covenant set forth in Section 4.09 hereof. The Trustee shall be given prompt notice by the Company of each resolution adopted by the Board of Directors of the Company under this provision, and furnished with a Board Resolution with respect to each such resolution adopted. "U.S. GOVERNMENT OBLIGATIONS" means (a) securities that are direct obligations of the United States of America for the payment of which its full faith and credit are pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or a specific payment of principal or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt. "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares) of which are owned, directly or indirectly, by the Company. Section 1.02. OTHER DEFINITIONS. The definitions of the following terms may be found in the sections indicated as follows: 32 -25-
Term Defined in Section ---- ------------------ "Affiliate Transaction"................................................. 4.11 "Agent Members"......................................................... 2.15(a) "Bankruptcy Law"........................................................ 6.01 "Business Day".......................................................... 11.07 "CEDEL"................................................................. 2.15(a) "Change of Control Offer"............................................... 4.19 "Change of Control Payment Date"........................................ 4.19 "Change of Control Purchase Price"...................................... 4.19 "Covenant Defeasance"................................................... 9.03 "Custodian"............................................................. 6.01 "Euroclear"............................................................. 2.15(a) "Event of Default"...................................................... 6.01 "Excess Proceeds Offer"................................................. 4.10 "Global Notes".......................................................... 2.15 "Legal Defeasance"...................................................... 9.02 "Legal Holiday"......................................................... 11.07 "Offer Period".......................................................... 4.10 "Other Notes"........................................................... 2.01 "Paying Agent".......................................................... 2.03 "Purchase Date"......................................................... 4.10 "Registrar"............................................................. 2.03 "Regulation S Global Notes"............................................. 2.15(a) "Regulation S Notes".................................................... 2.01 "Reinvestment Date"..................................................... 4.10 "Restricted Global Note"................................................ 2.15(a) "Restricted Period"..................................................... 2.15(l) "Rule 144A Notes"....................................................... 2.01
Section 1.03. Incorporation by Reference of Trust Indenture Act. -------------------------------------------------- Whenever this Indenture refers to a provision of the TIA, the portion of such provision required to be incorporated herein in order for this Indenture to be qualified under the TIA 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 Notes. "INDENTURE SECURITYHOLDER" means a Holder or Noteholder. "INDENTURE TO BE QUALIFIED" means this Indenture. 33 -26- "INDENTURE TRUSTEE" or "institutional trustee" means the Trustee. "OBLIGOR ON THE INDENTURE SECURITIES" means the Company, the Guarantors or any other obligor on the Notes. All other terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by SEC rule have the meanings therein assigned to them. Section 1.04. Rules of Construction. ---------------------- Unless the context otherwise requires: (1) a term has the meaning assigned to it herein, whether defined expressly or by reference; (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 in the plural include the singular; (5) words used herein implying any gender shall apply to both genders; and (6) whenever in this Indenture there is mentioned, in any context, principal, interest or any other amount payable under or with respect to any Note, such mention shall be deemed to include mention of the payment of Additional Interest to the extent that, in such context, Additional Interest is, was or would be payable in respect thereof. ARTICLE 2 THE NOTES Section 2.01. Form and Dating. ---------------- The Notes and the Trustee's certificate of authentication with respect thereto shall be substantially in the form set forth in EXHIBIT A, which is incorporated in and forms a part of this Indenture. The Notes may have notations, legends or 34 -27- endorsements required by law, rule or usage to which the Company is subject. Without limiting the generality of the foregoing, Notes offered and sold to Qualified Institutional Buyers in reliance on Rule 144A ("RULE 144A NOTES") shall bear the legend and include the form of assignment set forth in EXHIBIT B, Notes offered and sold in offshore transactions in reliance on Regulation S ("REGULATION S NOTES") shall bear the legend and include the form of assignment set forth in EXHIBIT C, and Notes offered and sold to Institutional Accredited Investors in transactions exempt from registration under the Securities Act ("OTHER NOTES") shall be represented by a Physical Note bearing the Private Placement Legend. Each Note shall be dated the date of its authentication and show the date of its authentication. The terms and provisions contained in the Notes shall constitute, and are 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 agree to be bound thereby. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. Section 2.02. Execution and Authentication. ---------------------------- Two Officers shall sign, or one Officer shall sign and one Officer (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Note shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Note to the Trustee for cancellation as provided in Section 2.11, for all purposes of this Indenture such Note shall be deemed never to 35 -28- have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. The Trustee or an authenticating agent shall authenticate Notes for original issue in the aggregate principal amount of up to $70,000,000 upon a Company Request. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. Upon receipt of the Company Request and an Officers' Certificate certifying that the registration statement relating to the exchange offer specified in the Registration Rights Agreement is effective and that the conditions precedent to a private exchange thereunder have been met, the Trustee shall authenticate an additional series of Notes in an aggregate principal amount not to exceed $70,000,000 for issuance in exchange for all Notes previously issued pursuant to an exchange offer registered under the Securities Act or pursuant to a Private Exchange. Exchange Notes or Private Exchange Notes may have such distinctive series designations and such changes in the form thereof as are specified in the Company Request referred to in the preceding sentence. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. Unless otherwise provided in the appointment, an authenticating agent may authenticate the Notes 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 and Affiliates of the Company. Each Paying Agent is designated as an authenticating agent for purposes of this Indenture. The Notes shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. Section 2.03. Registrar and Paying Agent. --------------------------- The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in The City of New York, State of New York) where Notes may be presented for registration of transfer or for exchange (the "REGISTRAR"), and an office or agency where Notes may be presented for payment (the "PAYING AGENT") and an office or agency where notices and demands to or upon the Company, if any, in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of 36 -29- the Notes and of their transfer and exchange. The Company may have one or more additional Paying Agents. The term "Paying Agent" includes any additional Paying Agent. Neither the Company nor any Affiliate thereof may act as Paying Agent. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.07. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Notes and this Indenture. Section 2.04. Paying Agent To Hold Money in Trust. ------------------------------------ Each Paying Agent shall hold in trust for the benefit of the Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of or premium or interest on the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. Money held in trust by the Paying Agent need not be segregated except as required by law and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder. The Company at any time may require the Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Event of Default specified in Section 6.01 (1) or (2), upon written request to the Paying Agent, require such Paying Agent to pay forthwith all money so held by it to the Trustee and to account for any funds disbursed. Upon making such payment, the Paying Agent shall have no further liability for the money delivered to the Trustee. Any money deposited with any Paying Agent, or then held by the Company or a Subsidiary in trust for the payment of principal or interest on any Note and remaining unclaimed for two years after such principal and interest has become due and payable shall be paid to the Company at its request, or, if then held by the Company or a Subsidiary, shall be discharged from such trust; and the Noteholders shall thereafter, as unsecured 37 -30- general creditors, look only to the Company for payment thereof, and all liability of the Paying Agent with respect to such money, and all liability of the Company or such Subsidiary as trustee thereof, shall thereupon cease. Section 2.05. Noteholder Lists. ----------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Noteholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least five Business Days before each Interest Payment Date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Noteholders. Section 2.06. Transfer and Exchange. ---------------------- Subject to Sections 2.15 and 2.16, when Notes are presented to the Registrar with a request from the Holder of such Notes to register a transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer as requested. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorneys duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall issue and execute and the Trustee shall authenticate new Notes (and the Guarantors shall execute the guarantee thereon) evidencing such transfer or exchange at the Registrar's request. No service charge shall be made to the Noteholder for any registration of transfer or exchange. The Company may require from the Noteholder payment of a sum sufficient to cover any transfer taxes or other governmental charge that may be imposed in relation to a transfer or exchange, but this provision shall not apply to any exchange pursuant to Section 2.02, 2.10, 3.06, 4.10, 4.19 or 8.05 (in which events the Company shall be responsible for the payment of such taxes). The Registrar shall not be required to exchange or register a transfer of any Note for a period of 15 days immediately preceding the mailing of notice of redemption of Notes to be redeemed or of any Note selected, called or being called for redemption except the unredeemed portion of any Note being redeemed in part. Any Holder of the Global Note shall, by acceptance of such Global Note, agree that transfers of the beneficial 38 -31- interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Global Note shall be required to be reflected in a book entry. Each Holder of a Note agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Note in violation of any provision of this Indenture and/or applicable U.S. Federal or state securities law. Except as expressly provided herein, neither the Trustee nor the Registrar shall have any duty to monitor the Company's compliance with or have any responsibility with respect to the Company's compliance with any Federal or state securities laws. Section 2.07. Replacement Notes. ------------------ If a mutilated Note is surrendered to the Registrar or the Trustee, or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note (and the Guarantors shall execute the guarantee thereon) if the Holder of such Note furnishes to the Company and the Trustee evidence reasonably acceptable to them of the ownership and the destruction, loss or theft of such Note and if the requirements of Section 8-405 of the New York Uniform Commercial Code as in effect on the date of this Indenture are met. If required by the Trustee or the Company, an indemnity bond shall be posted, sufficient in the judgment of both to protect the Company, the Trustee or any Paying Agent from any loss that any of them may suffer if such Note is replaced. The Company may charge such Holder for the Company's reasonable out-of-pocket expenses in replacing such Note and the Trustee may charge the Company for the Trustee's expenses (including, without limitation, attorneys' fees and disbursements) in replacing such Note. Every replacement Note shall constitute a contractual obligation of the Company. In the event any such mutilated, lost, destroyed or wrongfully taken Note has become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof. Section 2.08. Outstanding Notes. ------------------ The Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for (a) those cancelled by it, (b) those delivered to it for cancellation, 39 -32- (c) to the extent set forth in Sections 9.01 and 9.02, on or after the date on which the conditions set forth in Section 9.01 or 9.02 have been satisfied, those Notes theretofore authenticated and delivered by the Trustee hereunder and (d) those described in this Section 2.08 as not outstanding. Subject to Section 2.09, a Note does not cease to be outstanding because the Company or one of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser in whose hands such Note is a legal, valid and binding obligation of the Company. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. If the Paying Agent holds, in its capacity as such, on any Maturity Date or on any optional redemption date, money sufficient to pay all accrued interest and principal with respect to the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. Section 2.09. Treasury Notes. --------------- In determining whether the Holders of the required principal amount of Notes have concurred in any declaration of acceleration or notice of default or direction, waiver or consent or any amendment, modification or other change to this Indenture, Notes owned by the Company or any other Affiliate of the Company shall be disregarded as though they were not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent or any amendment, modification or other change to this Indenture, only Notes as to which a Responsible Officer of the Trustee has received an Officers' Certificate stating that such Notes are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee established to the satisfaction of the Trustee the pledgee's right so to act with respect to the Notes and that the pledgee is not the Company, a Guarantor, any other obligor on the Notes or any of their respective Affiliates. 40 -33- Section 2.10. Temporary Notes. ---------------- Until definitive Notes are prepared and ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. Section 2.11. Cancellation. ------------- The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall (subject to the record-retention requirements of the Exchange Act) destroy cancelled Notes and deliver a certificate of destruction thereof to the Company. The Company may not reissue or resell, or issue new Notes to replace, Notes that the Company has redeemed or paid, or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. ------------------- If the Company defaults on a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent permitted by law) any interest payable on the defaulted interest, in accordance with the terms hereof, to the Persons who are Noteholders on a subsequent special record date, which date shall be at least five Business Days prior to the payment date. The Company shall fix such special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before such special record date, the Company shall mail to each Noteholder a notice that states the special record date, the payment date and the amount of defaulted interest, and interest payable on defaulted interest, if any, to be paid. The Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements (if applicable) of any securities exchange on which the Notes may be listed and, upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the 41 -34- proposed payment pursuant to this sentence, such manner of payment shall be deemed practicable by the Trustee. Section 2.13. CUSIP Number. ------------- The Company in issuing the Notes may use a "CUSIP" number, and if so, such CUSIP number shall be included in notices of redemption or exchange as a convenience to Holders; PROVIDED, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any such CUSIP number used by the Company in connection with the issuance of the Notes and of any change in the CUSIP number. Section 2.14. Deposit of Moneys. ------------------ Prior to 10:00 a.m., New York City time, on each Interest Payment Date and Maturity Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Trustee to remit payment to the Holders on such Interest Payment Date or Maturity Date, as the case may be. The principal and interest on Global Notes shall be payable to the Depository or its nominee, as the case may be, as the sole registered owner and the sole holder of the Global Notes represented thereby. The principal and interest on Physical Notes shall be payable at the office of the Paying Agent. Section 2.15. Book-Entry Provisions for Global Notes. --------------------------------------- (a) Rule 144A Notes initially shall be represented by one or more notes in registered, global form without interest coupons (collectively, the "RESTRICTED GLOBAL NOTE"). Regulation S Notes initially shall be represented by one or more notes in registered, global form without interest coupons (collectively, the "REGULATION S GLOBAL NOTE," and, together with the Restricted Global Note and any other global notes representing Notes, the "GLOBAL NOTES"). The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, in each case for credit to an account of an Agent Member (or, in the case of the Regulation S Global Notes, of Euroclear System ("EUROCLEAR") and Cedel Bank, S.A. ("CEDEL")), (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in EXHIBIT D. 42 -35- Members of, or direct or indirect participants in, the Depository ("AGENT MEMBERS") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Notes, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of Global Notes shall be limited to transfer in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.16. In addition, a Global Note shall be exchangeable for Physical Notes if (i) the Depository (x) notifies the Company that it is unwilling or unable to continue as depository for such Global Note and the Company thereupon fails to appoint a successor depository or (y) has ceased to be a clearing agency registered under the Exchange Act, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of such Physical Notes or (iii) there shall have occurred and be continuing an Event of Default with respect to the Notes. In all cases, Physical Notes delivered in exchange for any Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depository (in accordance with its customary procedures). (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall upon receipt of a written order from the Company authenticate and make available for delivery, one or more Physical Notes of like tenor and amount. 43 -36- (d) In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Note delivered in exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.16, bear the Private Placement Legend or, in the case of the Regulation S Global Note, the legend set forth in EXHIBIT C, in each case, unless the Company determines otherwise in compliance with applicable law. (f) On or prior to the 40th day after the later of the commencement of the offering of the Notes represented by the Regulation S Global Note and the issue date of such Notes (such period through and including such 40th day, the "RESTRICTED PERIOD"), a beneficial interest in a Regulation S Global Note may be transferred to a Person who takes delivery in the form of an interest in the corresponding Restricted Global Note only upon receipt by the Trustee of a written certification from the transferor to the effect that such transfer is being made (i)(a) to a Person whom the transferor reasonably believes is a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A or (b) pursuant to another exemption from the registration requirements under the Securities Act which is accompanied by an opinion of counsel regarding the availability of such exemption and (ii) in accordance with all applicable securities laws of any state of the United States or any other jurisdiction. (g) Beneficial interests in the Restricted Global Note may be transferred to a Person who takes delivery in the form of an interest in the Regulation S Global Note, whether before or after the expiration of the Restricted Period, only if the transferor first delivers to the Trustee a written certificate to the effect that such transfer is being made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if such transfer occurs prior to the expiration of the Restricted Period, the interest transferred will be held immediately thereafter through Euroclear or CEDEL. (h) Any beneficial interest in one of the Global Notes that is transferred to a Person who takes delivery in the form of 44 -37- an interest in another Global Note shall, upon transfer, cease to be an interest in such Global Note and become an interest in such other Global Note and, accordingly, shall thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest. (i) The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. Section 2.16. Special Transfer Provisions. ---------------------------- (a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND NON-U.S. PERSONS. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Note to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Note constituting a Restricted Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after July 2, 1999 or such other date as such Note shall be freely transferable under Rule 144 as certified in an Officers' Certificate or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of EXHIBIT E hereto or (2) in the case of a transfer to a Non-U.S. Person (including a QIB), the proposed transferor has delivered to the Registrar a certificate substantially in the form of EXHIBIT F hereto; PROVIDED that in the case of a transfer of a Note bearing the Private Placement Legend for a Note not bearing the Private Placement Legend, the Registrar has received an Officers' Certificate authorizing such transfer; and (ii) if the proposed transferor is an Agent Member holding a beneficial interest in a Global Note, upon receipt by the Registrar of (x) the certificate, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depository's and the Registrar's procedures, whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal amount 45 -38- of a Global Note in an amount equal to the principal amount of the beneficial interest in a Global Note to be transferred, and (b) the Company shall execute and the Trustee shall authenticate and make available for delivery one or more Physical Notes of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed registration of transfer of a Note constituting a Restricted Note to a QIB (excluding transfers to Non-U.S. Persons): (i) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on such Holder's Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on such Holder's Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the Global Note, upon receipt by the Registrar of instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (c) PRIVATE PLACEMENT LEGEND. Upon the registration of transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes bearing the Private 46 -39- Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) it has received the Officers' Certificate required by paragraph (a)(i)(y) of this Section 2.16, (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Note has been sold pursuant to an effective registration statement under the Securities Act and the Registrar has received an Officers' Certificate from the Company to such effect. (d) GENERAL. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain for a period of two years copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable notice to the Registrar. Section 2.17. Computation of Interest. ----------------------- Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE 3 REDEMPTION Section 3.01. Election to Redeem; Notices to Trustee. --------------------------------------- If the Company elects to redeem Notes pursuant to paragraph 5 of the Notes, at least 45 days prior to the Redemption Date (unless a shorter notice shall be agreed to in writing by the Trustee) but not more than 65 days before the Redemption Date, the Company shall notify the Trustee in writing of the Redemption Date, the principal amount of Notes to be redeemed and the redemption price, and deliver to the Trustee an Officers' Certificate and an Opinion of Counsel stating that such 47 -40- redemption will comply with the conditions contained in paragraph 5 of the Notes. If fewer than all the Notes are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not less than 15 days after the date of notice to the Trustee (unless a shorter period shall be acceptable to the Trustee). Any such notice may be canceled by notice in writing to the Trustee at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. Section 3.02. Selection by Trustee of Notes To Be Redeemed. --------------------------------------------- In the event that fewer than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed, if the Notes are listed on a national securities exchange, in accordance with the rules of such exchange or, if the Notes are not so listed, either on a pro rata basis or by lot, or such other method as it shall deem fair and equitable; PROVIDED, HOWEVER, that if a partial redemption is made with the proceeds of a Public Equity Offering, selection of the Notes or portion thereof for redemption shall be made by the Trustee on a PRO RATA basis to the extent practical, unless such a method is prohibited. The Trustee shall promptly notify the Company of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. The Trustee may select for redemption portions of the principal of the Notes that have denominations larger than $1,000. Notes and portions thereof the Trustee selects shall be redeemed in amounts of $1,000 or whole multiples of $1,000. For all purposes of this Indenture unless the context otherwise requires, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption. --------------------- At least 30 days, and no more than 60 days, before a Redemption Date, the Company shall mail, or cause to be mailed, a notice of redemption by first-class mail to each Holder of Notes to be redeemed at his or her last address as the same appears on the registry books maintained by the Registrar pursuant to Section 2.03 hereof. The notice shall identify the Notes to be redeemed (including the CUSIP numbers thereof) and shall state: 48 -41- (1) the Redemption Date; (2) the redemption price and the amount of premium and accrued interest to be paid; (3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date and upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date; (7) the provision of paragraph 5 of the Notes pursuant to which the Notes called for redemption are being redeemed; (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes; and (9) the aggregate principal amount of Notes that are being redeemed. At the Company's written request made at least five Business Days prior to the date on which notice is to be given, the Trustee shall give the notice of redemption in the Company's name and at the Company's sole expense. Section 3.04. Effect of Notice of Redemption. ------------------------------- Once the notice of redemption described in Section 3.03 is mailed, Notes called for redemption become due and payable on the Redemption Date and at the redemption price, including any premium, plus interest accrued to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price, including any premium, plus interest accrued to the Redemption Date, PROVIDED that if the Redemption Date is after a regular record date and on or prior to the Interest Payment Date, the accrued interest shall be payable to the Holder of the redeemed Notes registered on the relevant record date, and 49 -42- PROVIDED, FURTHER, that if a Redemption Date is a Legal Holiday, payment shall be made on the next succeeding Business Day and no interest shall accrue for the period from such Redemption Date to such succeeding Business Day. Section 3.05. Deposit of Redemption Price. ---------------------------- On or prior to 10:00 A.M., New York City time, on each Redemption Date, the Company shall deposit with the Paying Agent in immediately available funds money sufficient to pay the redemption price of, including premium, if any, and accrued interest on all Notes to be redeemed on that date other than Notes or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation. On and after any Redemption Date, if money sufficient to pay the redemption price of, including premium, if any, and accrued interest on Notes called for redemption shall have been made available in accordance with the preceding paragraph, the Notes called for redemption will cease to accrue interest and the only right of the Holders of such Notes will be to receive payment of the redemption price of and, subject to the first proviso in Section 3.04, accrued and unpaid interest on such Notes to the Redemption Date. If any Note surrendered for redemption shall not be so paid, interest will be paid, from the Redemption Date until such redemption payment is made, on the unpaid principal of the Note and any interest not paid on such unpaid principal, in each case, at the rate and in the manner provided in the Notes. Section 3.06. Notes Redeemed in Part. ----------------------- Upon surrender of a Note that is redeemed in part, the Trustee shall authenticate for the Holder thereof a new Note equal in principal amount to the unredeemed portion of the Note surrendered. 50 -43- ARTICLE 4 COVENANTS Section 4.01. Payment of Notes. ---------------- The Company shall pay the principal of, premium (if any) and interest (including all Additional Interest as provided in the Registration Rights Agreement or, in the case of Notes issued subsequent to the Issue Date, a registration rights agreement substantially identical to the Registration Rights Agreement which shall be deemed to be included in the term "interest" for purposes of this Indenture and the Notes) on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal or interest shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date money designated for and sufficient to pay such installment. The Company shall pay interest on overdue principal (including post-petition interest in a proceeding under any Bankruptcy Law), and overdue interest, to the extent lawful, at the rate specified in the Notes. Section 4.02. SEC Reports. ------------ (a) The Company shall mail to each Holder of the Notes, and shall file with the Trustee within 15 days after it is required to file the same with the SEC, copies of the annual reports and quarterly reports or any amendments to such reports and of the information, documents and other reports which it may be required to file with the SEC pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act. The Company shall also comply with the other provisions of TIA Section 314(a). (b) Whether or not the Company is required to file with the SEC such reports and other information referred to in Section 4.2(a), the Company shall furnish without cost to each Holder of the Notes and file with the SEC and the Trustee (i) within 120 days after the end of each fiscal year of the Company, (x) audited year-end consolidated financial statements (including a balance sheet, income statement and statement of changes of cash flow) prepared in accordance with GAAP and substantially in the form required under Regulation S-X under the Securities Act and (y) the information described in Item 303 of Regulation S-K under the Securities Act with respect to such period and (ii) within 50 days after the end of each of the first three fiscal 51 -44- quarters of each fiscal year of the Company, (x) unaudited quarterly consolidated financial statements (including a balance sheet, income statement and statement of changes of cash flows) prepared in accordance with GAAP and substantially in the form required by Regulation S-X under the Securities Act and (y) the information described in Item 303 of Regulation S-K under the Securities Act with respect to such period. Section 4.03. Waiver of Stay, Extension or Usury Laws. ---------------------------------------- The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead (as a defense or otherwise) 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 which would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, and/or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.04. Compliance Certificate. ----------------------- (a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year and on or before 50 days after the end of the first, second and third quarters of each fiscal year, an Officers' Certificate (one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company) stating that a review of the activities of the Company and its Subsidiaries during such fiscal year or fiscal quarter, as the case may be, 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, that to the best of his or her knowledge, the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and are not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action they are taking or propose to take with respect thereto) and that to the 52 -45- best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as (and to the extent) not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.02 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements nothing has come to their attention which would lead them to believe that the Company or any Guarantor has violated any provisions of this Article 4 or Article 5 of this Indenture or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05. Taxes. ------ The Company and the Guarantors, if any, shall, and shall cause each of their Subsidiaries to, pay prior to delinquency all material taxes, assessments, and governmental levies except as contested in good faith and by appropriate proceedings. Section 4.06. Limitation on Additional Indebtedness. -------------------------------------- The Company shall not, and shall not permit any Restricted Subsidiary of the Company to, directly or indirectly, incur (as defined) any Indebtedness (including Acquired Indebtedness) unless (a) after giving effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, the Company's Fixed Charge Coverage Ratio (determined on a pro forma basis for the last four fiscal quarters of the Company for which financial statements are available at the date of determination) is greater than 2.25 to 1, and (b) no Default 53 -46- or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of such Indebtedness. Notwithstanding any restrictions set forth in this Section 4.06, the Company and its Restricted Subsidiaries may incur Permitted Indebtedness. Section 4.07. Limitation on Preferred Stock of Restricted Subsidiaries. --------------------------------------------------------- The Company shall not permit any Restricted Subsidiary to issue any Preferred Stock (except Preferred Stock to the Company or a Restricted Subsidiary) or permit any Person (other than the Company or a Subsidiary) to hold any such Preferred Stock unless the Company or such Restricted Subsidiary would be entitled to incur or assume Indebtedness under the first paragraph of Section 4.06 in the aggregate principal amount equal to the aggregate liquidation value of the Preferred Stock to be issued. Section 4.08. Limitation on Capital Stock of Restricted Subsidiaries. ------------------------------------------------------- The Company shall not (i) sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of a Subsidiary (other than under the Revolving Credit Facility or a successor facility) or (ii) permit any of its Subsidiaries to issue any Capital Stock, other than to the Company or a Wholly-Owned Restricted Subsidiary of the Company. The foregoing restrictions shall not apply to an Asset Sale made in compliance with Section 4.10 or the issuance of Preferred Stock in compliance with Section 4.07. Section 4.09. Limitation on Restricted Payments. ---------------------------------- The Company shall not make, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless: (a) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Restricted Payment; (b) immediately after giving pro forma effect to such Restricted Payment, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under Section 4.06 hereof; and 54 -47- (c) immediately after giving effect to such Restricted Payment, the aggregate of all Restricted Payments declared or made after the Issue Date does not exceed the sum of (1) 50% of the cumulative Consolidated Net Income of the Company (or in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit), plus (2) 100% of the aggregate Net Proceeds and the fair market value of securities or other property received by the Company from the issue or sale, after the Issue Date, of Capital Stock (other than Disqualified Capital Stock or Capital Stock of the Company issued to any Subsidiary of the Company) of the Company or any Indebtedness or other securities of the Company convertible into or exercisable or exchangeable for Capital Stock (other than Disqualified Capital Stock) of the Company which has been so converted or exercised or exchanged, as the case may be. For purposes of determining under this clause (c) the amount expended for Restricted Payments, cash distributed shall be valued at the face amount thereof and property other than cash shall be valued at its fair market value. The provisions of this Section 4.09 shall not prohibit (i) the payment of any distribution within 60 days after the date of declaration thereof, if at such date of declaration such payment would comply with the provisions of this Indenture, (ii) so long as no Default or Event of Default shall have occurred and be continuing, the retirement of any shares of Capital Stock of the Company or subordinated Indebtedness (A) by conversion into, or by or in exchange for, shares of Capital Stock (other than Disqualified Capital Stock) of the Company, or (B) out of, the Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of other shares of Capital Stock of the Company (other than Disqualified Capital Stock), (iii) so long as no Default or Event of Default shall have occurred and be continuing, the redemption or retirement of Indebtedness of the Company subordinated to the Notes in exchange for, by conversion into, or out of the Net Proceeds of, a substantially concurrent sale or incurrence of Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company that is contractually subordinated in right of payment to the Notes to at least the same extent as the Subordinated Indebtedness being redeemed or retired, (iv) so long as no Default or Event of Default shall have occurred and be continuing, the retirement of any shares of Disqualified Capital Stock by conversion into, or by exchange for, shares of Disqualified Capital Stock, or out of the Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of other shares of Disqualified Capital Stock; provided 55 -48- that (a) such Disqualified Capital Stock is not subject to mandatory redemption earlier than the maturity of the Notes, (b) such Disqualified Capital Stock is in an aggregate liquidation preference that is equal to or less than the sum of (x) the aggregate liquidation preference of the Disqualified Capital Stock being retired, (y) the amount of accrued and unpaid dividends, if any, and premiums owed, if any, on the Disqualified Capital Stock being required and (z) the amount of customary fees, expenses and costs related to the incurrence of such Disqualified Capital Stock and (c) such Disqualified Capital Stock is incurred by the same person that initially incurred the disqualified Capital Stock being retired, except that the Company may incur Disqualified Capital Stock to refund or refinance Disqualified Capital Stock of any Wholly-Owned Restricted Subsidiary of the Company, (v) the payment by the Company of cash dividends to Holding for the purpose of paying, so long as all proceeds thereof are promptly used by Holding to pay, franchise taxes and federal, state and local income taxes and interest and penalties with respect thereto, if any, payable by Holding, provided that any refund shall be promptly returned by Holding to the Company, (vi) so long as no Default or Event of Default shall have occurred and be continuing, payments to employees for repurchases of Capital Stock of Holding; provided, however, that the amount of all such payments under this clause (vi) does not exceed $250,000 during any twelve month period; (vii) deposits and loans, not to exceed $3.0 million at any time outstanding, made in connection with acquisition agreements; (viii) the making of payments by the Company to Holding to pay (A) upon consummation of the Transactions, up to $65,000 in connection with the delivery of an opinion relating to the solvency of the Company on the Issue Date and (B) operating expenses, not to exceed $25,000 in any fiscal year; or (ix) any payment from the Company to Holding in the amount of any payment received by the Company pursuant to a distribution from the Escrow Accounts in connection with the Merger under the terms of the Merger Agreement, not to exceed $50,000. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (c) of the immediately preceding paragraph, amounts expended pursuant to clauses (i), (ii)(B) and (iv) shall be included in such calculation and, in the event the acquisition contemplated in clause (vii) is not consummated within 180 days after the deposit or loan is made in connection therewith, (vii) shall also be included in such calculation. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by 56 -49- this Section 4.09 were computed, which calculations may be based upon the Company's latest available financial statements, and that no Default or Event of Default exists and is continuing and no Default or Event of Default will occur immediately after giving effect to any Restricted Payments. Section 4.10. Limitation on Certain Asset Sales. ---------------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or its Restricted Subsidiaries, as the case may be, receives consideration at the time of such sale or other disposition at least equal to the fair market value thereof (as determined in good faith by the Company's Board of Directors, and evidenced by a board resolution); (ii) not less than 85% of the consideration received by the Company or its Subsidiaries, as the case may be, is in the form of cash or cash equivalents (those equivalents allowed under "Temporary Cash Investments"); and (iii) the Asset Sale Proceeds received by the Company or such Restricted Subsidiary are applied (a) first, to the extent the Company elects, or is required to prepay, repay or purchase Indebtedness (other than Subordinated Indebtedness) of the Company or any Restricted Subsidiary within 270 days following the receipt of the Asset Sale Proceeds from any Asset Sale, provided that any such repayment shall result in a permanent reduction of the commitments thereunder in an amount equal to the principal amount so repaid; (b) second, to the extent of the balance of Asset Sale Proceeds after application as described above, to the extent the Company elects, to an investment in assets (including Capital Stock or other securities purchased in connection with the acquisition of Capital Stock or property of another person) used or useful in businesses similar or ancillary to the business of the Company or Restricted Subsidiary as conducted at the time of such Asset Sale, provided that such investment occurs or the Company or a Restricted Subsidiary enters into contractual commitments to make such investment, subject only to customary conditions (other than the obtaining of financing), on or prior to the 271st day following receipt of such Asset Sale Proceeds (the "REINVESTMENT DATE") and Asset Sale Proceeds contractually committed are so applied within 365 days following the receipt of such Asset Sale Proceeds; and (c) third, if on the Reinvestment Date with respect to any Asset Sale, the Available Asset Sale Proceeds exceed $5.0 million, the Company shall apply an amount equal to Available Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (an "EXCESS PROCEEDS OFFER"). If an Excess Proceeds Offer is not fully 57 -50- subscribed, the Company may retain the portion of the Available Asset Sale Proceeds not required to repurchase Notes. If the Company is required to make an Excess Proceeds Offer, the Company shall mail, within 30 days following the Reinvestment Date, a notice to the Holders stating, among other things: (1) that such Holders have the right to require the Company to apply the Available Asset Sale Proceeds to repurchase such Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase; (2) the purchase date (the "PURCHASE DATE"), which shall be no earlier than 30 days and not later than 60 days from the date such notice is mailed; (3) the instructions, determined by the Company, that each Holder must follow in order to have such Notes repurchased; and (4) the calculations used in determining the amount of Available Asset Sale Proceeds to be applied to the repurchase of such Notes. The Excess Proceeds Offer shall remain open for a period of 20 Business Days following its commencement (the "OFFER PERIOD"). The notice, which shall govern the terms of the Excess Proceeds Offer, shall state: (1) that the Excess Proceeds Offer is being made pursuant to this Section 4.10 and the length of time the Excess Proceeds Offer will remain open; (2) the purchase price and the Purchase Date; (3) that any Note not tendered or accepted for payment will continue to accrue interest; (4) that any Note accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest on and after the Purchase Date and the deposit of the purchase price with the Trustee; (5) that Holders electing to have a Note purchased pursuant to any Excess Proceeds Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Purchase Date; (6) that Holders will be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the expiration of the 58 -51- Offer Period, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note purchased; (7) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Available Asset Sale Proceeds, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (8) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, Notes or portions thereof tendered pursuant to the Excess Proceeds Offer, deposit with the Paying Agent U.S. legal tender sufficient to pay the purchase price plus accrued interest, if any, on the Notes to be purchased and deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.10. The Paying Agent shall promptly (but in any case not later than 5 days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Note tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, any Guarantor shall endorse the guarantee thereon and the Trustee shall authenticate and mail or make available for delivery such new Note to such Holder equal in principal amount to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Excess Proceeds Offer on the Purchase Date by sending a press release to the Dow Jones News Service or similar business news service in the United States. If an Excess Proceeds Offer is not fully subscribed, the Company may retain that portion of the Available Asset Sale Proceeds not required to repurchase Notes. Section 4.11. Limitation on Transactions with Affiliates. ------------------------------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter 59 -52- into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate (including entities in which the Company or any of its Restricted Subsidiaries own a minority interest) or holder of 10% or more of the Common Stock of the Company (an "AFFILIATE TRANSACTION") or extend, renew, waive or otherwise modify the terms of any Affiliate Transaction entered into prior to the Issue Date unless (i) such Affiliate Transaction is between or among the Company and its Wholly-Owned Restricted Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and reasonable to the Company or such Restricted Subsidiary, as the case may be, and the terms of such Affiliate Transaction are at least as favorable as the terms which could be obtained by the Company or such Restricted Subsidiary, as the case may be, in a comparable transaction made on an arm's-length basis between unaffiliated parties. In any Affiliate Transaction involving an amount or having a value in excess of $1.0 million which is not permitted under clause (i) above, the Company must obtain a resolution of the Board of Directors certifying that such Affiliate Transaction complies with clause (ii) above. In transactions with a value in excess of $5.0 million which are not permitted under clause (i) above, the Company must obtain a written opinion as to the fairness of such a transaction from a nationally recognized independent investment banking firm. (b) The foregoing provisions will not apply to (i) any Restricted Payment that is not prohibited by Section 4.09 hereof, (ii) any transaction, approved by the Board of Directors of the Company, with an officer or director of the Company or of any Subsidiary in his or her capacity as officer or director entered into in the ordinary course of business, (iii) any transactions with KECC for advisory services to the extent the payment for such services do not exceed $200,000 per year, (iv) customary banking transactions with an Affiliate of KECC, (v) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Subsidiary of the Company as determined in good faith by the Company's Board of Directors, or (vi) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by this Indenture. Section 4.12. Limitations on Liens. --------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur or otherwise cause or 60 -53- suffer to exist or become effective any Liens of any kind (other than Permitted Liens) upon any property or asset of the Company or any Restricted Subsidiary or any shares of stock or debt of any Restricted Subsidiary which owns property or assets, now owned or hereafter acquired, unless (i) if such Lien secures Indebtedness which is pari passu with the Notes, then the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligation is no longer secured by a Lien or (ii) if such Lien secures Indebtedness which is subordinated to the Notes, any such Lien shall be subordinated to a Lien on such property or asset or shares of stock or debt granted to the holders of the Notes to the same extent as such subordinated Indebtedness is subordinated to the Notes. Section 4.13. Limitations on Investments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any Investment other than (i) a Permitted Investment or (ii) an Investment that is made as a Restricted Payment in compliance with Section 4.09 hereof, after the Issue Date. Section 4.14. Limitation on Creation of Subsidiaries. --------------------------------------- The Company shall not create or acquire, nor permit any of its Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted Subsidiary existing as of the date of the Indenture, (ii) a Restricted Subsidiary conducting a business similar or reasonably related to the business of the Company and its Subsidiaries on the Issue Date, or (iii) an Unrestricted Subsidiary; PROVIDED, HOWEVER, that each Restricted Subsidiary organized under the laws of the United States or any State thereof or the District of Columbia acquired or created pursuant to clause (ii) shall, at the time it has either assets or shareholder's equity in excess of $10,000, execute a guarantee, in the form attached hereto as EXHIBIT G and reasonably satisfactory in form and substance to the Trustee (and with such documentation relating thereto as the Trustee shall require, including, without limitation a supplement or amendment to this Indenture and an Opinion of Counsel as to the enforceability of such Guarantee). Section 4.15. Limitation on Sale and Lease-Back Transactions. ----------------------------------------------- The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the consideration received in such Sale and Lease-Back Transaction is at least equal to the fair market 61 -54- value of the property sold, as determined by a board resolution of the Company and (ii) the Company could incur the Attributable Indebtedness in respect of such Sale and Lease-Back Transaction in compliance with Section 4.06. Section 4.16. Limitation on Dividend and Other Payment Restrictions Affecting --------------------------------------------------------------- Subsidiaries. ------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (b) make loans or advances or capital contributions to the Company or any of its Restricted Subsidiaries or (c) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) encumbrances or restriction existing on the Issue Date or under the Revolving Credit Facility, (ii) this Indenture, the Notes and the Guarantees, if applicable, (iii) applicable law, (iv) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries or of any Person that becomes a Restricted Subsidiary as in effect at the time of such acquisition or such Person becoming a Restricted Subsidiary (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition or such Person becoming a Restricted Subsidiary), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person (including any Subsidiary of the Person), so acquired, provided that the EBITDA of such Person is not taken into account (to the extent of such restriction) in determining whether any financing or Restricted Payment in connection with such acquisition was permitted by the terms of the Indenture, (v) customary nonassignment provisions in leases or other agreements entered into in the ordinary course of business and consistent with past practices, (vi) Refinancing Indebtedness; provided that such restrictions are in the aggregate no more restrictive than those contained in the agreements governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded or (vii) customary restrictions in security agreements, liens or mortgages securing Indebtedness of the 62 -55- Company or a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements and mortgages. Section 4.17. Payments for Consent. --------------------- Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, including out-of-pocket costs and expenses, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders of the Notes which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. Section 4.18. Legal Existence. --------------- Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its legal existence, and the corporate, partnership or other existence of each Restricted Subsidiary, in accordance with the respective organizational documents (as the same may be amended from time to time) of each Restricted Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries if 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 its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders. Section 4.19. Change of Control. ------------------ (a) Within 20 days of the occurrence of a Change of Control, the Company shall notify the Trustee in writing of such occurrence and shall make an offer to purchase (the "CHANGE OF CONTROL OFFER") the outstanding Notes at a purchase price equal to 101% of the principal amount thereof plus any accrued and unpaid interest thereon to the Change of Control Payment Date (as hereinafter defined) (such applicable purchase price being hereinafter referred to as the "CHANGE OF CONTROL PURCHASE PRICE") in accordance with the procedures set forth below. 63 -56- If the Revolving Credit Facility is in effect, or any amounts are owing thereunder, at the time of the occurrence of a Change of Control, prior to the mailing of the notice to Holders described in paragraph (b) below, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full all obligations under the Revolving Credit Facility or offer to repay in full all obligations under or in respect of the Revolving Credit Facility and repay the obligations under or in respect of the Revolving Credit Facility of each lender who has accepted such offer or (ii) obtain the requisite consent under the Revolving Credit Facility to permit the repurchase of the Notes pursuant to this Section 4.19. The Company must first comply with the covenant described in the preceding sentence before it may commence a Change of Control Offer in the event of a Change of Control; PROVIDED that the Company's failure to comply with the covenant described in the preceding sentence constitutes an Event of Default described in clause (3) under Section 6.01 hereof if not cured within 30 days after the notice required by such clause. (b) Within 30 days of the occurrence of a Change of Control, the Company also shall (i) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (ii) send by first-class mail, postage prepaid, to the Trustee and to each Holder of the Notes, at the address appearing in the register maintained by the Registrar of the Notes, a notice stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.19 and that all Notes tendered will be accepted for payment, and otherwise subject to the terms and conditions set forth herein; (2) the Change of Control Purchase Price and the purchase date (which shall be a Business Day no earlier than 30 Business Days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE")); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Purchase Price, any Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; 64 -57- (5) that Holders accepting the offer to have their Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to a depository, if appointed, or the Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their acceptance if the depository or Paying Agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, PROVIDED that each Note purchased and each such new Note issued shall be in an original principal amount in denominations of $1,000 and integral multiples thereof; (8) any other procedures that a Holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance; and (9) the name and address of the depository or Paying Agent. On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the depository or Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof tendered to the Company. The Paying Agent shall promptly mail to each Holder of Notes so accepted payment in an amount equal to the purchase price for such Notes, and the Company shall execute and issue, and the Trustee shall promptly authenticate and mail to such Holder, a new Note equal in principal amount to any unpurchased portion of the Notes surrendered; PROVIDED that each such new Note shall be issued in an original principal amount in denominations of $1,000 and integral multiples thereof. 65 -58- (c) (A) If either Company or any Subsidiary thereof has issued any outstanding (i) Indebtedness that is subordinated in right of payment to the Notes or (ii) Preferred Stock, and the Company or such Subsidiary is required to make a Change of Control offer or to make a distribution with respect to such subordinated Indebtedness or Preferred Stock in the event of a change of control, the Company shall not consummate any such offer or distribution with respect to such subordinated Indebtedness or Preferred Stock until such time as the Company shall have paid the Change of Control Purchase Price in full to the Holders of Notes that have accepted the Company's Change of Control Offer and shall otherwise have consummated the Change of Control Offer made to Holders of the Notes and (B) the Company will not issue Indebtedness that is subordinated in right of payment to the Notes or Preferred Stock with change of control provisions requiring the payment of such Indebtedness or Preferred Stock prior to the payment of the Notes in the event of a Change in Control under this Indenture. In the event that a Change of Control occurs and the Holders of Notes exercise their right to require the Company to purchase Notes, if such purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time, the Company will comply with the requirements of Rule 14e-1 as then in effect with respect to such repurchase. Section 4.20. Maintenance of Properties; Insurance; Books and Records; -------------------------------------------------------- Compliance with Law. -------------------- (a) The Company shall, and shall cause each of its Restricted Subsidiaries to, at all times cause all properties used or useful in the conduct of their business 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 repairs, renewals, replacements and betterments thereto. (b) The Company shall, and shall cause each of its Restricted Subsidiaries to, maintain insurance in such amounts and covering such risks as are usually and customarily carried with respect to similar facilities according to their respective locations. (c) The Company shall, and shall cause each of its Subsidiaries to, keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each 66 -59- Subsidiary of the Company, in accordance with GAAP consistently applied to the Company and its Subsidiaries taken as a whole. (d) The Company shall, and shall cause each of its Subsidiaries to, comply with all statutes, laws, ordinances or government rules and regulations to which they are subject, non-compliance with which would materially adversely affect the business, prospects, earnings, properties, assets or financial condition of the Company and their Subsidiaries taken as a whole. Section 4.21. Further Assurance to the Trustee. --------------------------------- The Company shall, upon the reasonable request of the Trustee, execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the provisions of this Indenture. ARTICLE 5 SUCCESSOR CORPORATION Section 5.01. Limitation on Consolidation, Merger and Sale of Assets. ------------------------------------------------------- (a) The Company shall not, nor shall it permit any Guarantor, if applicable, to consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions), to any Person unless: (i) the Company or such Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or such Guarantor) formed by such consolidation or into which the Company or such Guarantor, as the case may be, is merged or to which the properties and assets of the Company or such Guarantor, as the case may be, are transferred shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company or the Guarantor, as the case may be, under the Notes and this Indenture, and the obligations under this Indenture shall remain in full force and effect; (ii) immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) immediately after giving effect to such transaction or series of transactions on a pro forma basis the 67 -60- Consolidated Net Worth of the Company or the surviving entity as the case may be is at least equal to the Consolidated Net Worth of the Company immediately before such transaction or series of transactions; and (iv) immediately after giving effect to such transaction on a PRO FORMA basis the Company or the Surviving Person could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.06 hereof; PROVIDED that a Person that is a Guarantor may consolidate with, merge into or transfer all or substantially all of its assets to the Company or another Person that is a Guarantor without complying with this clause (iv). (b) In connection with any consolidation, merger or transfer of assets contemplated by this Section 5.01, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto, if any, comply with this Section 5.01 and that all conditions precedent herein provided for relating to such transaction or transactions have been complied with. Section 5.02. Successor Person Substituted. ----------------------------- Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company or any Guarantor, if applicable, in accordance with Section 5.01 above, the successor corporation formed by such consolidation or into which the Company or such Guarantor 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 or such Guarantor under this Indenture with the same effect as if such successor corporation had been named as the Company or such Guarantor herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Notes. 68 -61- ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01. Events of Default. ------------------ An "Event of Default" occurs if (1) there is a default in the payment of any principal of, or premium, if any, on the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; (2) there is a default in the payment of any interest on any Note when the same becomes due and payable and the Default continues for a period of 30 days; (3) either the Company or any Guarantor defaults in the observance or performance of any other covenant in the Notes or this Indenture for 30 days after written notice from the Trustee or the Holders of not less than 25% in the aggregate principal amount of the Notes then outstanding; (4) there is a default in the payment when due of principal, interest or premium in an aggregate amount of $5,000,000 or more with respect to any Indebtedness of the Company or any Restricted Subsidiary thereof, or there is an acceleration of any such Indebtedness aggregating $5,000,000 or more, which default shall not be cured, waived or postponed pursuant to an agreement with the holders of such Indebtedness within 60 days after written notice of such default to the Company by the Trustee or to the Company and the Trustee by any Holder, or which acceleration shall not be rescinded or annulled within 20 days after written notice of such Default to the Company by the Trustee or to the Company and the Trustee by any Holder; (5) the entry of a final judgment or judgments which can no longer be appealed for the payment of money in excess of $3,000,000 (which are not paid or covered by third party insurance by financially sound insurers that have not disclaimed coverage or so long as a court of competent jurisdiction has ordered, in a final and nonappealable order, the issuer to make payment) shall be rendered against the Company or any Restricted Subsidiary thereof and such judgment remains undischarged, for a period of 60 69 -62- consecutive days during which a stay of enforcement of such judgment shall not be in effect; (6) the Company or any Significant Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, or (E) generally is not paying its debts as they become due; or (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against either of the Company or any Restricted Subsidiary in an involuntary case, (B) appoints a Custodian of either of the Company or any Restricted Subsidiary or for all or substantially all of the property of either of the Company or any Restricted Subsidiary, or (C) orders the liquidation of either of the Company or any Restricted Subsidiary, and the order or decree remains unstayed and in effect for 60 days. The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Subject to Sections 7.01 and 7.02, the Trustee shall not be charged with knowledge of any Default, Event of Default, Change of Control or Asset Sale or the requirement for payment of Additional Interest unless written notice thereof shall have been 70 -63- given to a Responsible Officer at the Corporate Trust Office of the Trustee by the Company or any other Person. Section 6.02. Acceleration. ------------- If an Event of Default (other than an Event of Default arising under Section 6.01(6) or (7) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding may by written notice to the Company and the Trustee declare to be immediately due and payable the entire principal amount of all the Notes then outstanding plus accrued but unpaid interest to the date of acceleration; PROVIDED, HOWEVER, that after such acceleration but before a judgment or decree based on such acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes may rescind and annul such acceleration and its consequences if all existing Events of Default, other than the nonpayment of accelerated principal, premium, if any, or interest that has become due solely because of the acceleration, have been cured or waived and if the rescission would not conflict with any judgment or decree. No such rescission shall affect any subsequent Default or impair any right consequent thereto. In case an Event of Default specified in Section 6.01(6) or (7) with respect to the Company occurs, such principal, premium, if any, and interest amount with respect to all of the Notes shall be due and payable immediately without any declaration or other act on the part of the Trustee or the Holders of the Notes. Section 6.03. Other Remedies. --------------- If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, or premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture and may take any necessary action requested of it as Trustee to settle, compromise, adjust or otherwise conclude any proceedings to which it is a party. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. 71 -64- No remedy is exclusive of any other remedy. All available remedies are cumulative. Section 6.04. Waiver of Past Defaults and Events of Default. ---------------------------------------------- Subject to Sections 6.02, 6.08 and 8.02 hereof, the Holders of a majority in principal amount of the Notes then outstanding have the right to waive any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes. 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 Event of Default or impair any right consequent thereto. Section 6.05. Control by Majority. ------------------- The Holders of a majority in principal amount of the Notes then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee by this Indenture. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines may be unduly prejudicial to the rights of another Noteholder not taking part in such direction, and the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken or if the Trustee in good faith shall, by a Responsible Officer, determine that the proceedings so directed may involve it in personal liability; PROVIDED that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 6.06. Limitation on Suits. -------------------- Subject to Section 6.08 below, a Noteholder may not institute any proceeding or pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of the Notes then outstanding make a written request to the Trustee to pursue the remedy; 72 -65- (3) such Holder or Holders offer and if requested provide to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer, and, if requested, provision of, indemnity; and (5) 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 aggregate principal amount of the Notes then outstanding. A Noteholder may not use this Indenture to prejudice the rights of another Noteholder or to obtain a preference or priority over another Noteholder. Section 6.07. No Personal Liability of Directors, Officers, Employees and ----------------------------------------------------------- Stockholders. ------------- No director, officer, employee, incorporator or stockholder of the Company or any Guarantor shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Guarantees, if any, or this Indenture or for a claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 6.08. Rights of Holders To Receive Payment. ------------------------------------- Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal of, or premium, if any, and interest of the Note (including Additional Interest) on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. Section 6.09. Collection Suit by Trustee. --------------------------- If an Event of Default in payment of principal, premium or interest specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or the Guarantors (or any other obligor on the Notes) for the whole amount of unpaid principal and accrued interest remaining unpaid, 73 -66- together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate set forth in the Notes, and such further amounts as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.10. Trustee May File Proofs of Claim. --------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof) and the Noteholders allowed in any judicial proceedings relative to the Company or the Guarantors (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same after deduction of its charges and expenses to the extent that any such charges and expenses are not paid out of the estate in any such proceedings and any custodian in any such judicial proceeding is hereby authorized by each Noteholder 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 Noteholders, to pay to the Trustee any amount due to 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 7.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan or reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceedings. Section 6.11. Priorities. ----------- If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07 hereof; 74 -67- SECOND: to Noteholders for amounts due and unpaid on the Notes for principal, premium, if any, and interest (including Additional Interest, if any) as to each, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes; and THIRD: to the Company or, to the extent the Trustee collects any amount from any Guarantor, to such Guarantor. The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section 6.11. Section 6.12. Undertaking for Costs. ---------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.12 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.08 hereof or a suit by Holders of more than 10% in principal amount of the Notes then outstanding. Section 6.13. 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. 75 -68- ARTICLE 7 TRUSTEE Section 7.01. Duties of Trustee. ------------------ (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the same circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others. (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 but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (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 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in 76 -69- accordance with a direction received by it pursuant to Sections 6.02 or 6.05 hereof. (4) 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 rights, powers or duties if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, paragraphs (a), (b), (c), (e) and (f) of this Section 7.01 shall govern every provision of this Indenture that in any way relates to the Trustee. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it in its sole discretion against any loss, liability, expense or fee. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company or any Guarantor. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by the law. Section 7.02. Rights of Trustee. ------------------ Subject to Section 7.01 hereof: (1) The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both, which shall conform to the provisions of Section 11.05 hereof. The Trustee shall be protected and shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (3) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed by it with due care. 77 -70- (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers; PROVIDED that the Trustee's conduct does not constitute negligence or bad faith. (5) The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (6) The Trustee shall be under no obligation to exercise any of the rights or powers created in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (7) The Trustee shall not be bound to make any investigation into the facts or matters stated in any document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. Section 7.03. Individual Rights of Trustee. ----------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for or otherwise deal with the either of the Company or any Guarantor, or any Affiliates thereof, with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, shall be subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. --------------------- The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the sale of Notes or any money paid to the Company pursuant to the terms of this Indenture and it shall not be responsible for any statement in the Notes or this Indenture other than its certificate of authentication. 78 -71- Section 7.05. Notice of Defaults. ------------------- If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Noteholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of the principal of, or premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determine(s) that withholding the notice is in the interests of the Noteholders. Section 7.06. Reports by Trustee to Holders. ------------------------------ If required by TIA Section 313(a), within 60 days after May 15 of any year, commencing May 15, 1998, the Trustee shall mail to each Noteholder a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c) and TIA Section 313(d). A copy of each report at the time of its mailing to Noteholders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07. Compensation and Indemnity. --------------------------- The Company and the Guarantors shall pay to the Trustee and Agents from time to time such compensation as shall be agreed in writing between the Company and the Trustee for its services hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company and the Guarantors shall reimburse the Trustee and Agents promptly upon request for all reasonable disbursements, expenses and advances incurred or made by it, including costs of collection, in connection with its duties under this Indenture, including the reasonable compensation, disbursements and expenses of the Trustee's agents, accountants and counsel. The Company and the Guarantors shall indemnify each of the Trustee and any predecessor Trustee for, and hold each of them harmless against, any and all loss, damage, claim, liability or expense, including without limitation taxes (other than taxes based on the income of the Trustee or such Agent) and reasonable attorneys' fees and expenses incurred by each of them in connection with the acceptance or performance of its duties under this Indenture and the enforcement of this Indenture (including 79 -72- this Section 7.07) against the Company and any Guarantor, 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 (including, without limitation, settlement costs). The Trustee or Agent shall notify the Company and the Guarantors in writing promptly of any claim asserted against the Trustee or Agent for which it may seek indemnity. However, the failure by the Trustee or Agent to so notify the Company and the Guarantors shall not relieve the Company and Guarantors of their obligations hereunder. Notwithstanding the foregoing, the Company and the Guarantors need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by the Trustee through its negligence or bad faith. To secure the payment obligations of the Company and the Guarantors in this Section 7.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee except such money or property held in trust to pay principal of and interest on particular Notes. The Trustee's right to receive payment of any amounts under this Section 7.07 shall not be subordinate to any other liability or indebtedness of the Company or the Guarantors. The obligations of the Company and the Guarantors under this Section 7.07 to compensate and indemnify the Trustee, Agents and each predecessor Trustee and to pay or reimburse the Trustee, Agents and each predecessor Trustee for expenses, disbursements and advances shall be joint and several liabilities of the Company and each of the Guarantors and shall survive the satisfaction and discharge of this Indenture, including any termination or rejection hereof under any Bankruptcy Law. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(6) or (7) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. For purposes of this Section 7.07, the term "Trustee" shall include any trustee appointed pursuant to Article 9. Section 7.08. Replacement of Trustee. ----------------------- The Trustee may resign by so notifying the Company and the Guarantors in writing. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by notifying the Company and the removed Trustee in writing and 80 -73- may appoint a successor Trustee with the Company's written consent, which consent shall not be unreasonably withheld. The Company may remove the Trustee at its election if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise 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. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately following such delivery, the retiring Trustee shall, subject to its rights under Section 7.07 hereof, transfer all property held by it as Trustee to the successor Trustee (provided that the amounts owing to the Trustee hereunder have been paid in full), 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 Noteholder. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. 81 -74- Section 7.09. Successor Trustee by Consolidation, Merger, etc. ------------------------------------------------ If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, subject to Section 7.10 hereof, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. ------------------------------ This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee shall have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b), including the provision in Section 310(b)(1); PROVIDED that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities, or conflicts of interest or participation in other securities, of the Company or the Guarantors are outstanding if the requirements for exclusion set forth in TIA Section 310(b)(1) are met. 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 therein. Section 7.12. Paying Agents. -------------- The Company shall cause each Paying Agent other than the Trustee to execute and deliver to it and the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 7.12: (A) that it will hold all sums held by it as agent for the payment of principal of, or premium, if any, or interest on, the Notes (whether such sums have been paid to it by the Company or by any obligor on the Notes) in trust for the benefit of Holders of the Notes or the Trustee; (B) that it will at any time during the continuance of any Event of Default, upon written request from the Trustee, 82 -75- deliver to the Trustee all sums so held in trust by it together with a full accounting thereof; and (C) that it will give the Trustee written notice within three (3) Business Days of any failure of the Company (or by any obligor on the Notes) in the payment of any installment of the principal of, premium, if any, or interest on, the Notes when the same shall be due and payable. ARTICLE 8 AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 8.01. Without Consent of Holders. --------------------------- The Company and the Guarantors, if any, when authorized by a Board Resolution of each of them, and the Trustee may amend, waive or supplement this Indenture or the Notes without notice to or consent of any Noteholder: (1) to comply with Section 5.01 hereof; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to comply with any requirements of the SEC under the TIA; (4) to cure any ambiguity, defect or inconsistency; (5) to make any other change that does not adversely affect the rights of any Noteholders hereunder; (6) to add or release a Guarantor; or (7) to provide for the issuance of the Exchange Notes and the Private Exchange Notes in accordance with Section 2.02 in a manner that does not adversely affect the rights of any Noteholder. The Trustee is hereby authorized to join with the Company and the Guarantors, if any, in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee 83 -76- shall not be obligated to enter into any such supplemental indenture which adversely affects its own rights, duties or immunities under this Indenture. Section 8.02. With Consent of Holders. ------------------------ The Company, the Guarantors, if any, and the Trustee may modify, amend, waive or supplement this Indenture or the Notes with the written consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes may waive compliance in a particular instance by the Company or any Guarantor with any provision of this Indenture or the Notes. Subject to Section 8.04, without the consent of each Noteholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not: (1) reduce the principal amount of outstanding Notes whose Holders must consent to an amendment, supplement or waiver to this Indenture or the Notes; (2) reduce the rate of or change the time for payment of interest on any Note; (3) reduce the principal of or premium on or change the stated maturity of any Note; (4) make any Note payable in money other than that stated in the Note or change the place of payment from New York, New York; (5) change the amount or time of any payment required by the Notes or reduce the premium payable upon any redemption of the Notes in accordance with Section 3.01 hereof, or change the time before which no such redemption may be made; (6) waive a default in the payment of the principal of, or interest on, or redemption payment with respect to, any Note (including any obligation to make a Change of Control Offer or, after the Company's obligation to purchase Notes arises thereunder, an Excess Proceeds Offer or modify any of the provisions or definitions with respect to such offers); (7) make any changes in Sections 6.04 or 6.08 hereof or this sentence of Section 8.02; or 84 -77- (8) affect the ranking of the Notes or any Guarantee in a manner adverse to the Holders. After a modification, amendment, supplement or waiver under this Section 8.02 becomes effective, the Company shall mail to the Holders a notice briefly describing the modification, 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 modification, amendment, supplement or waiver. 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. Section 8.03. Compliance with Trust Indenture Act. ------------------------------------ Every amendment or supplement to this Indenture or the Notes shall comply with the TIA as then in effect. Section 8.04. Revocation and Effect of Consents. ---------------------------------- Until a modification, amendment, supplement, waiver or other action becomes effective, a consent to it by a Holder of a Note is a continuing consent conclusive and binding upon such Holder and every subsequent Holder of the same Note or portion thereof, and of any Note issued upon the transfer thereof or in exchange therefor or in place thereof, even if notation of the consent is not made on any such Note. Any such Holder or subsequent Holder, however, may revoke the consent as to his Note or portion of a Note, if the Trustee receives the written notice of revocation before the date the modification, amendment, supplement, waiver or other action becomes effective. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any modification, amendment, supplement, or waiver. If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such modification, amendment, supplement, or waiver or 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 unless the consent of the requisite number of Holders has been obtained. 85 -78- After a modification, amendment, supplement, waiver or other action becomes effective, it shall bind every Noteholder, unless it makes a change described in any of clauses (1) through (8) of Section 8.02 hereof. In that case the modification, amendment, supplement, waiver or other action shall bind each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note. Section 8.05. Notation on or Exchange of Notes. --------------------------------- If a modification, amendment, supplement or waiver changes the terms of a Note, the Trustee may request the Holder of the Note deliver it to the Trustee. In such case, the Trustee shall place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue, the Guarantors shall endorse, and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 8.06. Trustee To Sign Amendments, etc. -------------------------------- The Trustee shall sign any modification, amendment, supplement or waiver authorized pursuant to this Article 8 if the modification, amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such modification, amendment, supplement or waiver the Trustee shall be entitled to receive and, subject to Section 7.01 hereof, shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that such modification, amendment, supplement or waiver is authorized or permitted by this Indenture and is a legal, valid and binding obligation of the Company and the Guarantors, if any, enforceable against each of them in accordance with its terms (subject to customary exceptions). The Company or any Guarantor may not sign a modification, amendment or supplement until the Board of Directors of the Company or such Guarantor, as appropriate, approves it. 86 -79- ARTICLE 9 DISCHARGE OF INDENTURE; DEFEASANCE Section 9.01. Discharge of Indenture. ----------------------- The Company and the Guarantors, if any, may terminate their obligations under the Notes, the Guarantees, if any, and this Indenture, except the obligations referred to in the last paragraph of this Section 9.01, if there shall have been cancelled by the Trustee or delivered to the Trustee for cancellation all Notes theretofore authenticated and delivered (other than any Notes that are asserted to have been destroyed, lost or stolen and that shall have been replaced as provided in Section 2.07 hereof) and the Company has paid all sums payable by them hereunder or deposited all required sums with the Trustee. After such delivery, the Trustee upon Company Request shall acknowledge in writing the discharge of the Company's and the Guarantors' obligations under the Notes, the Guarantees and this Indenture except for those surviving obligations specified below. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company in Sections 7.07, 9.05, 9.06 and 9.08 hereof shall survive. Section 9.02. Legal Defeasance. ----------------- The Company may at its option, by Board Resolution of the Board of Directors of the Company, be discharged from its obligations with respect to the Notes and the Guarantors, if any, discharged from their obligations under the Guarantees, if any, on the date the conditions set forth in Section 9.04 below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Notes and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Company, shall, subject to Section 9.06 hereof, execute instruments in form and substance reasonably satisfactory to the Trustee and Company acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of outstanding Notes to receive solely from the trust funds described in Section 9.04 hereof and as more fully set forth in such Section, payments in respect of the principal of, 87 -80- premium, if any, and interest on such Notes when such payments are due, (B) the Company's obligations with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09 and 4.20 hereof, (C) the rights, powers, trusts, duties, and immunities of the Trustee hereunder (including claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof) and (D) this Article 9. Subject to compliance with this Article 9, the Company may exercise its option under this Section 9.02 with respect to the Notes notwithstanding the prior exercise of its option under Section 9.03 below with respect to the Notes. Section 9.03. Covenant Defeasance. -------------------- At the option of the Company, pursuant to a Board Resolution of the Board of Directors of the Company, the Company and the Guarantors, if any, shall be released from their respective obligations under Sections 4.02 (except for obligations mandated by the TIA), 4.05 through 4.16, 4.19 and 4.21, inclusive, and clause (a)(iii) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 9.04 hereof are satisfied (hereinafter, "COVENANT DEFEASANCE") and the Notes shall thereafter be deemed to not be outstanding for purposes of any direction, waiver, consent, declaration or act of the Holders (and the consequences thereof) in connection with such covenants but shall continue to be outstanding for all other purposes hereunder. For this purpose, such Covenant Defeasance means that the Company and the Guarantors, if any, may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section or portion thereof, whether directly or indirectly by reason of any reference elsewhere herein to any such specified Section or portion thereof or by reason of any reference in any such specified Section or portion thereof to any other provision herein or in any other document, but the remainder of this Indenture and the Notes shall be unaffected thereby. Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance. ------------------------------------------------------ The following shall be the conditions to application of Section 9.02 or Section 9.03 hereof to the outstanding Notes: (1) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 hereof who shall agree to comply with the provisions of this Article 9 applicable to it) as funds in trust for the purpose of 88 -81- making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Notes, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of, premium, if any, and accrued interest on the outstanding Notes at the maturity date of such principal, premium, if any, or interest, or on dates for payment and redemption of such principal, premium, if any, and interest selected in accordance with the terms of this Indenture and of the Notes; (2) no Event of Default or Default with respect to the Notes shall have occurred and be continuing on the date of such deposit, or shall have occurred and be continuing at any time during the period ending on the 91st day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period under any Bankruptcy Law applicable to the Company in respect of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (3) such Legal Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest for purposes of the TIA with respect to any securities of the Company; (4) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute default under any other agreement or instrument to which the Company or any Guarantor is a party or by which they are bound; (5) the Company shall have delivered to the Trustee an Opinion of Counsel stating that, as a result of such Legal Defeasance or Covenant Defeasance, neither the trust nor the Trustee will be required to register as an investment company under the Investment Company Act of 1940, as amended; 89 -82- (6) in the case of an election under Section 9.02 above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling to the effect that or (ii) there has been a change in any applicable Federal income tax law with the effect that, and such opinion shall confirm that, the Holders of the outstanding Notes or Persons in their positions will not recognize income, gain or loss for Federal income tax purposes solely as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner, including as a result of prepayment, and at the same times as would have been the case if such Legal Defeasance had not occurred; (7) in the case of an election under Section 9.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (8) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance under Section 9.02 above or the Covenant Defeasance under Section 9.03 hereof (as the case may be) have been complied with; (9) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit under clause (1) was not made by the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and (10) the Company shall have paid or duly provided for payment under terms mutually satisfactory to the Company and the Trustee all amounts then due to the Trustee pursuant to Section 7.07 hereof. 90 -83- Section 9.05. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions. -------------------------------------------------------------- All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent, to the Holders of such Notes, of all sums due and to become due thereon in respect of principal, premium, if any, and accrued interest, but such money need not be segregated from other funds except to the extent required by law. The Company and the Guarantors, if any, shall (on a joint and several basis) pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 9.04 hereof or the principal, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 9 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon an Company Request any money or U.S. Government Obligations held by it as provided in Section 9.04 hereof which, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 9.06. Reinstatement. -------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company and any Guarantor under this Indenture, the Notes and the Guarantees, if any, shall be revived and reinstated as though no deposit had occurred pursuant to this Article 9 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 9.01 hereof; PROVIDED, HOWEVER, that if the Company or the Guarantors 91 -84- have made any payment of principal of, premium, if any, or accrued interest on any Notes because of the reinstatement of their obligations, the Company or the Guarantors, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. Section 9.07. Moneys Held by Paying Agent. ---------------------------- In connection with the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon written demand of the Company, be paid to the Trustee, or if sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the Company upon an Company Request (or, if such moneys had been deposited by any Guarantors, to such Guarantors), and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 9.08. Moneys Held by Trustee. ----------------------- Any moneys deposited with the Trustee or any Paying Agent or then held by the Company or any Guarantors in trust for the payment of the principal of, or premium, if any, or interest on any Note that are not applied but remain unclaimed by the Holder of such Note for two years after the date upon which the principal of, or premium, if any, or interest on such Note shall have respectively become due and payable shall be repaid to the Company (or, if appropriate, the Guarantors) upon an Company Request, or if such moneys are then held by the Company or the Guarantors in trust, such moneys shall be released from such trust; and the Holder of such Note entitled to receive such payment shall thereafter, as an unsecured general creditor, look only to the Company and the Guarantors for the payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or any such Paying Agent, before being required to make any such repayment, may, at the expense of the Company and the Guarantors, if any, either mail to each Noteholder affected, at the address shown in the register of the Notes maintained by the Registrar pursuant to Section 2.03 hereof, or cause to be published once a week for two successive weeks, in a newspaper published in the English language, customarily published each Business Day and of general circulation in the City of New York, New York, a notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such mailing or publication, any unclaimed balance of such moneys then 92 -85- remaining will be repaid to the Company. After payment to the Company or any Guarantor or the release of any money held in trust by the Company or any Guarantor, as the case may be, Noteholders entitled to the money must look only to the Company and any Guarantors for payment as general creditors unless applicable abandoned property law designates another Person. ARTICLE 10 GUARANTEE OF NOTES Section 10.01. Guarantee. ---------- Subject to the provisions of this Article 10, each Guarantor, by execution of a Guarantee, will jointly and severally unconditionally guarantee to each Holder and to the Trustee, on behalf of the Holders, (i) the due and punctual payment of the principal of, and premium, if any, and interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest (including Additional Interest) on the overdue principal of, and premium, if any, and interest on the Notes, to the extent lawful, and the due and punctual performance of all other Obligations of the Company to the Holders or the Trustee (including without limitation amounts due the Trustee under Section 7.07) all in accordance with the terms of such Note and this Indenture, and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at stated maturity, by acceleration or otherwise. Each Guarantor, by execution of a Guarantee, will agree that its obligations hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note or this Indenture, any waiver, modification or indulgence granted to the Company with respect thereto by the Holder of such Note or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or such Guarantor. Each Guarantor, by execution of a Guarantee, will waive diligence, presentment, demand for payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest 93 -86- or notice with respect to any such Note or the Indebtedness evidenced thereby and all demands whatsoever, and will covenant that the Guarantee will not be discharged as to any such Note except by payment in full of the principal thereof, premium if any, and interest thereon and as provided in Section 9.01 hereof. Each Guarantor, by execution of a Guarantee, will further agree that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article 6 hereof, the Trustee shall promptly make a demand for payment on the Notes under the Guarantee provided for in this Article 10 and not discharged. Failure to make such a demand shall not affect the validity or enforceability of the Guarantee upon any Guarantor. A Guarantee shall not be valid or become obligatory for any purpose with respect to a Note until the certificate of authentication on such Note shall have been signed by or on behalf of the Trustee. A Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities, whether as a "voidable preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 94 -87- No stockholder, officer, director, employer or incorporator, past, present or future, of any Guarantor, as such, shall have any personal liability under this Guarantee by reason of his, her or its status as such stockholder, officer, director, employer or incorporator. A Guarantor, by execution of a Guarantee, will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under such Guarantee. Section 10.02. Execution and Delivery of Guarantees. ------------------------------------- A Guarantee shall be executed on behalf of a Guarantor by the manual or facsimile signature of an Officer of such Guarantor. If an Officer of a Guarantor whose signature is on the Guarantee no longer holds that office, such Guarantee shall be valid nevertheless. Section 10.03. Limitation of Guarantee. ------------------------ The obligations of each Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the Adjusted Net Assets of each Guarantor. Section 10.04. Additional Guarantors. ---------------------- Any person may become a Guarantor by executing and delivering to the Trustee (a) a supplemental indenture in form and substance satisfactory to the Trustee, which subjects such person to the provisions of this Indenture as a Guarantor, and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such person and constitutes the legal, valid, binding and enforceable obligation of such person (subject to such customary exceptions concerning fraudulent conveyance laws, creditors' rights and 95 -88- equitable principles as may be acceptable to the Trustee in its discretion). Section 10.05. Release of Guarantor. --------------------- A Guarantor shall be released from all of its obligations under its Guarantee if: (i) the Guarantor has sold all or substantially all of its assets or the Company and its Restricted Subsidiaries have sold all of the Capital Stock of the Guarantor owned by them, in each case in a transaction in compliance with Sections 4.10 and 5.01 hereof; or (ii) the Guarantor merges with or into or consolidates with, or transfers all or substantially all of its assets to, the Company or another Guarantor in a transaction in compliance with Section 5.01 hereof; and in each such case, such Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to such transactions have been complied with. ARTICLE 11 MISCELLANEOUS Section 11.01. Trust Indenture Act Controls. ----------------------------- If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. Section 11.02. Notices. -------- Any notice or communication shall be given in writing and delivered in person, sent by facsimile, delivered by commercial courier service or mailed by first-class mail, postage prepaid, addressed as follows: 96 -89- If to the Company or any Guarantor: Glasstech Sub Co. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: President Telephone: (419) 661-9500 Fax Number: (419) 661-9366 Copy to: Baker & Hostetler LLP 3200 National City Center 1900 East Ninth Street Cleveland, Ohio 44114-3485 Attention: R. Steven Kestner, Esq. Telephone: (216) 621-0200 Fax Number: (216) 696-0740 If to the Trustee: United States Trust Company of New York 114 West 47th Street New York, New York 10036 Attention: Corporate Trust Department Telephone: (212) 852-1646 Fax Number: (212) 852-1625 Copy to: Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022 Attention: Tonny K. Ho, Esq. Telephone: (212) 821-8000 Fax Number: (212) 821-8111 97 -90- Such notices or communications shall be effective when received and shall be sufficiently given if so given within the time prescribed in this Indenture. The Company, any Guarantors or the Trustee by written notice to the others may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Noteholder shall be mailed to him by first-class mail, postage prepaid, at his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication to a Noteholder is mailed in the manner provided above, it shall be deemed duly given, whether or not the addressee receives it. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by this Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. Section 11.03. Communications by Holders with Other Holders. --------------------------------------------- Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Guarantors, if any, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 11.04. Certificate and Opinion as to Conditions Precedent. --------------------------------------------------- Upon any request or application by the Company or any Guarantor to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (which shall include the statements set forth in Section 11.05 below) 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 (which shall include the statements set forth in Section 11.05 below) stating that, 98 -91- in the opinion of such counsel, all such conditions precedent have been complied with. Section 11.05. Statements Required in Certificate and Opinion. ----------------------------------------------- Each certificate and 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, it or he has made such examination or investigation as is necessary to enable it or 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 such Person, such covenant or condition has been complied with. Section 11.06. Rules by Trustee and Agents. ---------------------------- The Trustee may make reasonable rules for action by or meetings of Noteholders. The Registrar and Paying Agent may make reasonable rules for their functions. Section 11.07. Business Days; Legal Holidays. ------------------------------ A "Business Day" is a day that is not a Legal Holiday. A "Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. Section 11.08. Governing Law. -------------- THIS INDENTURE AND THE NOTES 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 99 -92- NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES. Section 11.09. No Adverse Interpretation of Other Agreements. ---------------------------------------------- This Indenture may not be used to interpret another indenture, loan, security or debt agreement of the Company or any Subsidiary thereof. No such indenture, loan, security or debt agreement may be used to interpret this Indenture. Section 11.10. No Recourse Against Others. --------------------------- No recourse for the payment of the principal of or premium, if any, or interest on any of the Notes, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in this Indenture or in any supplemental indenture, or in any of the Notes, or because of the creation of any Indebtedness represented thereby, shall be had against any stockholder, officer, director, partner, affiliate, beneficiary or employee, as such, past, present or future, of the Company or of any successor corporation or against the property or assets of any such stockholder, officer, employee, partner, affiliate, beneficiary or director, either directly or through the Company or any Guarantor, or any successor corporation thereof, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the Notes are solely obligations of the Company and any Guarantors, and that no such personal liability whatever shall attach to, or is or shall be incurred by, any stockholder, officer, employee, partner, affiliate, beneficiary or director of the Company or any Guarantor, or any successor corporation thereof, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or the Notes or implied therefrom, and that any and all such personal liability of, and any and all claims against every stockholder, officer, employee, partner, affiliate, beneficiary and director, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of the Notes. It is understood that this limitation on recourse is made expressly for the benefit of any such shareholder, employee, officer, partner, affiliate, beneficiary or director and may be enforced by any one or all of them. 100 -93- Section 11.11. Successors. ----------- All agreements of the Company and the Guarantors, if any, in this Indenture and the Notes shall bind their respective successors. All agreements of the Trustee, any additional trustee and any Paying Agents in this Indenture shall bind its successor. Section 11.12. Multiple Counterparts. ---------------------- The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement. Section 11.13. Table of Contents, Headings, etc. --------------------------------- The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. Section 11.14. Separability. ------------- Each provision of this Indenture shall be considered separable and if for any reason any provision which is not essential to the effectuation of the basic purpose of this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 101 -94- IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed all as of the date and year first written above. GLASSTECH SUB CO. By: /s/ Mark D. Christman --------------------------------- Name: Mark D. Christman Title: President UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: /s/ Cynthia Chaney --------------------------------- Name: Cynthia Chaney Title: Assistant Vice President 102 EXHIBIT A --------- [FORM OF FACE OF NOTE] CUSIP [ ] GLASSTECH SUB CO. No. [ ] $ 12 3/4% SENIOR NOTE DUE 2004 GLASSTECH SUB CO., a Delaware corporation (the "Company"), for value received, promises to pay to CEDE & CO. or registered assigns the principal sum of $70,000,000 dollars on July 1, 2004. Interest Payment Dates: January 1 and July 1 Record Dates: December 15 and June 15 Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. A-1 103 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. GLASSTECH SUB CO. By: --------------------------------- Title: By: --------------------------------- Title: Dated: Certificate of Authentication This is one of the 12 3/4% Senior Notes due 2004 referred to in the within-mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: ------------------------------------ Authorized Signatory A-2 104 [FORM OF REVERSE OF NOTE] GLASSTECH SUB CO. 12 3/4% SENIOR NOTE DUE 2004 1. INTEREST. Glasstech Sub Co., a Delaware corporation (the "Company"), promises to pay, until the principal hereof is paid or made available for payment, interest on the principal amount set forth on the face hereof at a rate of 12 3/4% per annum. Interest hereon will accrue from and including the most recent date to which interest has been paid or, if no interest has been paid, from and including July 2, 1997 to but excluding the date on which interest is paid. Interest shall be payable in arrears on each January 1 and July 1 commencing January 1, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and on overdue interest (to the full extent permitted by law) at a rate of 12 3/4% per annum. 2. METHOD OF PAYMENT. The Company will pay interest hereon (except defaulted interest) to the Persons who are registered Holders at the close of business on December 15 or June 15 next preceding the interest payment date (whether or not a Business Day). Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Interest may be paid by check mailed to the Holder entitled thereto at the address indicated on the register maintained by the Registrar for the Notes. 3. PAYING AGENT AND REGISTRAR. Initially, United States Trust Company of New York (the "Trustee") will act as a Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice. Neither the Company nor any of its Affiliates may act as Paying Agent or Registrar. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of July 2, 1997 (the "Indenture") by and between the Company and the Trustee. This is one of an issue of Notes of the Company issued, or to be issued, under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as amended from time to time. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of them. Capitalized and certain other terms used herein and not otherwise defined have the meanings set forth in the Indenture. The Notes are obligations of the Company limited in aggregate principal amount to $70.0 million. A-3 105 5. OPTIONAL REDEMPTION. The Company, at its option, may redeem the Notes, in whole or in part, at any time on or after July 1, 2002 upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount), set forth below, together, in each case, with accrued and unpaid interest to the Redemption Date, if redeemed during the twelve month period beginning on July 1 of each year listed below:
Year Redemption Price ---- ---------------- 2002......................................... 103.188% 2003......................................... 100.000%
Notwithstanding the foregoing, the Company may redeem in the aggregate up to 25% of the original principal amount of Notes at any time and from time to time on or prior to July 1, 2000 at a redemption price equal to 112.75% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the Redemption Date with the Net Proceeds of one or more Qualified Equity Offerings of the Company or Holding to the extent such proceeds were contributed to the Company as common equity; PROVIDED, that at least $52.5 million of the principal amount of Notes originally issued remains outstanding immediately after the occurrence of any such redemption and that any such redemption occurs within 90 days following the closing of any such Qualified Equity Offering. 6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at his registered address. On and after the Redemption Date, unless the Company defaults in making the redemption payment, interest ceases to accrue on Notes or portions thereof called for redemption. 7. OFFERS TO PURCHASE. The Indenture provides that upon the occurrence of a Change of Control or an Asset Sale and subject to further limitations contained therein, the Company shall make an offer to purchase outstanding Notes in accordance with the procedures set forth in the Indenture. 8. REGISTRATION RIGHTS. Pursuant to a Registration Rights Agreement by and between the Company and CIBC Wood Gundy Securities Corp., as Initial Purchaser of the Notes, the Company will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for notes of a separate series issued under the Indenture (or a trust indenture substantially identical to the Indenture in accordance with the terms of the Registration Rights Agreement) which have been registered under the Securities Act, in like principal amount and having substantially identical terms A-4 106 as the Notes. The Holders shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay to it any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Notes or portion of a Note selected for redemption, or register the transfer of or exchange any Notes for a period of 15 days before a mailing of notice of redemption. 10. PERSONS DEEMED OWNERS. The registered Holder of this Note may be treated as the owner of this Note for all purposes. 11. UNCLAIMED MONEY. If money for the payment of principal or interest remains unclaimed for two years, the Trustee will pay the money back to the Company at its written request. After that, Holders entitled to the money must look to the Company for payment as general creditors unless an "abandoned property" law designates another Person. 12. AMENDMENT, SUPPLEMENT, WAIVER, ETC. Subject to certain exceptions, the Indenture or the Notes may be modified, amended or supplemented by the Company, the Guarantors, if any, and the Trustee with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding and any existing default or compliance with any provision may be waived in a particular instance with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Without the consent of Holders, the Company, the Guarantors, if any, and the Trustee may amend the Indenture or the Notes or supplement the Indenture for certain specified purposes, including providing for uncertificated Notes in addition to certificated Notes, and curing any ambiguity, defect or inconsistency, or making any other change that does not materially and adversely affect the rights of any Holder. 13. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of their Capital Stock or certain Indebtedness, make certain Investments, create or incur liens, enter into transactions with Affiliates, enter into agreements restricting the ability of Restricted Subsidiaries to pay dividends and make distributions, issue Preferred Stock of A-5 107 any Restricted Subsidiaries of the Company, enter into sale and leaseback transactions and on the ability of the Company to merge or consolidate with any other Person or transfer all or substantially all of the Company's or any Guarantor's assets. Such limitations are subject to a number of important qualifications and exceptions. Pursuant to Section 4.04 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations. 14. SUCCESSOR CORPORATION. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture and the transaction complies with the terms of Article 5 of the Indenture, the predecessor corporation will, except as provided in Article 5, be released from those obligations. 15. DEFAULTS AND REMEDIES. Events of Default are set forth in the Indenture. Subject to certain limitations in the Indenture, if an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7) of the Indenture with respect to the Company) occurs and is continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of the outstanding Notes may, by written notice to the Trustee and the Company, and the Trustee upon the request of the Holders of not less than 25% in aggregate principal amount of the outstanding Notes shall, declare all principal of and accrued interest on all Notes to be immediately due and payable; PROVIDED, HOWEVER, that after such acceleration but before judgment or decree based on such acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes may rescind and annul such acceleration and its consequences if all existing Events of Default, other than the nonpayment of principal, premium or interest that has become due solely because of the acceleration, have been cured or waived and if the rescission would not conflict with any judgment or decree. If an Event of Default specified in Section 6.01(6) or (7) of the Indenture occurs with respect to the Company, the principal amount of and interest on, all Notes shall IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. 16. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept A-6 108 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 Trustee. 17. NO RECOURSE AGAINST OTHERS. No director, officer, employee incorporator or stockholder, of the Company or any Guarantor shall have any liability for any obligations of the Company or the Guarantors, if any, under the Notes, the Indenture or the Guarantees, if any, or for a claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 18. DISCHARGE. The Company's obligations pursuant to the Indenture will be discharged, except for obligations pursuant to certain sections thereof, subject to the terms of the Indenture, upon the payment of all the Notes or upon the irrevocable deposit with the Trustee of United States dollars or U.S. Government Obligations sufficient to pay when due principal of and interest on the Notes to maturity or redemption, as the case may be. 19. AUTHENTICATION. This Note shall not be valid until the Trustee signs the certificate of authentication on the other side of this Note. 20. GOVERNING LAW. THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE NOTES. 21. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= 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). A-7 109 The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: GLASSTECH SUB CO. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: President A-8 110 ASSIGNMENT I or we assign and transfer this Note to: (Insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee) and irrevocably appoint: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Agent to transfer this Note on the books of the Company. The Agent may substitute another to act for him. A-9 111 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have all or any part of this Note purchased by the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, check the appropriate box: [ ] Section 4.10 [ ] Section 4.19 If you want to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, state the amount you elect to have purchased: $-------------------- (multiple of $1,000) Date: ------------------ Your Signature: ------------------------------------ (Sign exactly as your name appears on the face of this Note) - --------------------------- Signature Guaranteed A-10 112 EXHIBIT B --------- [FORM OF LEGEND FOR 144A NOTE] THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (C) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (D) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE) (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT. B-1 113 [FORM OF ASSIGNMENT FOR 144A NOTE] I or we assign and transfer this Note to: (Insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee) and irrevocably appoint: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Agent to transfer this Note on the books of the Company. The Agent may substitute another to act for him. [Check One] --------- [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder. or -- [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied. Date: Your Signature: ------------------- -------------------------------------- ------------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------------------------ B-2 114 TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: -------------------- ------------------------------ NOTICE: To be executed by an executive officer B-3 115 EXHIBIT C --------- [FORM OF LEGEND FOR REGULATION S NOTE] THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. C-1 116 [FORM OF ASSIGNMENT FOR REGULATION S NOTE] I or we assign and transfer this Note to: (Insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee) and irrevocably appoint: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Agent to transfer this Note on the books of the Company. The Agent may substitute another to act for him. [Check One] --------- [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder. or -- [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied. Date: Your Signature: ------------------ ------------------------------------- ----------------------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: --------------------------------------------------- C-2 117 TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ----------------------- ------------------------------ NOTICE: To be executed by an executive officer C-3 118 EXHIBIT D --------- [FORM OF LEGEND FOR GLOBAL NOTE] Any Global Note authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Note) in substantially the following form: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IT REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. D-1 119 EXHIBIT E --------- Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- -----------, ---- Attention: Re: Glasstech Sub Co. (the "Company") 12 3/4% Senior Notes due 2004 (the "Notes") Dear Sirs: In connection with our proposed purchase of Notes of the Company, we confirm that: 1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of July 2, 1997 relating to the Notes and we agree to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the Notes have not been registered under the Securities Act, and that the Notes may not be offered, sold, pledged or otherwise transferred except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes, we will do so only (i) to the Company or any subsidiary thereof, (ii) pursuant to an effective registration statement under the Securities Act, (iii) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined in Rule 144A), (iv) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you a signed letter containing certain E-1 120 representations and agreements relating to the restrictions on transfer of the Notes, (v) outside the United States to persons other than U.S. persons in offshore transactions meeting the requirements of Rule 904 of Regulation S under the Securities Act, or (vi) pursuant to any other exemption from registration under the Securities Act (if available), and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 3. We are not acquiring the Notes for or on behalf of, and will not transfer the Notes to, any pension or welfare plan (as defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended), except as permitted in the section entitled "Notice to Investors" of the Memorandum. 4. We understand that, on any proposed resale of any Notes, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting each are able to bear the economic risk of our or their investment, as the case may be. 6. We are acquiring the Notes purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. E-2 121 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: --------------------------------------- Authorized Signature 122 EXHIBIT F --------- Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S ----------------------------------- ----------, ---- Attention: Re: Glasstech Sub Co. (the "Company") 12 3/4% Senior Notes due 2004 (the "Notes") ------------------------------------ Dear Sirs: In connection with our proposed sale of $__________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a U.S. person or to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. F-1 123 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ------------------------------- Authorized Signature F-2 124 EXHIBIT G --------- [FORM OF GUARANTEE] Each of the undersigned (the "GUARANTORS") hereby jointly and severally unconditionally guarantees, to the extent set forth in the Indenture dated as of July 2, 1997 by and between Glasstech Sub Co., as issuer and United States Trust Company of New York, as Trustee (as amended, restated or supplemented from time to time, the "INDENTURE"), and subject to the provisions of the Indenture, (a) the due and punctual payment of the principal of, and premium, if any, and interest on the Notes, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on overdue principal of, and premium and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Noteholders or the Trustee, all in accordance with the terms set forth in Article 10 of the Indenture, and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Noteholders and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms and limitations of this Guarantee. [GUARANTOR] By: ------------------------------------ Name: Title: G-1 EX-4.2 7 EXHIBIT 4.2 1 EXHIBIT 4.2 - -------------------------------------------------------------------------------- GLASSTECH, INC. and UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee - -------------------------------------------------------------------------------- FIRST SUPPLEMENTAL INDENTURE Dated as of July 2, 1997 to INDENTURE Dated as of July 2, 1997 by and between GLASSTECH SUB CO., as Issuer and UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee ------------------------ $70,000,000 12 3/4% Senior Notes Due 2004 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS ----------------- Page ---- ARTICLE I ASSUMPTION OF OBLIGATIONS OF GLASSTECH SUB CO. Section 1.01. Assumption .................................................2 ARTICLE II MISCELLANEOUS PROVISIONS Section 2.01. Terms Defined ..............................................2 Section 2.02. Indenture ..................................................2 Section 2.03. Governing Law ..............................................2 Section 2.04. Successors .................................................3 Section 2.05. Multiple Counterparts ......................................3 Section 2.06. Effectiveness ..............................................3 Section 2.07. Trustee Disclaimer .........................................3 SIGNATURES.................................................................4 -i- 3 FIRST SUPPLEMENTAL INDENTURE dated as of July 2, 1997, by and between GLASSTECH, INC., a Delaware corporation ("GLASSTECH"), and UNITED STATES TRUST COMPANY OF NEW YORK (the "TRUSTEE"). WHEREAS, GLASSTECH SUB CO., a Delaware corporation (the "COMPANY"), heretofore executed and delivered to the Trustee an Indenture dated as of July 2, 1997 (the "INDENTURE"), providing for the issuance of $70,000,000 aggregate principal amount of the Company's 12 3/4% Senior Notes Due 2004 (the "NOTES"); and WHEREAS, there have been issued and are now outstanding under the Indenture, Notes in the aggregate principal amount of $70,000,000; and WHEREAS, in connection with the merger of the Company with and into Glasstech pursuant to an Agreement and Plan of Merger dated as of June 5, 1997, the Company has been merged with and into Glasstech and in connection therewith, Glasstech has assumed, by operation of law, all of the Company's debts, liabilities, duties and obligations, including the Company's obligations in respect of the Notes and under the Indenture; and WHEREAS, Glasstech desires by this First Supplemental Indenture, to expressly assume the covenants, agreements and undertakings of the Company in the Indenture and under the Notes; and WHEREAS, the execution and delivery of this First Supplemental Indenture has been authorized by a resolution of the Board of Directors of Glasstech; and WHEREAS, all conditions and requirements necessary to make this First Supplemental Indenture a valid, binding and legal instrument in accordance with its terms have been performed and fulfilled by the parties hereto and the execution and delivery thereof have been in all respects duly authorized by the parties hereto. NOW, THEREFORE, in consideration of the above premises, each party agrees, for the benefit of the other and for the equal and ratable benefit of the Holders of the Notes, as follows: 4 ARTICLE I ASSUMPTION OF OBLIGATIONS OF GLASSTECH SUB CO. Section 1.01. ASSUMPTION. Glasstech hereby expressly and unconditionally assumes each and every covenant, agreement and undertaking of the Company in the Indenture as if Glasstech had been the original issuer of the Notes, and also hereby expressly and unconditionally assumes each and every covenant, agreement and undertaking in each Note outstanding on the date of this First Supplemental Indenture and any Notes delivered hereafter. Any Notes delivered after the date of this First Supplemental Indenture, including Notes delivered in substitution or exchange for any outstanding Notes, as provided in the Indenture, may be executed and delivered by Glasstech in its own name, with such notations, legends or endorsements required by law, stock exchange rules or usage, and each such Note shall constitute the obligation of Glasstech. ARTICLE II MISCELLANEOUS PROVISIONS Section 2.01. TERMS DEFINED. For all purposes of this First Supplemental Indenture, except as otherwise defined or unless the context otherwise requires, terms used in capitalized form in this First Supplemental Indenture and defined in the Indenture have the meanings specified in the Indenture. Section 2.02. INDENTURE. Except as amended hereby, the Indenture and the Notes are in all respects ratified and confirmed and all the terms shall remain in full force and effect. Section 2.03. GOVERNING LAW. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this First Supplemental Indenture, provided that such jurisdiction shall be non-exclusive. 5 -3- Section 2.04. SUCCESSORS. All agreements of Glasstech in this First Supplemental Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. Section 2.05. MULTIPLE COUNTERPARTS. The parties may sign multiple counterparts of this First Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 2.06. EFFECTIVENESS. The provisions of this First Supplemental Indenture will take effect immediately upon its execution and delivery by the Trustee in accordance with the provisions of Section 8.06 of the Indenture. Section 2.07. TRUSTEE DISCLAIMER. The Trustee accepts the amendment of the Indenture effected by his First Supplemental Indenture and agrees to execute the trust created by the Indenture and agrees to execute the trust created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee, which terms and provisions shall in like manner define and limit its liabilities and responsibilities in the performance of the trust created by the Indenture as hereby amended, and without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by Glasstech, or for or with respect to (i) the validity or sufficiency of this First Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by Glasstech by corporate action or otherwise, (iii) the due execution hereof by Glasstech, (iv) the consequences (direct or indirect and whether deliberate or inadvertent) of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters. 6 -4- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed as of the date first written above. GLASSTECH, INC. By: /s/ Mark D. Christman ------------------------------ Name: Mark D. Christman Title: President Attest: /s/ Kenneth H. Wetmore ----------------------------- UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: /s/ Cynthia Chaney ------------------------------- Name: Cynthia Chaney Title: Assistant Vice President EX-5.1 8 EXHIBIT 5.1 1 Exhibit 5.1 [BAKER & HOSTETLER LLP LETTERHEAD] August 26, 1997 Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 RE: REGISTRATION STATEMENT OF FORM S-4 WITH RESPECT TO $70,000,000 AGGREGATE PRINCIPAL AMOUNT SERIES B 12 3/4% SENIOR NOTES DUE 2004 OF GLASSTECH, INC. Gentlemen: As counsel for Glasstech, Inc., a Delaware corporation (the "Issuer"), we are familiar with the Issuer's Registration Statement on Form S-4 (the "Registration Statement"), filed with the Securities & Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), on August 26, 1997. Pursuant to the Registration Statement, the Issuer is proposing to offer for exchange (the "Exchange Offer") up to $70,000,000 aggregate principal amount Series B 12 3/4% Senior Notes due 2004 (the "New Notes") for its $70,000,000 aggregate principal amount 12 3/4% Senior Notes due 2004 (the "Old Notes") that are presently outstanding. In connection with the foregoing, we have examined such records of the Issuer and such other documents as we deem necessary to render this opinion. Based on such examination, we are of the opinion that when the Registration Statement has become effective under the Act, the New Notes, when issued pursuant to the Indenture (as defined in the Registration Statement) in exchange for the Old Notes pursuant to the Exchange Offer as contemplated in the Registration Statement, in the form attached as Exhibit A to Exhibit 4.1 of the Registration Statement, will be the legal, valid and binding obligation of the Issuer, except as may be limited by bankruptcy, insolvency, reorganization or other laws relating to the enforcement of creditor's rights generally or by general principles of equity. In connection with this opinion letter, we do not purport to be qualified to express legal conclusions based on the laws of any state or jurisdiction other than the laws of the State of Ohio and the United States of America and the General Corporation Law of the 2 Glasstech, Inc. August 26, 1997 Page 2 State of Delaware. Accordingly, we express no opinion as to the laws of any other state or jurisdiction. We call your attention to the fact that the New Notes provide that they are to be governed by and construed in accordance with the laws of the State of New York. This opinion has been rendered as if the New Notes were governed in all respects by the laws of the State of Ohio, without giving effect to principles of conflict of laws, and we have assumed that there is no New York law, legal decision or regulation of any governmental body that would render any of the provisions of the New Notes illegal, invalid, not binding or unenforceable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and the reference to us under the caption "Legal Matters" in the Prospectus that is a part of the Registration Statement. Sincerely, /s/ Baker & Hostetler LLP Baker & Hostetler LLP EX-10.1 9 EXHIBIT 10.1 1 Exhibit 10.1 FINANCING AND SECURITY AGREEMENT between NATIONSBANK, N.A. and GLASSTECH, INC. July 2, 1997 2 FINANCING AND SECURITY AGREEMENT -------------------------------- THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made as of the 2nd day of July, 1997, by and between GLASSTECH, INC., a corporation organized under the laws of Delaware (the "Borrower") and NATIONSBANK, N.A., a national banking association (the "Lender"). RECITALS -------- A. The Borrower has applied to the Lender for a revolving credit facility in the maximum principal amount of $10,000,000 to be used by the Borrower for the Permitted Uses described in this Agreement. B. The Lender is willing to make the credit facilities available to the Borrower upon the terms and subject to the conditions set forth in this Agreement. AGREEMENTS ---------- NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings: "Account" individually and "Accounts" collectively mean with respect to the Borrower all presently existing or hereafter acquired or created accounts, accounts receivable, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in, or a lease of, goods, all rights to receive the payment of money or other consideration under present or future contracts (including, without limitation, all rights to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of merchandise sold or leased, services rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising 3 out of present or future contracts, agreements or general interest in merchandise which gave rise to any or all of the foregoing, including all goods, all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including, without limitation, real property mortgages and deeds of trust) and letters of credit given by any Person with respect to any of the foregoing, all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all equipment and general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all proceeds (cash and non-cash) of the foregoing. "Account Debtor" means any Person who is obligated on a Receivable and "Account Debtors" means all Persons who are obligated on the Receivables. "Affiliate" means, with respect to a Person designated, any other Person, directly or indirectly controlling, directly or indirectly controlled by, or under direct or indirect common control with the Person designated, as the case may be, PROVIDED that the term "Affiliate" shall not include any portfolio company of either Key Equity Partners 97 or any of its sister partnerships or Key Equity Capital Corporation so long as such portfolio company does not own or control any shares of capital stock of Borrower and the Borrower does not own or control any share of the capital stock of such portfolio company. "Agreement" means this Financing and Security Agreement, as amended, restated, supplemented or otherwise modified in writing in accordance with the provisions of Section 8.2 of this Agreement. "Applicable Interest Rate" means (i) the LIBOR Rate, or (ii) the Base Rate. "Applicable Margin" means the applicable rate per annum added, as set forth in Section 2.3.1, to the LIBOR Base Rate or the Prime Rate. "Asset Disposition" means the disposition of any or all of the Assets of the Borrower or any Subsidiary of the Borrower, whether by sale, lease, transfer or other disposition (including any such disposition effected by way of merger or consolidation). "Assets" means at any date all assets that, in accordance with GAAP consistently applied, should be classified as assets on a consolidated balance sheet of the Borrower and its Subsidiaries. "Assignment of Patents" means that certain collateral assignment of patents as security dated the date hereof from the Borrower for the benefit of the Lender, as amended, restated, -2- 4 supplemented or otherwise modified in writing at any time and from time to time. "Bankruptcy Code" means the United States Bankruptcy Code, as amended from time to time. "Base Rate" means the sum of (i) the Prime Rate PLUS (ii) the Applicable Margin. "Base Rate Loan" means any Loan for which interest is to be computed with reference to the Base Rate. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State are authorized or required to close. "Capital Expenditure" means an expenditure for Fixed or Capital Assets including, without limitation, the entering into of a Capital Lease, but does not include (i) expenditures to purchase Fixed or Capital Assets as part of an acquisition of an on-going business which acquisition is subject to the restrictions and is in compliance with Section 6.1.11, (ii) an expenditure made to replace Fixed or Capital Assets which are the subject of a Casualty, provided that such expenditure is funded from Net Proceeds resulting from such Casualty and (iii) an expenditure made to purchase Fixed or Capital Assets, provided that such expenditure is funded solely from cash proceeds of a Permitted Asset Disposition. "Capital Lease" means any lease of real or personal property, for which the related Lease Obligations have been or should be, in accordance with GAAP consistently applied, capitalized on the balance sheet. "Cash Equivalents" means "Temporary Cash Investments" as that term and its constituent definitions are defined in the Indenture on the Closing Date. "Casualty" means any act or occurrence of any kind or nature that results in material damage, loss or destruction to any of the Equipment or other Fixed or Capital Assets. "Chattel Paper" means a writing or writings which evidence both a monetary obligation and a security interest in or lease of specific goods; any returned, rejected or repossessed goods covered by any such writing or writings and all proceeds (in any form including, without limitation, accounts, contract rights, documents, chattel paper, instruments and general intangibles) of such returned, rejected or repossessed goods; and all proceeds (cash and non-cash) of the foregoing. "Closing Date" means the date of this Agreement. -3- 5 "Collateral" means all property of the Borrower subject from time to time to the Liens of this Agreement, the Security Documents and the other Financing Documents, together with any and all cash and non-cash proceeds and products thereof. "Collateral Account" has the meaning described in Section (The Collateral Account). "Collateral Disclosure List" has the meaning described in Section (Collateral Disclosure List). "Commitment" means the Revolving Credit Commitment. "Committed Amount" means the Revolving Credit Committed Amount. "Compliance Certificate" means a periodic Compliance Certificate described in Section 6.1.1 (Financial Statements). "Commonly Controlled Entity" means an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code. "Condemnation" means any taking of title, of use, or of any other property interest under the exercise of the power of eminent domain, whether temporarily or permanently, partial or complete, by any Governmental Authority or by any Person acting under Governmental Authority. "Condemnation Awards" means any and all judgments, awards of damages (including, but not limited to, severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation. "Contingent Indemnification Obligations" means Obligations for the indemnification of the Lender arising under Section 2.3.4 (Indemnity), Section 6.1.13 (Hazardous Materials), Section 6.1.17 (Assignment of Receivables) or under similar substantive provisions of this Agreement or any of the Financing Documents, with respect to which there is no claim pending or threatened and which expressly survive the termination of this Agreement. "Copyrights" means and includes, in each case whether now existing or hereafter arising, all of the Borrower's rights, title and interest in and to (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, copyright applications, and all renewals of any of -4- 6 the foregoing, (b) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past, current or future infringements of any of the foregoing, (c) the right to sue for past, present and future infringements of any of the foregoing, and (d) all rights corresponding to any of the foregoing throughout the world. "Credit Facility" means the Revolving Credit Facility and the Letter of Credit Facility, and "Credit Facilities" means collectively the Revolving Credit Facility, the Letter of Credit Facility and any and all other credit facilities now or hereafter extended under or secured by this Agreement. "Default" means an event which, with the giving of notice or lapse of time, or both, could or would constitute an Event of Default under the provisions of this Agreement. "Documents" means with respect to the Borrower all documents of title, whether now existing or hereafter acquired or created, and all proceeds (cash and non-cash) of the foregoing. "Early Termination Fee" has the meaning described in Section 2.1.6 (Early Termination Fee). "EBITDA" means as to the Borrower for any period of determination thereof, the sum of (a) the net profit (or loss) determined in accordance with GAAP consistently applied for such period (but excluding the effect of a write-up of the value of purchased assets as required by GAAP), plus (b) interest expense (including, without limitation, interest rate protection agreements entered into in the ordinary course of business and not for speculative purposes) and income tax provisions for such period, plus (c) depreciation and amortization (including, without limitation, amortization of deferred financing costs) and other non-cash charges of assets for such period. "Enforcement Costs" means all reasonable expenses, charges, costs and fees whatsoever (including, without limitation, reasonable outside and reasonably allocated in-house counsel attorney's fees and expenses) of any nature whatsoever paid or incurred by or on behalf of the Lender in connection with (a) any or all of the Obligations, this Agreement and/or any of the other Financing Documents, (b) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Collateral, this Agreement or any of the other Financing Documents, including, without limitation, those costs and expenses more specifically enumerated in Section 3.7 (Costs) and/or Section 8.10 (Enforcement Costs), and (c) the monitoring and/or servicing of any or all of the Obligations, the Financing Documents, and/or the Collateral. -5- 7 "Equipment" means all equipment, machinery, computers, chattels, tools, parts, machine tools, furniture, furnishings, fixtures and supplies of every nature, presently existing or hereafter acquired or created and wherever located, whether or not the same shall be deemed to be affixed to real property, together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary or beneficial for the operation, use and/or disposition of such personal property, all licenses, warranties, franchises and general intangibles related thereto or necessary or beneficial for the operation, use and/or disposition of the same, together with all Accounts, Chattel Paper, Instruments and other consideration received by the Borrower on account of the sale, lease or other disposition of all or any part of the foregoing, and together with all rights under or arising out of present or future Documents and contracts relating to the foregoing and all proceeds (cash and non-cash) of the foregoing. "Equity" means capital stock (except treasury stock and net of any note receivable received upon the issuance of any shares of capital stock) and contributed capital, as determined on a consolidated basis in accordance with GAAP consistently applied, after eliminating all intercompany items. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurodollar Business Day" means any Business Day on which dealings in United States Dollar deposits are carried out on the London interbank market and on which commercial banks are open for domestic and international business (including dealings in Dollar deposits) in London, England. "Eurodollar Lending Office" means with respect to the Lender such branch or office of the Lender designated by the Lender, as applicable, from time to time as the branch or office at which the LIBOR Loans are to be made or maintained. "Event of Default" has the meaning described in Article 7. "Facilities" means the collective reference to the loan, letter of credit, interest rate protection, foreign exchange risk, cash management, and other credit facilities now or hereafter provided to the Borrower by the Lender whether under this Agreement or otherwise. "Fees" means the collective reference to each fee payable to the Lender under the terms of this Agreement or under the terms of any of the other Financing Documents, including, without limitation, the following: Revolving Credit Unused Line Fees, the -6- 8 Early Termination Fee, Letter of Credit Fees, the Origination Fee, and Servicing Fees. "Financial Institution" means bank, finance company or other Person or other Governmental Authority which is incorporated, organized or formed under the Laws of the United States of America or a state thereof and which in the ordinary course of business makes or purchases interests in commercial credit facilities. "Financing Documents" means at any time collectively this Agreement, the Notes, the Security Documents, the Letter of Credit Documents and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by the Borrower and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with this Agreement, any Note, any of the Security Documents, any of the Facilities, and/or any of the Obligations. "Fixed or Capital Assets" of a Person at any date means all assets which would, in accordance with GAAP consistently applied, be classified on the balance sheet of such Person as property, plant or equipment at such date. "Fixed Charges" means for any period of determination, the scheduled payments (including, without limitation, principal and interest, but excluding prepayments) on all Indebtedness for Borrowed Money (other than under item (d) (to the extent the applicable Lien is a security interest is in favor of the Borrower's customers to secure amounts which the customer paid to Borrower as a deposit or progress payment for the manufacture of identified equipment), item (f) or item (g) of that term) of the Borrower and Holding, plus Capital Expenditures not financed, plus cash Taxes paid by the Borrower and Holding plus dividends declared or paid by the Borrower and Holding. "Fixed Charge Coverage Ratio" means for the period of any determination thereof the ratio of (a) EBITDA to (b) Fixed Charges. "GAAP" means, subject to the provisions of Section 1.2, generally accepted accounting principles in the United States of America in effect from time to time. "General Intangibles" means all general intangibles of every nature, whether presently existing or hereafter acquired or created, and without implying any limitation of the foregoing, further means all books and records, claims (including without limitation all claims for income tax and other refunds), choses in action, claims, causes of action in tort or equity, contract rights, judgments, customer lists, Patents, Trademarks, licensing agreements, rights in intellectual property, goodwill (including goodwill of the Borrower's business symbolized by and associated with any and all trademarks, trademark licenses, Copyrights and/or -7- 9 service marks), royalty payments, licenses, contractual rights, rights as lessee under any lease of real or personal property, literary rights, Copyrights, service names, service marks, logos, trade secrets, amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures, general or limited partnerships, or limited liability companies or partnerships, rights in applications for any of the foregoing, books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all equipment and general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all proceeds (cash and non-cash) of the foregoing. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any department, agency or instrumentality thereof. "Hazardous Materials" means (a) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of 1976, as amended from time to time, and regulations promulgated thereunder; (b) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; (c) any substance the presence of which on any property now or hereafter owned, acquired or operated by the Borrower is prohibited by any Law similar to those set forth in this definition; and (d) any other substance which by Law requires special handling in its collection, storage, treatment or disposal. "Hazardous Materials Contamination" means the contamination (whether presently existing or occurring after the date of this Agreement) by Hazardous Materials of any property owned, operated or controlled by the Borrower or for which the Borrower has responsibility, including, without limitation, improvements, facilities, soil, ground water, air or other elements on, or of, any property now or hereafter owned, acquired or operated by the Borrower, and any other contamination by Hazardous Materials for which the Borrower is, or is claimed to be, responsible. "Holding" means Glasstech Holding Co., a corporation organized under the Laws of Delaware. "Indebtedness" of a Person means at any date the total liabilities of such Person at such time determined in accordance with GAAP consistently applied. "Indebtedness for Borrowed Money" of a Person means at any time, without duplication, the sum at such time of (a) indebtedness of such Person for borrowed money or for the deferred -8- 10 purchase price of property or services, (b) any obligations of such Person in respect of letters of credit, banker's or other acceptances or similar obligations issued or created for the account of such Person, (c) Lease Obligations of such Person with respect to Capital Leases, (d) all liabilities secured by any Lien on any property owned by such Person, to the extent attached to such Person's interest in such property, even though such Person has not assumed or become personally liable for the payment thereof, (e) obligations of third parties which are being guarantied or indemnified against by such Person or which are secured by the property of such Person; (f) any obligation of such Person under a employee stock ownership plan or other similar employee benefit plan; and (g) any obligation of such Person or a Commonly Controlled Entity to a Multiemployer Plan; but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue (as determined in accordance with customary trade practices) or which are being disputed in good faith by such Person and for which adequate reserves are being provided on the books of such Person in accordance with GAAP. "Indenture" means that certain Indenture dated as of July 1, 1997 (as amended, supplemented or otherwise modified from time to time), between Merger Company and the Trustee, to which the Borrower is a party as successor by merger to the Merger Company, a copy of which is attached to this Agreement as EXHIBIT D. "Interest Payment Date" means each date for the payment of interest provided under Section 2.3.5. "Interest Period" means as to any LIBOR Loan, the period commencing on and including the date such LIBOR Loan is made (or on the effective date of the Borrower's election to convert any Base Rate Loan to a LIBOR Loan in accordance with the provisions of this Agreement) and ending on and including the day which is 30, 60, 90, 180, or 360 days thereafter, as selected by the Borrower in accordance with the provisions of this Agreement, and thereafter, each period commencing on the last day of the then preceding Interest Period for such LIBOR Loan and ending on and including the day which is 30, 60, 90, 180 or 360 days thereafter, as selected by the Borrower in accordance with the provisions of this Agreement; provided, however that: (a) the first day of any Interest Period shall be a Eurodollar Business Day; (b) if any Interest Period would end on a day that shall not be a Eurodollar Business Day, such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless such next succeeding Eurodollar Business Day would fall in the next calendar month, in which case, such Interest -9- 11 Period shall end on the next preceding Eurodollar Business Day; and (c) no Interest Period shall extend beyond the Revolving Credit Expiration Date. "Interest Rate Election Notice" has the meaning described in Section 2.3.2(e). "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Income Tax Regulations issued and proposed to be issued thereunder. "Instrument" means with respect to the Borrower a negotiable instrument (as defined under Article 3 of the applicable Uniform Commercial Code), a "certificated security" (as defined under Article 8 of the applicable Uniform Commercial Code), or any other writing which evidences a right to payment of money and is not itself a security agreement or lease and is of a type which is in the ordinary course of business transferred by delivery with any necessary indorsement. "Inventory" means all inventory of the Borrower and all right, title and interest of the Borrower in and to all of its now owned and hereafter acquired goods, merchandise and other personal property furnished under any contract of service or intended for sale or lease, including, without limitation, all raw materials, work-in-progress, finished goods and materials and supplies of any kind, nature or description which are used or consumed in the Borrower's business or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise and other licenses, warranties, franchises, general intangibles,personal property and all documents of title or documents relating to the same and all proceeds (cash and non-cash) of the foregoing. "Item of Payment" means with respect to the Borrower each check, draft, cash, money, instrument, item, and other remittance in payment or on account of payment of the Receivables or otherwise with respect to any Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed goods, the sale or lease of which gave rise to a Receivable, and other proceeds of Collateral; and "Items of Payment" means the collective reference to all of the foregoing. "Key Entity" shall have the meaning set forth in Section 7.1.12. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any Governmental Authority with applicable jurisdiction. -10- 12 "Lease Obligations" of a Person means for any period the rental commitments of such Person for such period under leases for real and/or personal property (net of rent from subleases thereof, but including taxes, insurance, maintenance and similar expenses which the lessee, is obligated to pay under the terms of said leases, except to the extent that such taxes, insurance, maintenance and similar expenses are payable by sublessees), including rental commitments under Capital Leases. "Letter of Credit" and "Letters of Credit" shall have the meanings described in Section 2.2.1 hereof. "Letter of Credit Agreement" means the collective reference to each letter of credit application and agreement substantially in the form of the Lender's then standard form of application for letter of credit or such other form as may be approved by the Lender, executed and delivered by the Borrower in connection with the issuance of a Letter of Credit, as the same may from time to time be amended, restated, supplemented or modified and "Letter of Credit Agreements" means all of the foregoing in effect at any time and from time to time. "Letter of Credit Documents" means any and all drafts under or purporting to be under a Letter of Credit, any Letter of Credit Agreement, and any other instrument, document or agreement executed and/or delivered by the Borrower or any other Person under, pursuant to or in connection with a Letter of Credit or any Letter of Credit Agreement. "Letter of Credit Facility" means the facility established by the Lender pursuant to Section 2.2 (Letter of Credit Facility) of this Agreement. "Letter of Credit Fee" and "Letter of Credit Fees" have the meanings described in Section 2.2.2 hereof. "Letter of Credit Obligations" means all Obligations of the Borrower with respect to the Letters of Credit and the Letter of Credit Agreements. "Liabilities" means at any date all liabilities that in accordance with GAAP consistently applied should be classified as liabilities on a consolidated balance sheet of the Borrower and its Subsidiaries. "LIBOR Base Rate" means for any Interest Period with respect to any LIBOR Loan, the rate per annum (rounded upward, if necessary, to the nearest next 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in United States Dollars at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to the first day of such Interest Period for a term comparable to such -11- 13 Interest Period. If for any reason such rate is not available, the term "LIBOR Base Rate" shall mean, for any LIBOR Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in United States Dollars for a term comparable to the Interest Period at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to the first day of such Interest Period; PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. For purposes of this definition, Telerate Page 3750 refers to the British Bankers Association Libor Rates (determined at approximately 11:00 a.m (London time)) that are published by Dow Jones Telerate, Inc. "LIBOR Loan" means any Loan for which interest is to be computed with reference to the LIBOR Rate. "LIBOR Rate" means for any Interest Period with respect to any LIBOR Loan, (i) the Applicable Margin, PLUS (ii) the per annum rate of interest calculated pursuant to the following formula: LIBOR Base Rate ------------------------- 1.00 - Reserve Percentage "Lien" means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, lien, hypothecation, provision in any instrument or other document for confession of judgment, cognovit or other similar right or remedy, claim or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction, excluding the precautionary filing of any financing statement by any lessor in a true lease transaction, by any bailor in a true bailment transaction or by any consignor in a true consignment transaction under the Uniform Commercial Code of any jurisdiction or the agreement to give any financing statement by any lessee in a true lease transaction, by any bailee in a true bailment transaction or by any consignee in a true consignment transaction. "Loan" means each of the Revolving Loan, as the case may be, and "Loans" means the collective reference to the advances under the Revolving Loan. "Loan Notice" has the meaning described in Section 2.1.2 (Procedure for Making Advances). -12- 14 "Lockbox" has the meaning described in Section 7.2.4 (The Collateral Account). "Material Adverse Effect" means an effect, either in any case or in the aggregate, which would result in a material adverse change for the Borrower (w) in the business, condition, or operations of the Borrower, (x) to any of the material properties or Assets of the Borrower, (y) in the right or ability of the Borrower to carry on a substantial portion of its operations, or (z) to the value of, or the ability of the Lender to realize upon, the Collateral in any material respect. "Merger Agreement" means that certain agreement and plan of merger dated June 5, 1997 by and among Holding, the Borrower and the Merger Company. "Merger Agreement Documents" means collectively the Merger Agreement and any and all other agreements, documents or instruments (together with any and all amendments, modifications, and supplements thereto, restatements thereof, and substitutes therefor) previously, now or hereafter executed and delivered by Holding, the Borrower, the Merger Company, or any other Person in connection with the Merger Agreement Transaction. "Merger Agreement Transaction" means the merger transaction contemplated by the provisions of the Merger Agreement under which the Merger Company and the Borrower merge, with the Borrower being the survivor. "Merger Company" means Glasstech Sub Co., a corporation organized under the laws of the State of Delaware. "Mortgage" means that certain mortgage dated the date hereof from the Borrower to the Lender, as the same may from time to time be amended, restated, supplemented or modified. "Mortgaged Property" means the real property covered by the Mortgage. "Multiemployer Plan" means a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds" means when used with respect to any Condemnation Awards, insurance proceeds resulting from any Casualty, or from Asset Dispositions other than Permitted Asset Dispositions, the gross proceeds (other than Unrestricted Proceeds) from any Casualty, Condemnation or Asset Disposition remaining after payment of all reasonable expenses (including reasonable attorneys' fees) incurred in the collection of such gross proceeds. "Net Worth" means as to the Borrower its shareholders equity, as determined in accordance with GAAP. -13- 15 "Note" means the Revolving Credit Note, and "Notes" means collectively the Revolving Credit Note and any other promissory note which may from time to time evidence all or any portion of the Obligations. "Obligations" means all present and future indebtedness, duties, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of the Borrower to the Lender under, arising pursuant to, in connection with and/or on account of the provisions of this Agreement, each Note, each Security Document, and/or any of the other Financing Documents, the Loans, and/or any of the Facilities including, without limitation, the principal of, and interest on, each Note, late charges, the Fees, Enforcement Costs, and prepayment fees (if any), letter of credit fees or fees charged with respect to any guaranty of any letter of credit; also means all other present and future indebtedness, liabilities and obligations, whether now existing or contemplated or hereafter arising, of the Borrower to the Lender of any nature whatsoever regardless of whether such indebtedness, obligations and liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed or contingent; and also means any and all renewals, extensions, substitutions, amendments, restatements and rearrangements of any such indebtedness, obligations and liabilities. "Offering Memorandum" means the Borrower's Offering Memorandum dated June 27, 1997, pursuant to which the Senior Notes were offered. "Offering Transaction" means the sale of the Senior Notes as described in the Offering Memorandum. "Outstanding Letter of Credit Obligations" has the meaning described in Section 2.2.3 hereof. "Origination Fee" has the meaning described in Section (Origination Fee). "Patent and Trademark Security Agreement" means that certain patent and trademark security agreement dated the date hereof from the Borrower for the benefit of the Lender, as the same may from time to time be amended, restated, supplemented or otherwise modified. "Patents" means and includes, in each case whether now existing or hereafter arising, all of the Borrower's rights, title and interest in and to (a) any and all patents and patent applications, (b) any and all inventions and improvements described and claimed in such patents and patent applications, (c) reissues, divisions, continuations, renewals, extensions and continuations- in-part of any patents and patent applications, (d) income, royalties, damages, claims and payments now or hereafter due and/or -14- 16 payable under and with respect to any patents or patent applications, including, without limitation, damages and payments for past and future infringements, (e) rights to sue for past, present and future infringements of patents, and (f) all rights corresponding to any of the foregoing throughout the world. "PBGC" means the Pension Benefit Guaranty Corporation. "Permitted Acquisition" means an acquisition involving all or substantially all of the assets, or all of the capital stock, of a Person in the line of business of the Borrower described in Section 6.1.6, with respect to which the Borrower has complied with Section 6.1.11 and upon the consummation of which the Lender obtains a Lien on the assets acquired or, if applicable, the assets of the Subsidiary so acquired, subject only to Permitted Liens and securing the Obligations. "Permitted Asset Disposition" means any one or more of the following Asset Dispositions provided that unless otherwise expressly provided in this definition, each such Asset Disposition shall be made in the ordinary course of business: (a) sales of Inventory, (b) licensing of Patents, Trademarks, Copyrights and/or other intellectual property, (c) dispositions of worn, used, surplus or obsolete Equipment or intellectual property deemed uneconomical or obsolete, (d) leases of real property to the extent not otherwise prohibited by the provisions of this Agreement, (e) intercompany sales, leases or other Asset Dispositions among and between the Borrower and its Subsidiaries, provided, that any such Assets sold, leased or otherwise disposed of as between the Borrower and its Subsidiaries shall continuously remain subject to the then existing first priority Liens of the Lender, under this Agreement and under the other Financing Documents, and shall be subject only to Permitted Liens, (f) usual and customary write-downs and other reductions of Accounts in connection with the compromise and collection of Accounts, (g) Asset Dispositions which are the subject of a Casualty or Condemnation, provided, that the Net Proceeds of any such Casualty or Condemnation are used by the Borrower in accordance with the provisions of this Agreement and the other Financing Documents; and -15- 17 (h) any other Asset Disposition; provided that the aggregate net proceeds from all such other Asset Dispositions during any fiscal year shall not exceed $250,000. "Permitted Liens" means: (a) Liens for Taxes which are not delinquent or which the Lender has determined in the exercise of its reasonable discretion (i) are being diligently contested in good faith and by appropriate proceedings, and such contest operates to suspend collection of the contested Taxes and enforcement of a Lien, (ii) the Borrower has the financial ability to pay, with all penalties and interest, at all times without materially and adversely affecting the Borrower, and (iii) are not, and will not be with appropriate filing, the giving of notice and/or the passage of time, entitled to priority over any Lien of the Lender; (b) deposits or pledges to secure obligations under workers' compensation, social security or similar laws, or under unemployment insurance in the ordinary course of business; (c) Liens in favor of the Lender; (d) judgment Liens to the extent the entry of such judgment does not constitute a Default or an Event of Default under the terms of this Agreement or result in the sale or levy of, or execution on, any of the Collateral; (e) Purchase Money Security Interests and Capital Leases not exceeding $500,000 in the aggregate; (f) liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 30 days past due for warehousemans' liens or 60 days for other such liens or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books; (g) easements, zoning or deed restrictions and such other encumbrances or charges (other than liens or security interests) against real property which do not in any material way affect the marketability or value of the same or interfere with the ownership or use thereof in the business of the Borrower or its Subsidiaries; (h) any transfer of a check or other medium of payment for deposit or collection through normal banking channels or any similar transaction in the normal course of business; (i) any Lien or cash or cash equivalents securing or given in the ordinary course of the Borrower's business to secure surety or performance bonds, or securing performance of contracts or bids (other than contracts for the payment of money borrowed) or deposits required by Law or as a condition to the transaction of business or the exercise of any right, privilege or license; (j) other consensual liens not exceeding $500,000 in the aggregate; (k) security interests in favor of the Borrower's customers to secure amounts which the customer paid to Borrower as a deposit or progress payment for the manufacture of identified equipment, but only to the extent such security interests cover only the identified equipment, secure only those amounts, and do not have priority over the security interests of the Lender arising under this Agreement; (l) Liens in favor of the Borrower or any of its Subsidiaries which do not encumber the Collateral, (m) Liens securing reimbursement obligations with respect to commercial -16- 18 letters of credit that encumber only the documents and, as a result thereof, other property relating to such letters of credit; (n) Liens on property or assets of a Person existing at the time such Person becomes a Subsidiary of the Borrower or merges into the Borrower, but only to the extent such Liens are not incurred in connection with, or in contemplation of, such Person's becoming a Subsidiary or merging into the Borrower; (o) such other Liens, if any, as are set forth on SCHEDULE 4.1.20 attached hereto and made a part hereof; and (p) any extensions, substitutions, replacements or renewals of the foregoing, to the extent such extensions, substitutions, replacements and renewals, to the extent the Lien does not cover any additional property or secure any additional debt. "Permitted Uses" means the payment of expenses incurred in the ordinary course of the Borrower's business and the general corporate purposes of the Borrower which do not violate this Agreement. "Person" means and includes an individual, a corporation, a partnership, a joint venture, a limited liability company or partnership, a trust, an unincorporated association, a Governmental Authority, or any other organization or entity. "Plan" means any pension plan which is covered by Title IV of ERISA and in respect of which the Borrower or a Commonly Controlled Entity is an "employer" as defined in Section 3 of ERISA. "Post-Default Rate" means the Applicable Interest Rate in effect from time to time plus 200 basis points. "Prime Rate" means the floating and fluctuating per annum prime commercial lending rate of interest of the Lender, as established and declared by the Lender at any time or from time to time. The Prime Rate shall be adjusted automatically, without notice, as of the effective date of any change in such prime commercial lending rate. The Prime Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. "Proforma Financial Projections" has the meaning described in Section 4.1.12 (Proforma Financial Statements) below. "Proforma Financial Statements" has the meaning described in Section 4.1.12 (Proforma Financial Statements) below. "Purchase Money Security Interest" means the interest of the lessor under a Capital Lease and also means a purchase money security interest, attaching at the time of acquisition, in Equipment, or construction or improvement of any real or personal property, acquired after the date of this Agreement; provided, -17- 19 however, that (i) the indebtedness secured by any such security interest shall not exceed 100% of the cost of the property covered plus finance charges, fees, costs and expenses (including attorneys fees) of documentation, perfection, collection and enforcement, (ii) each such security interest shall attach only to the property so acquired for the purchase money for the property so acquired, constructed or improved, and (iii) the acquisition to which any such security interest relates shall not result in a Default or Event of Default under this Agreement. "Receivable" means one of the Borrower's now owned and hereafter owned, acquired or created Accounts, Chattel Paper, General Intangibles and Instruments; and "Receivables" means all of the Borrower's now or hereafter owned, acquired or created Accounts, Chattel Paper, General Intangibles and Instruments, and all cash and non-cash proceeds and products thereof. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder. "Reserve Percentage" means, at any time, the then current maximum rate for which reserves (including any basic, supplemental, marginal and emergency reserves) are required to be maintained by member banks of the Federal Reserve System under Regulation D of the Board of Governors of the Federal Reserve System against "Eurocurrency liabilities", as that term is defined in Regulation D. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage. "Responsible Officer" means the chief executive officer, the chief financial officer, any senior vice president or the president of the Borrower. "Restricted Payment" shall have the meaning given that term and its constituent definitions in the Indenture on the Closing Date. "Revolving Credit Commitment" means the agreement of the Lender relating to the making of the Revolving Loan and advances thereunder subject to and in accordance with the provisions of this Agreement. "Revolving Credit Commitment Period" means the period of time from the Closing Date to the Business Day preceding the Revolving Credit Termination Date. "Revolving Credit Committed Amount" has the meaning described in Section 2.1.1 (Revolving Credit Facility). "Revolving Credit Expiration Date" means June 30, 2002, extending automatically for successive periods of one (1) year (but in no event later than June 30, 2007) unless the Lender in the -18- 20 exercise of its sole and absolute discretion has notified the Borrower, or the Borrower in the exercise of its sole and absolute discretion has notified the Lender, no later than the April 30, immediately preceding the next scheduled Revolving Credit Expiration Date of its intention to terminate the Revolving Credit Facility as of the next scheduled Revolving Credit Expiration Date. "Revolving Credit Facility" means the facility established by the Lender pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement. "Revolving Credit Note" has the meaning described in Section 2.1.3 (Revolving Credit Note). "Revolving Credit Termination Date" means the earlier of (a) the Revolving Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment is terminated pursuant to Section 7.2 or otherwise. "Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees" have the meanings described in Section 2.1.5 (Revolving Credit Unused Line Fee). "Revolving Loan" has the meaning described in Section 2.1.1 (Revolving Credit Facility). "Revolving Loan Account" has the meaning described in Section 2.1.4 (Revolving Loan Account). "Securities" means the collective reference to each and every certificated or uncertificated security which constitutes a "security" under the provisions of Title 8 of the Uniform Commercial Code and to each and every "investment property" under the provisions of Title 9 of the Uniform Commercial Code (if that definition is included in that Title), and all proceeds (cash and non-cash) of the foregoing. "Security Documents" means collectively any assignment, pledge agreement, security agreement, mortgage, deed of trust, deed to secure debt, financing statement and any similar instrument, document or agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of, the Lender on any real or personal property of any Person to secure all or any portion of the Obligations, all as the same may from time to time be amended, restated, supplemented or otherwise modified, including, without limitation, this Agreement, the Mortgage, and the Assignment of Patents. "Security Procedures" means the rules, policies and procedures adopted and implemented by the Lender and its Affiliates at any time and from time to time with respect to security procedures and measures relating to electronic funds transfers, all -19- 21 as the same may be amended, restated, supplemented, terminated, or otherwise modified at any time and from time to time by the Lender in its sole and absolute discretion. "Senior Notes" means any and all 12-3/4% Senior Notes due 2007 to be issued from time to time under the Indenture, in the original principal amount of $70,000,000. "Senior Notes Documents" means, collectively, the Offering Memorandum, the Indenture and the Senior Notes. "Servicing Fee" and "Servicing Fees" have the meanings described in Section 2.4.4 (Servicing Fees). "State" means the State of Maryland. "Stir Melter" shall have the meaning set forth in Section 3.4.1(b). "Subordinated Indebtedness" means all Indebtedness incurred at any time by the Borrower, which is in amounts, subject to repayment terms, and subordinated to the Obligations, as set forth in one or more written agreements, all in form and substance satisfactory to the Lender in its sole and absolute discretion. "Subsidiary" means any corporation the majority of the voting shares of which at the time are owned directly by the Borrower and/or by one or more Subsidiaries of the Borrower. "Taxes" means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest thereon), which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority on the Borrower or any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits. "Trademarks" means and includes in each case whether now existing or hereafter arising, all of the Borrower's rights, title and interest in and to (a) any and all trademarks (including service marks), trade names and trade styles, and applications for registration thereof and the goodwill of the business symbolized by any of the foregoing, (b) any and all licenses of trademarks, service marks, trade names and/or trade styles, whether as licensor or licensee, (c) any renewals of any and all trademarks, service marks, trade names, trade styles and/or licenses of any of the foregoing, (d) income, royalties, damages and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages, claims, and payments for past, present and future infringements thereof, (e) rights to sue for past, present and future infringements of any of the foregoing, including the right to settle suits involving claims and demands for -20- 22 royalties owing, and (f) all rights corresponding to any of the foregoing throughout the world. "Trustee" means United States Trust Company of New York and its successor and assigns as Trustee under the Indenture. "Uniform Commercial Code" means, unless otherwise provided in this Agreement, the Uniform Commercial Code as adopted by and in effect from time to time in the State or in any other jurisdiction, as applicable. "Unrestricted Proceeds" means $200,000 in the aggregate in any year for any event or any group of related event. "Wholly Owned Subsidiary" means any domestic United States corporation all the shares of stock of all classes of which (other than directors' qualifying shares) at the time are owned directly or indirectly by the Borrower and/or by one or more Wholly Owned Subsidiaries of the Borrower. "Wire Transfer Procedures" means the rules, policies and procedures adopted and implemented by the Lender and its Affiliates at any time and from time to time with respect to electronic funds transfers, including, without limitation, the Security Procedures, all as the same may be amended, restated, supplemented, terminated or otherwise modified at any time and from time to time by the Lender in its sole and absolute discretion. SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. Unless otherwise defined herein, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined herein, and accounting terms only partly defined herein, to the extent not defined, shall have the respective meanings given to them under GAAP. All computations determining compliance with financial covenants, including definitions used therein and calculations made after the Closing Date, shall be made giving effect to GAAP as in effect on the Closing Date in determining the financial covenants contained in this Agreement. Unless otherwise defined herein, all terms used herein which are defined by the Uniform Commercial Code shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the extent varied by this Agreement. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, schedule and exhibit references are references to articles, sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. As used herein, the singular number shall include the plural, the plural the singular and the use of the masculine, -21- 23 feminine or neuter gender shall include all genders, as the context may require. Reference to any one or more of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified. ARTICLE 2 THE CREDIT FACILITIES SECTION 2.1 THE REVOLVING CREDIT FACILITY. 2.1.1 REVOLVING CREDIT FACILITY. Subject to and upon the provisions of this Agreement, the Lender establishes a revolving credit facility in favor of the Borrower. The aggregate of all advances under the Revolving Credit Facility are sometimes referred to in this Agreement collectively as the "Revolving Loan". The principal amount of Ten Million Dollars ($10,000,000) is the "Revolving Credit Committed Amount". If at any time the unpaid principal balance of the Revolving Loan and of the Letter of Credit Obligations exceed the Revolving Credit Committed Amount in effect from time to time, the Borrower shall pay such excess to the Lender ON DEMAND. During the Revolving Credit Commitment Period, the Lender agrees to make advances under the Revolving Loan requested by the Borrower from time to time. Unless sooner paid, the unpaid Revolving Loan, together with interest accrued and unpaid thereon, and all other Obligations shall be due and payable in full on the Revolving Credit Expiration Date. 2.1.2 PROCEDURE FOR MAKING ADVANCES UNDER THE REVOLVING LOAN; LENDER PROTECTION LOANS. The Borrower may borrow, prepay and reborrow under the Revolving Credit Commitment on any Business Day. Advances under the Revolving Loan shall be deposited to a demand deposit account of the Borrower with the Lender (or an Affiliate of the Lender) or shall be otherwise applied as directed by the Borrower, which direction the Lender may require to be in writing. No later than noon (Baltimore time) on the date of the requested borrowing, the Borrower shall give the Lender oral or written notice (a "Loan Notice") of the amount and (if requested by the Lender) the purpose of the requested borrowing. Any oral Loan Notice shall be confirmed in writing by the Borrower within three (3) Business Days after the making of the requested Revolving Loan. In addition, the Borrower hereby irrevocably authorizes the Lender at any time and from time to time, without further request from or notice to the Borrower, to make advances under the Revolving Loan which the -22- 24 Lender, in its reasonable discretion, deems necessary or appropriate to protect the Lender's interests under this Agreement, including, without limitation, advances under the Revolving Loan made to cover debit balances in the Revolving Loan Account, principal of, and/or interest on, any Loan, any of the Obligations, and/or Enforcement Costs, prior to, on, or after the termination of other advances under this Agreement, regardless of whether the outstanding principal amount of the Revolving Loan which the Lender may make hereunder exceeds the Revolving Credit Committed Amount. 2.1.3 REVOLVING CREDIT NOTE. The obligation of the Borrower to pay the Revolving Loan, with interest, shall be evidenced by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise modified, the "Revolving Credit Note") substantially in the form of EXHIBIT "A-1" attached hereto and made a part hereof, with appropriate insertions. The Revolving Credit Note shall be dated as of the Closing Date, shall be payable to the order of the Lender at the times provided in the Revolving Credit Note, and shall be in the principal amount of the Revolving Credit Committed Amount. The Borrower acknowledges and agrees that, if the outstanding principal balance of the Revolving Loan outstanding from time to time exceeds the face amount of the Revolving Credit Note, the excess shall bear interest at the Base Rate for the Revolving Loan and shall be payable, with accrued interest, ON DEMAND. The Revolving Credit Note shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement. On the first day of each month, the Borrower shall pay the Lender as part of the Obligations an amount equal to the additional interest which would have accrued on the Revolving Loan during the preceding month if prepayments of the Revolving Loan during the preceding month had been received one (1) Business Day subsequent to their actual receipt. 2.1.4 REVOLVING LOAN ACCOUNT. The Lender will establish and maintain a loan account on its books (the "Revolving Loan Account") to which the Lender will (a) DEBIT (i) the principal amount of each advance of the Revolving Loan made by the Lender hereunder as of the date made, (ii) the amount of any interest accrued on the Revolving Loan as and when due, and (iii) any other amounts due and payable by the Borrower to the Lender from time to time under the provisions of this Agreement in connection with the Revolving Loan, including, without limitation, Enforcement Costs, Fees, late charges, and service, collection and audit fees, as and when due and payable, and (b) CREDIT all payments made by the Borrower to the Lender on account of the Revolving Loan as of the date made including, without limitation, funds credited to the Revolving Loan Account from the Collateral Account. The Lender may debit the Revolving Loan Account for the amount of any Item of Payment which is returned to the Lender unpaid. All credit entries -23- 25 to the Revolving Loan Account are conditional and shall be readjusted as of the date made if final and indefeasible payment is not received by the Lender in cash or solvent credits. Any and all periodic or other statements or reconciliations, and the information contained in those statements or reconciliations, of the Revolving Loan Account shall be examined by the Borrower within ninety (90) days after receipt. If following that examination the Borrower believes those statements or reconciliations to be incorrect, the Borrower shall within five (5) Business Days after completion of its examination, notify the Lender of the Borrower's beliefs and the reasons therefor. 2.1.5 REVOLVING CREDIT UNUSED LINE FEE. The Borrower shall pay to the Lender a quarterly revolving credit facility fee (collectively, the "Revolving Credit Unused Line Fees" and individually, a "Revolving Credit Unused Line Fee") in an amount equal to one-quarter percent (0.25%) per annum of the average daily unused and undisbursed portion of the Revolving Credit Committed Amount in effect from time to time accruing during each calendar quarter in arrears. The accrued and unpaid portion of the Revolving Credit Unused Line Fee shall be paid by the Borrower to the Lender on the first day of each month, commencing on the first such date following the date hereof, and on the Revolving Credit Termination Date. 2.1.6 EARLY TERMINATION FEE. In the event of the termination by, or on behalf of, the Borrower, of the Revolving Credit Commitment, the Borrower shall pay a fee (the "Early Termination Fee") equal to following amount at the following times: PERIOD EARLY TERMINATION FEE - ------ --------------------- Closing Date through and including June 30, 1998 $75,000.00 July 1, 1998 through and including June 30, 1999 $50,000.00 July 1, 1999 through and including June 30, 2000 $35,000.00 Thereafter No Early Termination Fee Payment of the Revolving Loan in whole or in part by or on behalf of the Borrower, by court order or otherwise, following and as a result of the institution of any bankruptcy proceeding by or against the Borrower, shall be deemed to be a prepayment of the Revolving Loan subject to the Early Termination Fee provided in this subsection, except that there shall not, however, be an Early Termination Fee due if the termination of the Revolving Credit Commitment and repayment of the Revolving Credit Facility is made solely as a result of (i) the closing and consummation of an -24- 26 initial public offering of Securities by Holding which generates sufficient proceeds and is in fact used to repay all Obligations in full, (ii) acceleration of the Obligations by the Lender or demand for payment under Section 7.2.1, (iii) the sale by the Borrower of all or substantially all of its Assets which generates sufficient proceeds and is in fact used to repay all Obligations in full, (iv) a simultaneous initial public offering of Borrower's common stock with net proceeds to the Parent and/or the Borrower of $25,000,000 or more, (v) the sale by Holdings of its securities or of all of the securities issued by the Borrower to Holding which generates sufficient proceeds and is in fact used to repay all Obligations in full, or (vi) the generation and retention of excess cash flow sufficient to have maintained the outstanding principal balance of the Revolving Loan at zero for at least one fiscal quarter and the Lender's reasonable satisfaction based on projections provided by the Borrower that there is no use, need for, or contemplation of senior debt (other than that evidenced by the Senior Notes) for the then next four (4) fiscal quarters. SECTION 2.2 THE LETTER OF CREDIT FACILITY. ----------------------------- 2.2.1 LETTERS OF CREDIT. Subject to and upon the provisions of this Agreement, and as a part of the Revolving Credit Commitment, the Borrower may, upon the prior approval of the Lender, obtain standby letters of credit (as the same may from time to time be amended, supplemented or otherwise modified, each a "Letter of Credit" and collectively the "Letters of Credit") from the Lender from time to time from the Closing Date until the Business Day preceding the Revolving Credit Termination Date. The Borrower will not be entitled to obtain a Letter of Credit hereunder unless (a) after giving effect to the request, the outstanding principal balance of the Revolving Loan and of the Letter of Credit Obligations would not exceed the Revolving Credit Committed Amount, and (b) the sum of the aggregate face amount of the then outstanding Letters of Credit (including the face amount of the requested Letter of Credit) does not exceed Five Million Dollars ($5,000,000). 2.2.2 LETTER OF CREDIT FEES. Prior to or simultaneously with the opening of each Letter of Credit, the Borrower shall pay to the Lender, a letter of credit fee (each a "Letter of Credit Fee" and collectively the "Letter of Credit Fees") in an amount equal to 200 basis points per annum of the amount of the Letter of Credit, based on a term beginning with the date of issuance and ending on the expiration date of the Letter of Credit. Such Letter of Credit Fees shall be paid upon the opening of the Letter of Credit and upon each anniversary thereof, if any. In addition, the Borrower shall pay to the Lender any and all additional issuance, negotiation, processing, transfer or other fees to the extent and as and when required by the provisions of any Letter of Credit Agreement, which shall be no greater than the fees therefor customarily charged by the Lender; such additional -25- 27 fees are included in and a part of the "Fees" payable by the Borrower under the provisions of this Agreement. 2.2.3 TERMS OF LETTERS OF CREDIT. Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit Agreement, and (b) expire on a date not later than the Business Day preceding the Revolving Credit Expiration Date; provided, however, if any Letter of Credit does have an expiration date later than the Business Day preceding the Revolving Credit Termination Date, as of the Business Day preceding the Revolving Credit Termination Date an advance of the Revolving Credit Facility shall be made by the Lender in the face amount of such Letter of Credit (or Letters of Credit) and the proceeds thereof shall be deposited in an interest bearing account selected by the Lender titled in the name of the Lender as trustee for the Borrower. The proceeds of the trustee account referred to in the immediately preceding sentence shall be held as collateral for the Letter of Credit (or Letters of Credit) and in the event of a draw under the Letter of Credit (or Letters of Credit), used to pay any such draw. The aggregate face amount of all Letters of Credit at any one time outstanding and issued by the Lender pursuant to the provisions of this Agreement, plus the amount of any unpaid Letter of Credit Fees accrued or scheduled to accrue thereon, and less the aggregate amount of all drafts issued under or purporting to have been issued under such Letters of Credit that have been paid by the Lender, is herein called the "Outstanding Letter of Credit Obligations". 2.2.4 PROCEDURE FOR LETTERS OF CREDIT. The Borrower shall give the Lender written notice at least three (3) Business Days prior to the date on which a Letter of Credit is requested to be opened of their request for a Letter of Credit. Such notice shall be accompanied by a duly executed and delivered Letter of Credit Agreement. Upon receipt of the Letter of Credit Agreement and the Letter of Credit Fee, the Lender shall process such Letter of Credit Agreement in accordance with its customary procedures and open such Letter of Credit on the Business Day specified in such notice. 2.2.5 CHANGE IN LAW; INCREASED COST. If any change in any law or regulation or in the interpretation thereof by any court or other Governmental Authority charged with the administration thereof shall either (a) impose, modify or deem applicable any reserve, special deposit or similar requirement against Letters of Credit issued by the Lender, or (b) impose on the Lender any other condition regarding this Agreement or any Letter of Credit, and the result of any event referred to in clauses (a) or (b) above shall be to increase the cost to the Lender of issuing, maintaining or extending the Letter of Credit or the cost to the Lender of funding any obligation under or in connection with the Letter of Credit, then, upon the earlier of thirty (30) days after demand therefor by the Lender or the Revolving Credit Termination Date, the Borrower shall immediately -26- 28 pay to the Lender from time to time as specified by the Lender, additional amounts which shall be sufficient to compensate the Lender for such increased cost, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the then highest current rate of interest on the Revolving Loan. A certificate as to such increased cost incurred by the Lender, submitted by the Lender to the Borrower, shall be conclusive, absent manifest error. SECTION 2.3 INTEREST. 2.3.1 APPLICABLE INTEREST RATES. (a) Each Loan shall bear interest until maturity (whether by acceleration, declaration, extension or otherwise) at either the Base Rate or the LIBOR Rate, as selected and specified by the Borrower in an Interest Rate Election Notice furnished to the Lender in accordance with the provisions of Section 2.3.2(e), or as otherwise determined in accordance with the provisions of this Section 2.3, and as may be adjusted from time to time in accordance with the provisions of Section 2.3.3. (b) Notwithstanding the foregoing, following the occurrence and during the continuance of an Event of Default, at the option of the Lender, all Loans and all other Obligations shall bear interest at the Post-Default Rate. (c) The Applicable Margin for (i) LIBOR Loans shall be 200 basis points per annum, and (ii) Base Rate Loans shall be zero basis points per annum. 2.3.2 SELECTION OF INTEREST RATES. (a) The Borrower may select the initial Applicable Interest Rate or Applicable Interest Rates to be charged on the Loans. (b) From time to time after the date of this Agreement as provided in this Section, by a proper and timely Interest Rate Election Notice furnished to the Lender in accordance with the provisions of Section 2.3.2(e), the Borrower may select an initial Applicable Interest Rate or Applicable Interest Rates for any Loans or may convert the Applicable Interest Rate and, when applicable, the Interest Period, for any existing Loan to any other Applicable Interest Rate or, when applicable, any other Interest Period. (c) The Borrower's selection of an Applicable Interest Rate and/or an Interest Period, the Borrower's election to convert an Applicable Interest Rate and/or an Interest Period to another Applicable Interest Rate or Interest Period, and any other -27- 29 adjustments in an interest rate are subject to the following limitations: (i) the Borrower shall not at any time select or change to an Interest Period that extends beyond the Revolving Credit Expiration Date in the case of the Revolving Loan, (ii) except as otherwise provided in Section 2.3.4, no change from the LIBOR Rate to the Base Rate shall become effective on a day other than a Business Day and on a day which is the last day of the then current Interest Period, no change of an Interest Period shall become effective on a day other than the last day of the then current Interest Period, and no change from the Base Rate to the LIBOR Rate shall become effective on a day other than a day which is a Eurodollar Business Day. (iii) any Applicable Interest Rate change for any Loan to be effective on a date on which any principal payment on account of such Loan is scheduled to be paid shall be made only after such payment shall have been made, (iv) no more than three (3) different LIBOR Rates may be outstanding at any time and from time to time with respect to the Revolving Loan, (v) the first day of each Interest Period shall be a Eurodollar Business Day, (vi) as of the effective date of a selection, there shall not exist a Default or an Event of Default, and (vii) the minimum principal amount of a LIBOR Loan shall be Five Hundred Dollars ($500,000). (d) If a request for an advance under the Loans is not accompanied by an Interest Rate Election Notice or does not otherwise include a selection of an Applicable Interest Rate and, if applicable, an Interest Period, or if, after having made a selection of an Applicable Interest Rate and, if applicable, an Interest Period, the Borrower fails or is not otherwise entitled under the provisions of this Agreement to continue such Applicable Interest Rate or Interest Period, the Borrower shall be deemed to have selected the Base Rate as the Applicable Interest Rate until such time as the Borrower has selected a different Applicable Interest Rate and specified an Interest Period in accordance with, and subject to, the provisions of this Section. (e) The Lender will not be obligated to make Loans, to convert the Applicable Interest Rate on Loans to another -28- 30 Applicable Interest Rate, or to change Interest Periods, unless the Lender shall have received an irrevocable written or telephonic notice (an "Interest Rate Election Notice") from the Borrower specifying the following information: (i) the amount to be borrowed or converted, (ii) a selection of the Base Rate or the LIBOR Rate, (iii) the length of the Interest Period if the Applicable Interest Rate selected is the LIBOR Rate, and (iv) the requested date on which such election is to be effective. Any telephonic notice must be confirmed in writing within three (3) Business Days. Each Interest Rate Election Notice must be received by the Lender not later than noon (Baltimore City time) on the Business Day of any requested borrowing or conversion in the case of a selection of the Base Rate and not later than noon (Baltimore City time) on the third Business Day before the effective date of any requested borrowing or conversion in the case of a selection of the LIBOR Rate. 2.3.3 INABILITY TO DETERMINE LIBOR BASE RATE. In the event that (i) the Lender shall have determined that, by reason of circumstances affecting the London interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the LIBOR Base Rate for any requested Interest Period with respect to a Loan the Borrower has requested to be made as or to be converted to a LIBOR Loan or (ii) the Lender shall determine that the LIBOR Base Rate for any requested Interest Period with respect to a Loan the Borrower has requested to be made as or to be converted to a LIBOR Loan does not adequately and fairly reflect the cost to the Lender of funding or converting such Loan, the Lender shall give telephonic or written notice of such determination to the Borrower at least one (1) day prior to the proposed date for funding or converting such Loan. If such notice is given, any request for a LIBOR Loan shall be made as or converted to a Base Rate Loan. Until such notice has been withdrawn by the Lender, the Borrower will not request that any Loan be made as or converted to a LIBOR Loan. 2.3.4 INDEMNITY. The Borrower agrees to indemnify and reimburse the Lender and to hold the Lender harmless from any loss, cost (including administrative costs) or expense which the Lender may sustain or incur as a consequence of (a) a default by the Borrower in payment when due of the principal amount of or interest on any LIBOR Loan, (b) the failure of the Borrower to make, or convert the Applicable Interest Rate of, a Loan after -29- 31 the Borrower has given a Loan Notice or an Interest Rate Election Notice, (c) the failure of the Borrower to make any prepayment of a LIBOR Loan after the Borrower has given notice of such intention to make such a prepayment, and/or (d) the making by the Borrower of a prepayment of a LIBOR Loan on a day which is not the last day of the Interest Period for such LIBOR Loan, including, without limitation, any such loss or expense arising from the reemployment of funds obtained by the Lender to maintain any LIBOR Loan or from fees payable to terminate the deposits from which such funds were obtained. This agreement and covenant of the Borrower shall survive termination or expiration of this Agreement and payment of the other Obligations. 2.3.5 PAYMENT OF INTEREST. (a) Unpaid and accrued interest on any advance of the Revolving Loan which consists of a Base Rate Loan shall be paid monthly, in arrears, on the first day of each calendar month, commencing on the first such date after the date of this Agreement, and on the first day of each calendar month thereafter, and at maturity (whether by acceleration, declaration, extension or otherwise). (b) Notwithstanding the foregoing, any and all unpaid and accrued interest on any Base Rate Loan converted to a Eurodollar Loan or prepaid shall be paid immediately upon such conversion and/or prepayment, as appropriate. (c) Unpaid and accrued interest on any LIBOR Loan shall be paid on the last Business Day of each Interest Period for such LIBOR Loan (and, in addition, for an Interest Period of 180 days, on the first Business Day after the 89th day after the commencement of the Interest Period and for an Interest Period of 360 days, on the first Business Day after the 89th day, on the first Business Day after 179th day and on the on the first Business Day after the 269th day after the commencement of the Interest Period) and at maturity (whether by acceleration, declaration, extension or otherwise); provided, however that any and all unpaid and accrued interest on any LIBOR Loan prepaid prior to expiration of the then current Interest Period for such LIBOR Loan shall be paid immediately upon prepayment. SECTION 2.4 GENERAL FINANCING PROVISIONS. 2.4.1 BORROWER'S REPRESENTATIVES. The Lender is hereby irrevocably authorized by the Borrower to make advances under the Loans to the Borrower pursuant to the provisions of this Agreement upon the written, oral or telephone request of any one of the Persons who is from time to time a Responsible Officer of the Borrower under the provisions of the most recent "Certificate" of corporate resolutions of the Borrower on file with the Lender or who is an officer or employee of the Borrower whom a Responsible -30- 32 Officer from time to time authorizes in writing to do so. The Lender does not and shall not assume any responsibility or liability for any errors, mistakes, and/or discrepancies in the oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations between the Lender and the Borrower in connection with the Credit Facilities, any Loan or any other transaction in connection with the provisions of this Agreement. 2.4.2 USE OF PROCEEDS OF THE LOANS. The proceeds of each advance under the Loans shall be used by the Borrower for Permitted Uses, and for no other purposes except as may otherwise be agreed by the Lender in writing. The Borrower shall use the proceeds of the Loans promptly. 2.4.3 ORIGINATION FEE. The Borrower shall pay to the Lender on or before the Closing Date a loan origination fee (the "Origination Fee") in the amount of Fifty Thousand Dollars ($50,000), which fee has been fully earned and is non-refundable. 2.4.4 SERVICING FEES. The Borrower shall pay to the Lender an annual servicing fee (collectively, the "Servicing Fees" and individually a "Servicing Fee") in the amount of $10,000 which shall be deemed earned on the Closing Date and on each anniversary of the Closing Date, and which shall be payable in installments of $2,500 each, the first installment being due on the Closing Date and subsequent installments being due on the first day of each September, December, March and June thereafter, with any unpaid installments being due and payable on the Revolving Credit Termination Date. 2.4.5 COMPUTATION OF INTEREST AND FEES. All applicable Fees and interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Any change in the interest rate on any of the Obligations resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate is announced. 2.4.6 PAYMENTS. All payments of the Obligations, including, without limitation, principal, interest, prepayments, and Fees, shall be paid by the Borrower without setoff, recoupment or counterclaim to the Lender in immediately available funds not later than 12:00 noon, Baltimore, Maryland time on the due date of such payment. All such payments shall be made to the Lender's principal office in Baltimore, Maryland or at such other location as the Lender may at any time and from time to time notify the Borrower. Alternatively, at its sole discretion, the Lender may charge any deposit account of the Borrower at the Lender or any Affiliate of the Lender with all or any part of any amount due to the Lender under this Agreement or any of the other Financing Documents to the extent that the Borrower shall have not -31- 33 otherwise tendered payment to the Lender. All payments shall be applied first to any unpaid Fees, second to any and all accrued and unpaid late charges and Enforcement Costs, third to any and all accrued and unpaid interest on the Obligations, and then to the then unpaid principal balance of the Obligations, all in such order and manner as shall be determined by the Lender in its sole and absolute discretion. 2.4.7 LIENS; SETOFF. In addition to the Liens set forth in ARTICLE 3, the Borrower hereby grants to the Lender as additional collateral and security for all of the Obligations, a continuing Lien on any and all monies, Securities, and other personal property of the Borrower and any and all proceeds thereof, now or hereafter held or received by, or in transit to, the Lender or any Affiliate of the Lender from, or for the account of, the Borrower, and also upon any and all depository accounts (whether general or special) and credits of the Borrower, if any, with the Lender or any Affiliate of the Lender, at any time existing, excluding any depository accounts held by the Borrower in its capacity as trustee for Persons who are not Affiliates of the Borrower. Without implying any limitation on any other rights the Lender may have under the Financing Documents or applicable Laws, during the continuance of an Event of Default, the Lender is hereby authorized by the Borrower at any time and from time to time at the Lender's option, without notice to, or consent of, the Borrower, to set off, appropriate, seize, freeze and apply any or all items hereinabove referred to against all Obligations then outstanding (whether or not then due), all in such order and manner as shall be determined by the Lender in its sole and absolute discretion. The Lender shall promptly after taking such action give the Borrower notice thereof by fax or telephone advice or overnight messenger. 2.4.8 REQUIREMENTS OF LAW. In the event that the Lender shall have determined in good faith that (a) the adoption of any Laws regarding capital adequacy, or (b) any change in such Laws or in the interpretation or application thereof or (c) compliance by the Lender or any corporation controlling the Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority or central bank, does or shall have the effect of reducing the rate of return on the capital of the Lender or such controlling corporation as a consequence of the Lender's obligations under this Agreement to a level below that which the Lender or such corporation would have achieved but for such adoption, change or compliance (taking into consideration the policies of the Lender and its controlling corporation with respect to capital adequacy) by an amount deemed by the Lender, in its discretion, to be material, then from time to time, after submission by the Lender to the Borrower of a written request therefor and a statement of the basis for the Lender's determination, the Borrower shall pay to the Lender, upon the earlier of thirty (30) days after demand by the Lender therefor or the Revolving Credit Termination Date, such additional amount or -32- 34 amounts in order to compensate the Lender or its controlling corporation for any such reduction. 2.4.9 FUNDS TRANSFER SERVICES. (a) The Borrower has requested that the Lender and its Affiliates make available to the Borrower electronic funds transfer services and related security measures in connection with the Obligations. A copy of the Lender's current Wire Transfer Procedures, including the Security Procedures, is attached to this Agreement as EXHIBIT B. The Borrower acknowledges and agrees that all electronic funds transfers made by the Lender or any Affiliate of the Lender to, or for the account of, the Borrower shall be governed by, and subject to, the Wire Transfer Procedures and the Security Procedures in effect from time to time. The Borrower and the Lender agree that the current Wire Transfer Procedures and the Security Procedures are commercially reasonable. The Borrower further acknowledges and agrees, however, that the full scope of the Security Procedures which the Lender and its Affiliates offer and strongly recommend for electronic funds transfers is available only if the Borrower communicates directly with the Lender or its Affiliate, as applicable, in accordance with and as required by the Wire Transfer Procedures and the Security Procedures. If the Borrower attempts to communicate with the Lender or any Affiliate of the Lender by any other method or otherwise does not communicate with the Lender and/or its Affiliate, as appropriate, in accordance with the Wire Transfer Procedures and the Security Procedures, the Lender and/or its Affiliate, as applicable, shall not be required to execute the instructions of the Borrower, but if the Lender or such Affiliate, as applicable, does so, the Borrower will be deemed to have refused and waived the Security Procedures that the Lender or its Affiliate, as applicable, offers and strongly recommends, and the Borrower will be bound by any funds transfer, whether or not authorized, which is issued in the Borrower's name and accepted by the Lender or any Affiliate, as applicable, in good faith. The Lender or its Affiliate, as applicable, may modify the Wire Transfer Procedures including, without limitation, the Security Procedures at such time or times and in such manner as the Lender and/or any Affiliate of the Lender, as applicable, in its or their sole and absolute discretion, deems appropriate to meet then prevailing standards of good banking practice. The Lender shall notify the Borrower of any material change or modification to the Wire Transfer Procedures and/or the Security Procedures. By continuing to use the wire transfer services of the Lender and/or any Affiliate of the Lender following notice to the Borrower of any such change or modification to the Wire Transfer Procedures and/or the Security Procedures, the Borrower shall be deemed automatically to have agreed to the Wire Transfer Procedures and the Security Procedures, as changed and/or modified and to have further agreed that the Wire Transfer Procedures and the Security Procedures, as changed and/or modified, are likewise commercially reasonable. The Borrower further agrees to establish and maintain procedures to -33- 35 safeguard the Security Procedures and any information related thereto. Neither the Lender nor any Affiliate of the Lender is responsible for detecting any error in any payment order sent by the Borrower to the Lender or any Affiliate of the Lender. (b) The Lender and its Affiliates, as applicable, will generally use the Fedwire funds transfer system for domestic funds transfers, and the funds transfer system operated by the Society for Worldwide International Financial Telecommunication (SWIFT) for international funds transfers. International funds transfers may also be initiated through the Clearing House InterBank Payment System (CHIPs) or international cable. However, the Lender and/or its Affiliates, as applicable, may use any means and routes that the Lender or any such Affiliate, as applicable, in its sole discretion, may consider suitable for the transmission of funds. Each payment order, or cancellation thereof, carried out through a funds transfer system or a clearinghouse will be governed by all applicable funds transfer system rules and clearing house rules and clearing arrangements, whether or not the Lender or any Affiliate, as applicable, is a member of the system, clearinghouse or arrangement and the Borrower acknowledges that the right of the Lender or any Affiliate, as applicable, to reverse, adjust, stop payment or delay posting of an executed payment order is subject to the Laws, regulations, rules, circulars and arrangements described herein. ARTICLE 3 THE COLLATERAL SECTION 3.1 DEBT AND OBLIGATIONS SECURED. All property and Liens assigned, pledged or otherwise granted under or in connection with this Agreement (including, without limitation, those under Section 3.2 (Grant of Liens) below) or any of the Financing Documents shall secure (a) the payment of all of the Obligations, and (b) the performance, compliance with and observance by the Borrower of the provisions of this Agreement and all of the other Financing Documents or otherwise under the Obligations. SECTION 3.2 GRANT OF LIENS. The Borrower hereby assigns, pledges and grants to the Lender, and agrees that the Lender shall have a perfected and continuing security interest in, and Lien on, (a) all of the Borrower's Accounts, Inventory, Chattel Paper, Documents, Instruments, Equipment, Securities, and General Intangibles, whether now owned or existing or hereafter acquired or arising, (b) all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to an Account or Chattel Paper, (c) all insurance policies relating to the foregoing, (d) all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to the foregoing and all Equipment and General Intangibles necessary or beneficial to retain, access and/or process the information -34- 36 contained in those books and records, and (e) all cash and non-cash proceeds and products of the foregoing. The Borrower further agrees that the Lender shall have in respect thereof all of the rights and remedies of a secured party under the Uniform Commercial Code as well as those provided in this Agreement, under each of the other Financing Documents and under applicable Laws. Notwithstanding any other provision of this Agreement and the other Security Documents, the Lender agrees that it will not record the Assignment of Patents except during the continuance of an Event of Default and that the failure of the Lender to have a perfected security interest in the Patents and Trademarks until such recording shall not be breach of any provision of this Agreement or the other Financing Documents. SECTION 3.3 COLLATERAL DISCLOSURE LIST. On or prior to the Closing Date, the Borrower shall deliver to the Lender a list (the "Collateral Disclosure List") which shall contain such information with respect to the Borrower's business and real and personal property as the Lender may require and shall be certified by a Responsible Officer of the Borrower, all in the form provided to the Borrower by the Lender. Promptly after demand by the Lender, the Borrower shall furnish to the Lender an update of the information contained in the Collateral Disclosure List at any time and from time to time as may be requested by the Lender. SECTION 3.4 PERSONAL PROPERTY. The Borrower acknowledges and agrees that it is the intention of the parties to this Agreement that the Lender shall have a first priority, perfected Lien, in form and substance satisfactory to the Lender and its counsel, on all of the Borrower's personal property of any kind and nature whatsoever, whether now owned or hereafter acquired, subject only to the Permitted Liens, if any. In furtherance of the foregoing: 3.4.1 SECURITIES, CHATTEL PAPER, PROMISSORY NOTES, ETC. (a) On the Closing Date and without implying any limitation on the scope of Section 3.2 (Grant of Liens) above, the Borrower shall deliver to the Lender all originals of all of the Borrower's letters of credit, stock certificates, Chattel Paper, Documents and Instruments and, if the Lender so requires, shall execute and deliver to the Lender separate pledges, assignments and security agreements in form and content acceptable to the Lender, which pledges, assignments and security agreements shall assign, pledge and grant a Lien to the Lender on all letters of credit, stock certificates, Chattel Paper, Documents, and Instruments. (b) The Borrower acknowledges and agrees that its Securities include, without limitation, one hundred percent -35- 37 (100%) of the equity interests of Stir-Melter, Inc., a corporation organized under the Laws of the State of Delaware ("Stir Melter"). During the continuance of an Event of Default, the Borrower shall receive no dividend or distribution or other benefit with respect to Stir Melter without the Lender's prior written consent, and shall not vote, consent, waive or ratify any action taken, which would violate or be inconsistent with any of the terms and provisions of this Agreement or any of the other Financing Documents or which would materially impair the position or interest of the Lender in the such Securities or dilute the percentage of the ownership interests of Stir Melter pledged to the Lender hereunder, except as expressly permitted by this Agreement. (c) In the event that the Borrower shall acquire after the Closing Date any letters of credit, Securities, Chattel Paper, Documents, or Instruments, the Borrower shall promptly so notify the Lender and deliver the originals of all of the foregoing to the Lender promptly and in any event within ten (10) days of each acquisition. (d) All letters of credit, stock certificates, Chattel Paper, Documents and Instruments shall be delivered to the Lender endorsed and/or assigned as required by any pledge, assignment and security agreement and/or as the Lender may require and, if applicable, shall be accompanied by blank irrevocable and unconditional stock or bond powers and/or notices as the Lender may require. 3.4.2 PATENTS, COPYRIGHTS AND OTHER PROPERTY REQUIRING ADDITIONAL STEPS TO PERFECT. On the Closing Date and without implying any limitation on the scope of Section 3.2 above, the Borrower shall execute and deliver all Financing Documents and take all actions requested by the Lender in order to perfect a first priority assignment of Patents, Copyrights, Trademarks or any other type or kind of intellectual property acquired by the Borrower after the Closing Date. SECTION 3.5 RECORD SEARCHES. As of the Closing Date and thereafter at the time any Financing Document is executed and delivered by the Borrower pursuant to this Section, the Lender shall have received, in form and substance satisfactory to the Lender, such Lien or record searches with respect to the Borrower and/or any other Person, as appropriate, and the property covered by such Financing Document showing that the Lien of such Financing Document will be a perfected first priority Lien on the property covered by such Financing Document subject only to Permitted Liens or to such other matters as the Lender may approve. SECTION 3.6 REAL PROPERTY. The Borrower acknowledges and agrees that it is the intention of the parties to this Agreement that the Lender shall have a first priority, perfected Lien, in -36- 38 form and substance satisfactory to the Lender and its counsel, on all of the Borrower's real property of any kind and nature whatsoever, whether now owned or hereafter acquired, subject only to the Permitted Liens, if any. In furtherance of the foregoing: With respect to each parcel of real property now owned by the Borrower, the Borrower shall on the Closing Date execute and deliver a deed of trust or a mortgage or other document, as appropriate, which deed of trust, mortgage and/or other document shall be included among the Financing Documents. With respect to real property acquired by the Borrower after the Closing Date, the Borrower shall, promptly after acquisition thereof, grant a Lien covering such real property to the Lender under the provisions of a mortgage, deed of trust or other document, as appropriate. Each Financing Document to be executed and delivered pursuant hereto shall: (a) be in form and substance reasonably satisfactory to the Lender; (b) create a first priority Lien in such real property in favor of the Lender subject only to Permitted Liens, zoning ordinances, and such other matters as the Lender may approve; (c) except for the Mortgaged Property, be accompanied by a current appraisal of the fair market value of the subject real property prepared by appraisers reasonably satisfactory to the Lender; (d) be accompanied by a current survey reasonably satisfactory in all respects to the Lender of the subject real property, prepared by a registered land surveyor or engineer reasonably satisfactory to the Lender; (e) be accompanied by evidence reasonably satisfactory to the Lender regarding the current and past pollution control practices at such real property in connection with the discharge, emission, handling, disposal or existence of Hazardous Materials, which may include, at the Lender's request, an environmental audit of such real property prepared by a person or firm acceptable to the Lender; (f) be accompanied by a mortgagee's title insurance policy or marked-up unconditional commitment or binder for such insurance in form and substance reasonably satisfactory to the Lender and issued by a title insurance company reasonably satisfactory to the Lender; and (g) upon request of the Lender, be accompanied by a signed opinion of counsel, in form and substance -37- 39 reasonably satisfactory to the Lender, and from counsel, satisfactory to the Lender, licensed to practice in the state where the subject real property is located. SECTION 3.7 COSTS. The Borrower agrees to pay, as part of the Enforcement Costs and to the fullest extent permitted by applicable Laws, on demand all reasonable costs, fees and expenses incurred by the Lender in connection with the taking, perfection, preservation, protection and/or release of a Lien on the Collateral, including, without limitation: (a) customary fees and expenses incurred in preparing Financing Documents from time to time (including, without limitation, reasonable attorneys' fees incurred in connection with preparing the Financing Documents); (b) all filing and/or recording taxes or fees; (c) all title insurance premiums and costs; (d) all costs of Lien and record searches; (e) reasonable attorneys' fees in connection with all legal opinions required; (f) appraisal and/or survey costs; and (g) all related costs, fees and expenses. SECTION 3.8 RELEASE. Upon the indefeasible repayment in full in cash of the Obligations and performance of all Obligations of the Borrower (other than Contingent Indemnification Obligations) under this Agreement and all other Financing Documents, the termination and/or expiration of the Commitment and all Letter of Credit Obligations, upon the Borrower's request and at the Borrower's sole cost and expense, the Lender shall release and/or terminate any Financing Document but only if and provided that there is no commitment or obligation (whether or not conditional) of the Lender to re-advance amounts which would be secured thereby. SECTION 3.9 INCONSISTENT PROVISIONS. In the event that the provisions of any Financing Document directly conflict with any provision of this Agreement, the provisions of this Agreement govern. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.1 REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lender, as follows: -38- 40 4.1.1 SUBSIDIARIES. Except as acquired or created as permitted by this Agreement, the Borrower has the Subsidiaries listed on the Collateral Disclosure List attached hereto and made a part hereof and no others. As of the Closing Date, each of the Subsidiaries is a Wholly Owned Subsidiary except as shown on the Collateral Disclosure List, which correctly indicates the nature and amount of the Borrower's ownership interests therein. 4.1.2 GOOD STANDING. Each of the Borrower and its Subsidiaries (a) is a corporation duly organized, existing and in good standing under the laws of the jurisdiction of its incorporation, (b) has the corporate power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary and in which the failure to qualify would materially adversely affect the business, operations or properties of the Borrower and/or their Subsidiaries. 4.1.3 POWER AND AUTHORITY. The Borrower has full corporate power and authority to execute and deliver this Agreement, the other Financing Documents to which it is a party, to make the borrowings under this Agreement, and to incur and perform the Obligations whether under this Agreement, the other Financing Documents or otherwise, all of which have been duly authorized by all proper and necessary corporate action. No consent or approval of shareholders or any creditors of the Borrower, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of the Borrower, is required as a condition to the execution, delivery, validity or enforceability of this Agreement, the other Financing Documents, the performance by the Borrower of the Obligations. 4.1.4 BINDING AGREEMENTS. This Agreement and the other Financing Documents executed and delivered by the Borrower have been properly executed and delivered and constitute the valid and legally binding obligations of the Borrower and are fully enforceable against the Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties, and general principles of equity regardless of whether applied in a proceeding in equity or at law. 4.1.5 NO CONFLICTS. Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by the Borrower nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (a) the Borrower's charter or bylaws, (b) any existing mortgage, -39- 41 indenture, contract or agreement binding on the Borrower or affecting its property, or (c) any Laws. 4.1.6 NO DEFAULTS, VIOLATIONS. (a) No Default or Event of Default has occurred and is continuing. (b) Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any obligation under any existing mortgage, indenture, contract or agreement binding on it or affecting its property in any respect which could be materially adverse to the business, operations, property or financial condition of the Borrower, or which could materially adversely affect the ability of the Borrower to perform its obligations under this Agreement or the other Financing Documents, to which the Borrower is a party. 4.1.7 COMPLIANCE WITH LAWS. Neither the Borrower nor any of its Subsidiaries is in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator, or any Governmental Authority affecting the Borrower or any of its properties, the violation of which, considered in the aggregate, could materially adversely affect the business, operations or properties of the Borrower and/or its Subsidiaries, the violation of which, considered in the aggregate would materially adversely affect the business, operations or properties of the Borrower and/or their Subsidiaries. 4.1.8 MARGIN STOCK. None of the proceeds of the Loans will be used, directly or indirectly, by the Borrower or any Subsidiary for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry, any "margin security" within the meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System or for any other purpose which might make the transactions contemplated in this Agreement a "purpose credit" within the meaning of said Regulation G or Regulation U, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as amended, or any rules or regulations promulgated under any of such statutes. 4.1.9 INVESTMENT COMPANY ACT; MARGIN SECURITIES. Neither the Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company -40- 42 Act of 1940, as amended, nor is it, directly or indirectly, controlled by or acting on behalf of any Person which is an investment company within the meaning of said Act. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin security" within the meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System. 4.1.10 LITIGATION. Except as otherwise disclosed to the Lender on SCHEDULE 4.1.10 attached to and made a part of this Agreement, there are no proceedings, actions or investigations pending or, so far as the Borrower knows, threatened before or by any court, arbitrator or any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of the Borrower or any Subsidiary, would have a material adverse effect on the business, properties, condition (financial or otherwise) or operations, present or prospective, of the Borrower. 4.1.11 FINANCIAL CONDITION. The consolidated financial statements of the Borrower dated March 31, 1997, fairly present in all material respects the financial position of the Borrower and its Subsidiaries and the results of their operations and transactions in their surplus accounts as of the date and for the period referred to and have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject to year-end adjustments and footnotes. There are no liabilities, direct or indirect, fixed or contingent, of the Borrower or its Subsidiaries as of the date of such financial statements which are not reflected therein or in the notes thereto. There has been no material adverse change in the financial condition or operations of the Borrower or its Subsidiaries since the date of such financial statements and to the Borrower's knowledge no such adverse change is pending or threatened. Neither the Borrower nor any Subsidiary has guaranteed the obligations of, or made any investment in or advances to, any Person, except as disclosed in such financial statements. The representations and warranties contained in this Section shall also cover financial statements of the Borrower furnished from time to time to the Lender pursuant to Section 6.1.1 (Financial Statements) of this Agreement. 4.1.12 PROFORMA FINANCIAL STATEMENTS. The Offering Memorandum contains a proforma consolidated and consolidating balance sheet of Holding and its Subsidiaries as of immediately after consummation of the Merger Agreement Transactions and the transactions incident thereto (the "Proforma Balance Sheet"). The Borrower has furnished to the Lender proforma financial projections for the five (5) year period subsequent to the closing of the Merger Agreement Transactions (the "Proforma Financial Projections"). The Proforma Balance Sheet has been -41- 43 prepared substantially in accordance with GAAP, and fairly presents the consolidated financial condition of the Borrower and its Subsidiaries as of immediately after consummation of the Merger Agreement Transactions, this Agreement and the transactions incident thereto. The Proforma Financial Projections represent the Borrower's good faith estimate of the future operations of the Borrower and are based on reasonable and conservative assumptions of the Borrower. 4.1.13 FULL DISCLOSURE. The financial statements referred to in Section 4.1.11 (Financial Condition) of this Agreement, the Financing Documents (including, without limitation, this Agreement), and the written statements, reports or certificates furnished by the Borrower in connection with the Financing Documents (a) do not contain any untrue statement of a material fact and (b) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. The budgets and projections under Section 6.1.1(f) represent the Borrower's good faith estimate of the future operations of the Borrower. 4.1.14 INDEBTEDNESS FOR BORROWED MONEY. Except for the Obligations and the indebtedness under the Senior Notes, and except as set forth in SCHEDULE 4.1.14 attached to and made a part of this Agreement, the Borrower has no Indebtedness for Borrowed Money. The Lender has received photocopies of all promissory notes evidencing any Indebtedness for Borrowed Money set forth in SCHEDULE 4.1.14, together with any and all subordination agreements, other agreements, documents, or instruments securing, evidencing, guarantying or otherwise executed and delivered in connection therewith. 4.1.15 TAXES. Each of the Borrower and its Subsidiaries has filed all returns, reports and forms for Taxes which, to the knowledge of the Borrower, are required to be filed, and has paid all Taxes as shown on such returns or on any assessment received by it, to the extent that such Taxes have become due, unless and to the extent only that such Taxes, assessments and governmental charges are currently contested in good faith and by appropriate proceedings by the Borrower, such Taxes are not the subject of any Liens other than Permitted Liens, and adequate reserves therefor have been established as required under GAAP. All tax liabilities of the Borrower were as of the date of audited financial statements referred to in Section 4.1.11 (Financial Condition) above, and are now, adequately provided for on the books of the Borrower or its Subsidiaries, as appropriate. As of the Closing Date, no tax liability has been asserted by the Internal Revenue Service or any state or local authority against the Borrower for Taxes in excess of those already paid. 4.1.16 ERISA. With respect to any "pension plan" as defined in SECTION 3(2) of ERISA, which plan is now or -42- 44 previously has been maintained or contributed to by the Borrower and/or by any commonly controlled entity: (a) no "accumulated funding deficiency" as defined in Code Section 412 or ERISA Section 302 in a material amount has occurred, whether or not that accumulated funding deficiency has been waived; (b) no Reportable Event has occurred that will have Material Adverse Effect; (c) no termination of any plan subject to Title IV of ERISA has occurred that will have Material Adverse Effect; (d) neither the Borrower nor any commonly controlled entity (as defined under ERISA) has incurred a "complete withdrawal" within the meaning of ERISA Section 4203 from any Multiemployer Plan that will have Material Adverse Effect; (e) neither the Borrower nor any commonly controlled entity has incurred a "partial withdrawal" within the meaning of ERISA Section 4205 with respect to any Multiemployer Plan; (f) no Multiemployer Plan to which the Borrower or any commonly controlled entity has an obligation to contribute is in "reorganization" within the meaning of ERISA Section 4241 nor has notice been received by the Borrower or any commonly controlled entity that such a Multiemployer Plan will be placed in "reorganization," if such reorganization would reasonably be expected to have a Material Adverse Effect. 4.1.17 TITLE TO PROPERTIES. Subject to the Permitted Liens, the Borrower has good and marketable title to all of its properties, including, without limitation, the Collateral and the properties and assets reflected in the balance sheets described in Section 4.1.11 (Financial Condition) above. Subject to the Permitted Liens, the Borrower has legal, enforceable and uncontested rights to use freely such property and assets. All of such properties, including, without limitation, the Collateral which were purchased, were purchased for fair consideration and reasonably equivalent value in the ordinary course of business. 4.1.18 PATENTS, TRADEMARKS, ETC. Each of the Borrower and its Subsidiaries owns, possesses, or has the right to use all necessary Patents, licenses, Trademarks, Copyrights, permits and franchises to own its properties and to conduct its business as now conducted, without known conflict with the rights of any other Person. 4.1.19 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS CONTAMINATION. To the Borrower's knowledge, (a) no Hazardous Materials are located on any real property owned, controlled or operated by of the Borrower or for which the Borrower is, or is claimed to be, responsible, except for reasonable quantities of necessary supplies for use by the Borrower in the ordinary course of its current line of business and stored, used and disposed in accordance with applicable Laws; and (b) no property owned, controlled or operated by the Borrower or for which the Borrower has, or is claimed to have, responsibility has ever been used as a manufacturing, -43- 45 storage, or dump site for Hazardous Materials nor is affected by Hazardous Materials Contamination at any other property. 4.1.20 PERFECTION AND PRIORITY OF COLLATERAL. The Lender has, or upon execution and recording of this Agreement and the Security Documents will have, and will continue to have as security for the Obligations, a valid and perfected Lien on and security interest in all Collateral, free of all other Liens, claims and rights of third parties whatsoever except Permitted Liens. 4.1.21 PLACES OF BUSINESS AND LOCATION OF COLLATERAL. The information contained in the Collateral Disclosure List is complete and correct as of the Closing Date in all material respects. 4.1.22 MERGER AGREEMENT TRANSACTION. (a) The Lender has received true and correct photocopies of the Merger Agreement and each of the other Merger Agreement Documents, executed, delivered and/or furnished on or before the Closing Date in connection with the Merger Agreement Transaction. Neither the Merger Agreement nor any of the other Merger Agreement Documents have been modified, changed, supplemented, canceled, amended or otherwise altered or affected, except as otherwise disclosed to the Lender in writing on or before the Closing Date. (b) The Merger Agreement Transaction has been effected, closed and consummated pursuant to, and in accordance with, the terms and conditions of the Merger Agreement and with all applicable Laws. (c) As part of the closing of the Merger Agreement Transaction, the Merger Company received paid-in cash Equity aggregating not less than Fifteen Million Dollars ($15,000,000), which Equity was paid to the Merger Company at such times, by such purchasers, and on such terms and conditions as shall have been disclosed to, and approved by, the Lender in writing on or before the Closing Date and in accordance with all applicable Laws. (d) The Lender has received true and correct photocopies of the Indenture, the Offering Memorandum, and each of the Senior Notes Documents, executed, delivered and/or furnished on or before the Closing Date in connection with the transactions contemplated by the Senior Notes Documents. Neither the Indenture, the Offering Memorandum nor any of the Senior Notes Documents have been modified, changed, supplemented, canceled, amended or -44- 46 otherwise altered or affected, except as otherwise disclosed to the Lender in writing on or before the Closing Date. (e) As part of the closing of the Merger Agreement Transaction, the Offering Transaction has been effected, closed and consummated pursuant to, and in accordance with, the terms and conditions of the Indenture and all applicable Laws and the Merger Company received proceeds from the sale of the Senior Notes aggregating not less than Seventy Million Dollars ($70,000,000). 4.1.23 SECURITIES ACTS. The Borrower has not issued any unregistered securities in violation of the registration requirements of Section 5 of the Securities Act of 1933, as amended, or any other Law, and is not in violation of any rule, regulation, or requirement under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended. The Borrower is not required to qualify any indenture under the Trust Indenture Act of 1939, as amended, in connection with the execution and delivery of any of the Notes. 4.1.24 GOVERNMENTAL REGULATION. Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Interstate Commerce Act or to any Federal or state Laws limiting its ability to incur Indebtedness for Borrowed Money. SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the Closing Date, the making of any advance under the Loans and extension of credit made hereunder, and the incurring of any other Obligations and shall be deemed to have been made at the time of each request for, and again at the time the making of, each advance under the Loans and each the issuance of each Letter of Credit except that the representations and warranties which relate to financial statements which are referred to in Section 4.1.11, shall also be deemed to cover financial statements furnished from time to time to the Lender pursuant to Section 6.1.1 (Financial Statements) of this Agreement. ARTICLE 5 CONDITIONS PRECEDENT SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE. The making of the initial advance under the Loans or, if sooner, the issuance of the initial Letter of Credit is subject to the fulfillment on or before the Closing Date of the following -45- 47 conditions precedent in a manner satisfactory in form and substance to the Lender and its counsel: 5.1.1 ORGANIZATIONAL DOCUMENTS - BORROWER. The Lender shall have received: (a) a certificate of good standing for the Borrower certified by the Secretary of State, or other appropriate Governmental Authority, of the state of incorporation for the Borrower; (b) a certificate of qualification to do business for the Borrower certified by the Secretary of State or other Governmental Authority of each state in which the Borrower conducts business and where the failure to qualify would have a Material Adverse Effect; (c) a certificate dated as of the Closing Date by the Secretary or an Assistant Secretary of the Borrower covering: (i) true and complete copies of the Borrower's corporate charter, bylaws, and all amendments thereto; (ii) true and complete copies of the resolutions of its Board of Directors authorizing (i) the execution, delivery and performance of the Financing Documents, the Senior Notes Documents and the Merger Agreement Documents to which the Borrower is a party, (ii) the borrowings by the Borrower hereunder, (iii) the granting of the Liens contemplated by this Agreement and the Financing Documents to which the Borrower is a party, and (iv) the Merger Agreement Transaction; (iii) the incumbency, authority and signatures of the officers of the Borrower authorized to sign this Agreement and the other Financing Documents to which the Borrower is a party; and (iv) the identity of the Borrower's current directors, common stock holders and other equity holders, as well as their respective percentage ownership interests. 5.1.2 OPINION OF BORROWER'S COUNSEL. The Lender shall have received the favorable opinion of counsel for the Borrower addressed to the Lender. -46- 48 5.1.3 CONSENTS, LICENSES, APPROVALS, ETC. The Lender shall have received copies of all consents, licenses and approvals, required in connection with the execution, delivery, performance, validity and enforceability of the Financing Documents, the Senior Notes Documents and the Merger Agreement Documents, and such consents, licenses and approvals shall be in full force and effect. 5.1.4 NOTES. The Lender shall have received the Revolving Credit Note, each conforming to the requirements hereof and executed by a Responsible Officer of the Borrower and attested by a duly authorized representative of the Borrower. 5.1.5 FINANCING DOCUMENTS AND COLLATERAL. The Borrower shall have executed and delivered the Financing Documents to be executed by it, and shall have delivered original Chattel Paper, Instruments, Securities, and related Collateral and all opinions, title insurance, and other documents contemplated by Article 3 hereof, including, without limitation, that each original stock certificate of Stir Melter and blank stock powers with respect thereto. 5.1.6 OTHER FINANCING DOCUMENTS. In addition to the Financing Documents to be delivered by the Borrower, the Lender shall have received the Financing Documents duly executed and delivered by Persons other than the Borrower. 5.1.7 OTHER DOCUMENTS, ETC. The Lender shall have received such other certificates, opinions, documents and instruments confirmatory of or otherwise relating to the transactions contemplated hereby as may have been reasonably requested by the Lender. 5.1.8 PAYMENT OF FEES. The Lender shall have received payment of any Fees due on or before the Closing Date. 5.1.9 COLLATERAL DISCLOSURE LIST. The Borrower shall have delivered the Collateral Disclosure List required under the provisions of Section (Collateral Disclosure List) hereof duly executed by a Responsible Officer of the Borrower. 5.1.10 RECORDINGS AND FILINGS. The Borrower shall have: (a) executed and delivered all Financing Documents (including, without limitation, UCC-1 and UCC-3 statements) required to be filed, registered or recorded in order to create, in favor of the Lender, a perfected Lien in the Collateral (subject only to the Permitted Liens) in form and in sufficient number for filing, registration, and recording in each office in each jurisdiction in which such filings, registrations and recordations are required, and (b) delivered such evidence as the Lender require that all necessary filing fees and all recording and other similar -47- 49 fees, and all Taxes and other expenses related to such filings, registrations and recordings will be or have been paid in full. 5.1.11 INSURANCE CERTIFICATE. The Lender shall have received an insurance certificate in accordance with the provisions of Section 6.1.7 (Insurance) and Section 6.1.8 (Insurance With Respect to Equipment, the Inventory and the Mortgaged Property) of this Agreement. 5.1.12 LANDLORD'S WAIVERS. The Lender shall have received a waiver from each landlord of each and every business premise leased by the Borrower and on which any of the Collateral is or may hereafter be located, which landlords' waivers must be reasonably acceptable to the Lender and its counsel. 5.1.13 BAILEE ACKNOWLEDGEMENTS. The Lender shall have received an agreement acknowledging the Lender's Liens from each bailee, warehouseman, consignee or similar third party which has possession of any of the Collateral with a fair market value in excess of $500,000, which agreements must be reasonably acceptable to the Lender and its counsel in their reasonable discretion. 5.1.14 FIELD EXAMINATION. The Lender shall have completed a field examination and audit of the Borrower's business, operations and income, the results of which field examination and audit shall be in all respects reasonably acceptable to the Lender in its sole but reasonable discretion and shall include reference discussions with key customers and vendors. 5.1.15 PROFORMA BALANCE SHEET AND PROJECTIONS. The Lender shall have received and approved the Borrower's Proforma Balance Sheet and Proforma Financial Projections, which Proforma Balance Sheet and Proforma Financial Projections must be in form and content acceptable to the Lender in its sole but reasonable discretion. 5.1.16 OFFERING. The Lender shall have received a certificate signed by a Responsible Officer of the Borrower, certifying to the Lender that the Merger Company (a) received the proceeds from the sale of the Senior Notes, in accordance with, and pursuant to, the terms and conditions of the Offering Memorandum, the Indenture, and the Senior Notes Documents, and applied the same to such purposes as has been previously disclosed to, and approved by, the Lender, and (b) has delivered to the Lender true and correct photocopies of all Senior Notes Documents. The Borrower shall have delivered such evidence of the receipt of such proceeds as may be requested by the Lender. The Lender must be satisfied that such proceeds have been paid to the Merger Company on such terms and conditions as shall have been previously disclosed to, and approved by, the Lender. -48- 50 5.1.17 CAPITAL FUNDS. The Lender shall have received a certificate signed by a Responsible Officer of the Borrower, certifying to the Lender that the Merger Company received paid-in cash Equity aggregating not less than Fifteen Million Dollars ($15,000,000), which Equity was paid to the Merger Company at such times, by such purchasers, and on such terms and conditions as shall have been disclosed to, and approved by, the Lender in writing on or before the Closing Date and in accordance with all applicable Laws. The Borrower shall have delivered such evidence of the Equity as may be requested by the Lender. The Lender must be satisfied that such Equity has been paid to the Merger Company on such terms and conditions as shall have been previously disclosed to, and approved by, the Lender. 5.1.18 MERGER AGREEMENT TRANSACTION. (a) The Lender shall be satisfied that the Merger Agreement Transaction shall have been completed and closed in accordance with the Merger Agreement and applicable Laws. (b) The Lender shall have received photocopies of all Merger Agreement Documents executed, delivered and/or furnished in connection with the Merger Agreement Transaction, together with a certificate signed by a Responsible Officer of the Borrower certifying that (i) the Merger Agreement and the other Merger Agreement Documents furnished to the Lender are true, correct, in full force and effect and the provisions thereof have not been in any way modified, amended or waived, and (ii) the Merger Agreement Transaction has been closed and completed in accordance with the Merger Agreement and the other Merger Agreement Documents furnished to the Lender and in accordance with all applicable Laws. SECTION 5.2. CONDITIONS TO ALL EXTENSIONS OF CREDIT. The making of all advances under the Loans and the issuance of all Letters of Credit is subject to the fulfillment of the following conditions precedent: 5.2.1 COMPLIANCE. The Borrower shall have complied and shall then be in compliance with all terms, covenants, conditions and provisions of this Agreement and the other Financing Documents which are binding upon it. 5.2.2 DEFAULT. There shall exist no Event of Default or Default hereunder. 5.2.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Borrower contained among the provisions of this Agreement shall be true in all material respects and with the same effect as though such representations and warranties had been made at the time of the making of, and of the request for, each advance under the Loans, and the issuance of each -49- 51 Letter of Credit except that the representation and warranty pertaining to balance sheets, financial statements and other financial condition information or data shall refer to the latest balance sheets, financial statements, and financial condition information and data furnished to the Lender pursuant to the provisions of this Agreement. 5.2.4 LEGAL MATTERS. All legal documents incident to each advance under the Loans and each of the Letters of Credit shall be reasonably satisfactory to counsel for the Lender. ARTICLE 6 COVENANTS OF THE BORROWER SECTION 6.1 AFFIRMATIVE COVENANTS. So long as any of the Obligations (other than Contingent Indemnification Obligations) or the Commitment shall be outstanding hereunder, the Borrower agrees with the Lender as follows: 6.1.1 FINANCIAL STATEMENTS. The Borrower shall furnish to the Lender: (a) ANNUAL STATEMENTS AND CERTIFICATES. The Borrower shall furnish to the Lender as soon as available, but in no event more than one hundred twenty (120) days after the close of each fiscal year of the Borrower, (i) a copy of the annual financial statement in reasonable detail reasonably satisfactory to the Lender relating to the Borrower and its Subsidiaries, prepared in accordance with GAAP and examined and certified by independent certified public accountants reasonably satisfactory to the Lender, which financial statement shall include a consolidated balance sheet of the Borrower and its Subsidiaries, as of the end of such fiscal year and consolidated statements of income, cash flows and changes in shareholders equity of the Borrower and its Subsidiaries, for such fiscal year, (ii) a Compliance Certificate, in substantially the form attached to this Agreement as EXHIBIT C, as may be amended by the Lender and the Borrower from time to time, containing a detailed computation of each financial covenant which is applicable for the period reported, a certification that no material change has occurred to the information contained in the Collateral Disclosure List (except as set forth in a schedule attached to the certification), and a cash flow projection report, each prepared by a Responsible Officer of the Borrower in a format reasonably acceptable to the Lender, and (iii) a management letter in the form prepared by the Borrower's independent certified public accountants. (b) ANNUAL OPINION OF ACCOUNTANT. The Borrower shall furnish to the Lender as soon as available, but in no event more than one hundred twenty (120) days after the close of the Borrower's fiscal years, a letter or opinion of the accountant -50- 52 who examined and certified the annual financial statement relating to the Borrower and its Subsidiaries stating whether anything in such accountant's examination has revealed the occurrence of a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (c) QUARTERLY STATEMENTS AND CERTIFICATES. The Borrower shall furnish to the Lender as soon as available, but in no event more than thirty (30) days after the end of each fiscal quarter, a financial statement in reasonable detail satisfactory to the Lender relating to the Borrower and its Subsidiaries, prepared in accordance with GAAP, which financial statement shall include a consolidated balance sheet of the Borrower and its Subsidiaries, as of the end of such fiscal quarter and consolidated statements of income, cash flows and changes in shareholders equity of the Borrower and its Subsidiaries for such fiscal quarter, and (ii) a Compliance Certificate, in substantially the form attached to this Agreement as EXHIBIT C, containing a detailed computation of each financial covenant which is applicable for the period reported and a certification that no change has occurred to the information contained in the Collateral Disclosure List (except as set forth on any schedule attached to the certification), all as prepared and certified by a Responsible Officer of the Borrower and accompanied by a certificate of that officer stating whether any event has occurred which constitutes a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (d) OTHER QUARTERLY REPORTS. The Borrower shall furnish to the Lender within thirty (30) days after the end of each fiscal quarter, a report containing the following information: (i) a summary aging schedule of all Receivables by Account Debtor; (ii) a summary aging of all accounts payable; and (iii) such other information as the Lender may reasonably request. (e) ANNUAL BUDGET AND PROJECTIONS. The Borrower shall furnish to the Lender as soon as available, but in no event later than the 30th day after the end of each fiscal year a consolidated budget and pro forma financial statements on a quarterly basis for the following fiscal year. (f) ADDITIONAL REPORTS AND INFORMATION. The Borrower shall furnish to the Lender promptly, such additional information, reports or statements as the Lender may from time to time reasonably request. -51- 53 (g) CERTAIN INFORMATION FURNISHED TO SENIOR NOTE HOLDERS. Unless otherwise furnished to the Lender, the Borrower will furnish to the Lender, at the same time sent to the Trustee and/or the holders of the Senior Notes, at least one (l) copy of all financial statements, reports, and other information sent by the Borrower to the Trustee and/or holders of the Senior Notes. 6.1.2 RECORDKEEPING, RIGHTS OF INSPECTION, FIELD EXAMINATION, ETC. (a) The Borrower shall, and shall cause each of its Subsidiaries to, maintain (i) a standard system of accounting in accordance with GAAP, and (ii) proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its properties, business and activities. (b) The Borrower shall, and shall cause each of its Subsidiaries to, permit authorized representatives of the Lender to visit and inspect the properties of the Borrower and its Subsidiaries, to review, audit, check and inspect the Collateral at any time to review, audit, check and inspect the Borrower's other books of record at any time with or without notice and to make abstracts and photocopies thereof, and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries, with the officers, directors, employees and other representatives of the Borrower and its Subsidiaries and their respective accountants, all at such times during normal business hours and other reasonable times and as often as the Lender may reasonably request; provided, however, that prior to initiating discussions with the Borrower's employees, the Lender shall advise an officer of the Borrower of the Lender's intention to do so and shall allow the Borrower's officers to be present during such discussion. The Lender shall give the Borrower reasonable notice of visits and inspections, which the Lender agrees will be no less than two (2) Business Days, unless special circumstances exist, provided, however, the Borrower acknowledges and agrees that (i) no notice need be given if there exists an Event of Default or if the Lender has information which the Lender believes is consistent with a conclusion that information provided by or at the direction of the Borrower regarding the Collateral or the Borrower's financial condition has been intentionally misstated; and (ii) the Borrower shall not prevent any visit or inspection if the Lender or a representative thereof advises (which advice may be oral) the Borrower that no notice is required because the inspection is being made pursuant to Section 6.1.2(b)(ii) of this Agreement. For the purpose of the foregoing, the Lender shall have, and are hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of the Borrower's owned or leased property. -52- 54 (c) Any and all reasonable costs and expenses incurred by, or on behalf of, the Lender in connection with the conduct of any of the foregoing shall be part of the Enforcement Costs and shall be payable to the Lender upon demand. The Borrower acknowledges and agrees that such expenses may include, but shall not be limited to, any and all reasonable out-of-pocket costs and expenses of the Lender's employees and agents in, and when, travel- ling to the Borrower's facilities. 6.1.3 CORPORATE EXISTENCE. The Borrower shall maintain, and cause each of its Subsidiaries to maintain, its corporate existence in good standing in the jurisdiction in which it is incorporated and in each other jurisdiction where it is required to register or qualify to do business if the failure to do so in such other jurisdiction would reasonably be expected to have a Material Adverse Effect. 6.1.4 COMPLIANCE WITH LAWS. The Borrower shall comply, and cause each of its Subsidiaries to comply, with all applicable Laws and observe the valid requirements of Governmental Authorities, the noncompliance with or the nonobservance of which would reasonably be expected to have a Material Adverse Effect. 6.1.5 PRESERVATION OF PROPERTIES. The Borrower will, and will cause each of its Subsidiaries to, at all times (a) maintain, preserve, protect and keep its properties, whether owned or leased, in good operating condition, working order and repair (ordinary wear and tear and Casualty excepted), and from time to time will make all proper repairs, maintenance, replacements, additions and improvements thereto needed to maintain such properties in good operating condition, working order and repair, and (b) do or cause to be done all things necessary to preserve and to keep in full force and effect its material franchises, leases of real and personal property, trade names, Patents, Trademarks, Copyrights and permits which are necessary for the orderly continuance of its business. 6.1.6 LINE OF BUSINESS. The Borrower will continue to engage substantially only in the business of design and assembly of glass bending and tempering systems used by glass manufacturers and processors in the conversion of flat glass into safety glass and the sale of new and aftermarket related products and services and related businesses and services. 6.1.7 INSURANCE. Without implying any limitation to the provisions of Section , the Borrower will, and will cause each of its Subsidiaries to, at all times maintain with A- or better rated insurance companies such insurance as is required by applicable Laws and such other insurance, all in such amounts, of such types and against such risks, hazards, liabilities, casualties and contingencies as are usually insured against in the same geographic areas by business entities engaged in the -53- 55 same or similar business. Without limiting the generality of the foregoing, the Borrower will, and will cause each of its Subsidiaries to, keep adequately insured all of its property against loss or damage resulting from fire or other risks insured against by extended coverage and maintain public liability insurance against claims for personal injury, death or property damage occurring upon, in or about any properties occupied or controlled by it, or arising in any manner out of the businesses carried on by it. The Borrower shall deliver to the Lender on the Closing Date (and thereafter on each date there is a material change in the insurance coverage) a certificate of a Responsible Officer of the Borrower containing a detailed list of the insurance then in effect and stating the names of the insurance companies, the types, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby. 6.1.8 INSURANCE WITH RESPECT TO EQUIPMENT, INVENTORY AND MORTGAGED PROPERTY. The Borrower will maintain and cause each of its Subsidiaries to maintain hazard insurance with fire and extended coverage and naming the Lender as an additional insured (or mortgagee, in the case of the Mortgaged Property) with loss payable to the Lender as its interest may appear on the Equipment, the Inventory and the Mortgaged Property in an amount at least equal to the lesser amount of the outstanding principal amount of the Obligations or the fair market value of Equipment, the Inventory and the Mortgaged Property (but in any event sufficient to avoid any co-insurance obligations) and with a specific endorsement to each such insurance policy pursuant to which the insurer agrees to give the Lender at least thirty (30) days written notice before any alteration or cancellation of such insurance policy and agrees to pay any loss to the Lender as its interest may appear and that no act or default of the Borrower shall affect the right of the Lender to recover under such policy in the event of loss or damage. If there exists no Event of Default and the insurance proceeds from a casualty is $500,000 or the less, such proceeds shall be applied at the election of the Borrower promptly to replace or restore the Equipment, the Inventory and the Mortgaged Property or the Obligations. The Lender agrees that if the cost to repair or restore the Equipment, the Inventory and the Mortgaged Property exceeds $500,000, and so long as there exists no Event of Default at the time such proceeds are paid to the Lender or at any time thereafter during which proceeds are held by the Lender, the proceeds shall be held in an interest bearing escrow account and shall be available for the replacement of such Equipment, the Inventory and the Mortgaged Property, promptly, but in no event more than one (1) year after the Lender's receipt of the proceeds. The Borrower hereby assigns to the Lender, and grants the Lender a security interest in, such escrow account and the funds therein to secure the payment and performance of the Obligations. Immediately upon the occurrence and during the continuance of any Event of -54- 56 Default, or on the sooner expiration of the replacement period provided in this Section, the Lender may apply such proceeds and other sums so deposited with the Lender to the repayment of the Obligations in such order as the Lender may elect. 6.1.9 TAXES. Except to the extent that the validity or amount thereof is being contested in good faith and by appropriate proceedings, the Borrower will, and will cause each of its Subsidiaries to, pay and discharge all Taxes prior to the date when any interest or penalty would accrue for the nonpayment thereof. The Borrower shall furnish to the Lender at such times as the Lender may require proof satisfactory to the Lender of the making of payments or deposits required by applicable Laws including, without limitation, payments or deposits with respect to amounts withheld by the Borrower from wages and salaries of employees and amounts contributed by the Borrower on account of federal and other income or wage taxes and amounts due under the Federal Insurance Contributions Act, as amended. 6.1.10 ERISA. The Borrower will, and will cause each of its Subsidiaries and Affiliates to, comply with the funding requirements of ERISA with respect to employee pension benefit plans for its respective employees. The Borrower will not permit with respect to any employee benefit plan or plans covered by Title IV of ERISA (a) any prohibited transaction or transactions under ERISA or the Internal Revenue Code, which results, or may result, in any material liability of the Borrower and/or any Subsidiary and/or Affiliate, or (b) any Reportable Event if, upon termination of the plan or plans with respect to which one or more such Reportable Events shall have occurred, there is or would be any material liability of the Borrower and/or any Subsidiary and/or Affiliate to the PBGC. Upon the Lender's request, the Borrower will deliver to the Lender a copy of the most recent actuarial report, financial statements and annual report completed with respect to any "defined benefit plan", as defined in ERISA. 6.1.11 NOTIFICATION OF MERGERS AND ACQUISITIONS AND OWNERSHIP CHANGES. (a) The Borrower will notify and cause each of the Subsidiaries to notify the Lender not less than twenty (20) days prior to entering into any agreement of merger or agreement to acquire all or substantially all of the assets as part of an acquisition of an on-going business of any Person and will at the time of such notification provide the Lender with the following, in form and substance reasonably acceptable to the Lender: (i) a proforma balance sheet of the Borrower as of immediately after consummation of the proposed merger or acquisition; -55- 57 (ii) proforma financial projections for the three (3) year period subsequent to the consummation of the proposed merger or acquisition; (iii) a detailed calculation by a Responsible Officer of the Borrower of the financial covenants contained in this Agreement based on the balance sheet described in item (A) and the projections described in item (B), which calculations shall not show that a Default or an Event of Default on account of a failure to comply with Section shall arise at the time of or after the proposed merger or acquisition; and (iv) a certificate from that Responsible Officer that (A) the statements proforma balance sheet described in item (i) has been prepared in a manner consistent with GAAP, and fairly presents in all material respects the financial condition of the Borrower as of immediately after the consummation of the proposed merger or acquisition and that the proforma financial projections described in item (ii) represent the Borrower's good faith estimate of the future operations of the Borrower and (B) no Default or Event of Default results on account of the proposed merger or acquisition. (b) The Borrower will notify and cause each of the Subsidiaries to notify the Lender not less than twenty (20) days prior to any change in the ownership of Holding such that a Key Entity ceases to own collectively at least seventy-five percent (75%) of the voting power of Holding (determined as if all equity securities held by a Person and convertible into voting securities were so converted) entitled to vote in the election of members of the board of directors of Holding. 6.1.12 NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS. The Borrower shall promptly notify the Lender upon obtaining knowledge of the occurrence of: (a) any Event of Default; (b) any Default; (c) any litigation instituted or threatened against the Borrower or its Subsidiaries and of the entry of any judgment or Lien (other than any Permitted Liens) against any of the assets or properties of the Borrower or any Subsidiary where the claims against the Borrower or any of its Subsidiaries exceed One Million Five Hundred Thousand Dollars ($1,500,000) and are not covered by insurance; -56- 58 (d) any event, development or circumstance whereby the financial statements furnished hereunder fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operational results of the Borrower or any of its Subsidiaries; (e) any judicial, administrative or arbitral proceeding pending against the Borrower or any of its Subsidiaries and any judicial or administrative proceeding known by the Borrower to be threatened against it or any of its Subsidiaries which, if adversely decided, could materially adversely affect its financial condition or operations (present or prospective); (f) the receipt by the Borrower or any of its Subsidiaries of any notice, claim or demand from any Governmental Authority which alleges that the Borrower or any Subsidiary is in violation of any of the terms of, or has failed to comply with any applicable Laws regulating its operation and business, including, but not limited to, the Occupational Safety and Health Act and the Environmental Protection Act; and (g) any other development in the business or affairs of the Borrower and any of its Subsidiaries which may be materially adverse; in each case describing in detail reasonably satisfactory to the Lender the nature thereof and the action the Borrower proposes to take with respect thereto. 6.1.13 HAZARDOUS MATERIALS; CONTAMINATION. The Borrower agrees to: (a) give notice to the Lender immediately upon the Borrower's acquiring knowledge of the presence of any Hazardous Materials and of any Hazardous Materials Contamination on any property owned or controlled by the Borrower or for which the Borrower is, or is claimed to be, responsible (provided that such notice shall not be required for Hazardous Materials placed or stored on such property in accordance in all material respects with applicable Laws in the ordinary course (including, without limitation, quantity) of the Borrower's line of business expressly described in this Agreement) or of any Hazardous Materials Contamination, with a full description thereof; (b) promptly comply in all material respects with any Laws requiring the removal, treatment or disposal of Hazardous Materials or Hazardous Materials -57- 59 Contamination and provide the Lender with reasonably satisfactory evidence of such compliance; and (c) as part of the Obligations, defend, indemnify and hold harmless the Lender and its agents, employees, trustees, successors and assigns from any and all claims (except for those arising because of their own gross negligence or wilful misconduct) which may now or in the future (whether before or after the termination of this Agreement) be asserted as a result of the presence of any Hazardous Materials or of any Hazardous Materials Contamination on any property owned or controlled by the Borrower or for which the Borrower is, or is claimed to be, responsible. The Borrower acknowledges and agrees that this indemnification shall survive the termination of this Agreement and the Commitment and the payment and performance of all of the other Obligations. 6.1.14 DISCLOSURE OF SIGNIFICANT TRANSACTIONS. The Borrower shall deliver to the Lender a written notice describing in detail each transaction by it involving the purchase, sale, lease, or other acquisition or Casualty to or disposition or Condemnation of an interest in Fixed or Capital Assets which exceeds Two Hundred Fifty Thousand Dollars ($250,000.00), said notices to be delivered to the Lender within thirty (30) days of the occurrence of each such transaction. 6.1.15 FINANCIAL COVENANTS. (a) Fixed Charge Coverage Ratio. The Borrower will maintain, tested for each four (4) quarter period ending as of the last day of each of the Borrower's fiscal quarters commencing September 30, 1997, a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0. (b) Net Worth. The Borrower will at all times maintain, tested on the Closing Date and as of the end of each of the Borrower's fiscal quarters commencing September 30, 1997, a Net Worth of not less than the following: -58- 60 - ---------------------------------------------------------------- Period Amount - ---------------------------------------------------------------- Closing Date $15,000,000 - ---------------------------------------------------------------- The day next following the $14,500,000 Closing Date through and including June 29, 1999 - ---------------------------------------------------------------- June 30, 1999 through and $16,500,000 including June 29, 2000 - ---------------------------------------------------------------- June 30, 2000 through and $14,500,000 including June 29, 2001 - ---------------------------------------------------------------- June 30, 2001 and thereafter $16,000,000 - ---------------------------------------------------------------- 6.1.16 COLLECTION OF RECEIVABLES. Until such time that the Lender shall notify the Borrower of the revocation of such privilege following and during the continuance of an Event of Default, the Borrower and each of the Subsidiaries shall at its own expense have the privilege for the account of, and in trust for, the Lender of collecting its Receivables and receiving in respect thereto all Items of Payment and shall otherwise completely service all of the Receivables including (a) the billing, posting and maintaining of complete records applicable thereto, (b) the taking of such action with respect to the Receivables as the Lender may request or in the absence of such request, as the Borrower and each of the Subsidiaries may deem advisable; and (c) the granting, in the ordinary course of business, to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to a Receivable and may take such other actions relating to the settling of any Account Debtor's claim as may be commercially reasonable. The Lender may, at its option, at any time or from time to time after and during the continuance of an Event of Default hereunder, revoke the collection privilege given in this Agreement to the Borrower and any one or more of the Subsidiaries by either giving notice of its assignment of, and lien on the Collateral to the Account Debtors or giving notice of such revocation to the Borrower. The Lender shall not have any duty to, and the Borrower hereby releases the Lender from all claims of loss or damage caused by the delay or failure to collect or enforce any of the Receivables or to preserve any rights against any other party with an interest in the Collateral, except to the extent caused by the Lender's gross negligence or wilful misconduct of the Lender. The Lender shall be entitled at any time and from time to time to confirm and verify Receivables. 6.1.17 ASSIGNMENTS OF RECEIVABLES. Following and during the continuance of an Event of Default, the Borrower will promptly, upon request, execute and deliver to the Lender written -59- 61 assignments, in form and content acceptable to the Lender, of specific Receivables or groups of Receivables; provided, however, the Lien and/or security interest granted to the Lender under this Agreement shall not be limited in any way to or by the inclusion or exclusion of Receivables within such assignments. Receivables so assigned shall secure payment of the Obligations and are not sold to the Lender whether or not any assignment thereof, which is separate from this Agreement, is in form absolute. The Borrower agrees that neither any assignment to the Lender nor any other provision contained in this Agreement or any of the other Financing Documents shall impose on the Lender any obligation or liability of the Borrower with respect to that which is assigned and the Borrower hereby agrees to indemnify the Lender and hold the Lender harmless from any and all claims, actions, suits, losses, damages, costs, expenses, fees, obligations and liabilities (except those arising with respect to the Lender's own gross negligence or wilful misconduct) which may be incurred by or imposed upon the Lender by virtue of the assignment of and Lien on the Borrower's rights, title and interest in, to, and under the Collateral. 6.1.18 GOVERNMENT ACCOUNTS. At the request of the Lender, the Borrower will immediately notify the Lender if any of the Receivables arise out of contracts with the United States or with any other Governmental Authority, and execute any instruments and take any steps reasonably required by the Lender in order that all moneys due and to become due under such contracts shall be assigned to the Lender and notice thereof given to the Governmental Authority under the Federal Assignment of Claims Act or any other applicable Laws. 6.1.19 DEFENSE OF TITLE AND FURTHER ASSURANCES. At its expense the Borrower will defend the title to the Collateral (and any part thereof), and will immediately execute, acknowledge and deliver any financing statement, renewal, affidavit, deed, assignment, continuation statement, security agreement, certificate or other document which the Lender may reasonably require in order to perfect, preserve, maintain, continue, protect and/or extend the Lien granted to the Lender under this Agreement or under any of the other Financing Documents and the first priority of that Lien subject only to the Permitted Liens. The Borrower will from time to time do whatever the Lender may reasonably require by way of obtaining, executing, delivering, and/or filing financing statements, landlords', mortgagees' or bailees' waivers, notices of assignment and other notices and amendments and renewals thereof and the Borrower will take any and all steps and observe such formalities as the Lender may require, in order to create and maintain a valid Lien upon, pledge of, or paramount security interest in, the Collateral, subject to the Permitted Liens; provided, however, that the Lender agrees that the Borrower shall not be deemed to be in default under this sentence if, despite its continuing best reasonable efforts, a third party (such as a landlord) refuses to execute and deliver a required document; -60- 62 provided further, however, that, by so agreeing, the Lender is not waiving any rights or remedies or limiting the affect of any other provision of this Agreement (including, by way of illustration and not limitation, the existence of Liens which are not Permitted Liens). The Borrower shall pay to the Lender, upon the earlier of thirty (30) days after demand by the Lender therefor or the Revolving Credit Termination Date, all taxes, costs and expenses incurred by the Lender in connection with the preparation, execution, recording and filing of any such document or instrument. To the extent that the proceeds of any of the Accounts or Receivables of the Borrower are expected to become subject to the control of, or in the possession of, a party other than the Borrower or the Lender, the Borrower shall cause all such parties to execute and deliver on the Closing Date security documents, financing statements or other documents as requested by the Lender and as may be necessary to evidence and/or perfect the security interest of the Lender in those proceeds. The Borrower agrees that a copy of a fully executed security agreement and/or financing statement shall be sufficient to satisfy for all purposes the requirements of a financing statement as set forth in Article 9 of the applicable Uniform Commercial Code. The Borrower hereby irrevocably appoints the Lender as the Borrower's attorney-in-fact, with power of substitution, in the name of the Lender or in the name of the Borrower or otherwise, for the use and benefit of the Lender, but at the cost and expense of the Borrower and without notice to the Borrower, to execute and deliver any and all of the financing statements and other instruments which the Lender may require pursuant the foregoing provisions of this Section 6.1.19 in order to perfect or to continue the perfection of the Lender's security interests in all or any part of the Collateral. 6.1.20 BUSINESS NAMES; LOCATIONS. The Borrower will notify and cause each of the Subsidiaries to notify the Lender not less than thirty (30) days prior to (a) any change in the name under which the Borrower or the applicable Subsidiary conducts its business, (b) any change of the location of the chief executive office of the Borrower or the applicable Subsidiary, and (c) the opening of any new place of business or the closing of any existing place of business, in either case, in which the book value of the Assets located therein exceed in the aggregate $100,000, and any change in the location of the places where the Collateral, or any part thereof, or the books and records, or any part thereof, are kept. 6.1.21 SUBSEQUENT OPINION OF COUNSEL AS TO RECORDING REQUIREMENTS. In the event that the Borrower or any Subsidiary shall transfer its principal place of business or the office where it keeps its records pertaining to the Collateral, upon the Lender's request, the Borrower will provide to the Lender a subsequent opinion of counsel as to the filing, recording and other require- -61- 63 ments with which the Borrower and the Subsidiaries have complied to maintain the Lien and security interest in favor of the Lender in the Collateral. 6.1.22 USE OF PREMISES AND EQUIPMENT. The Borrower agrees that until the Obligations (other than Contingent Indemnification Obligations) are fully paid and this Agreement has been terminated, the Lender (a) after and during the continuance of a Default or an Event of Default, may use any of the Borrower's owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (b) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of the Borrower's owned or leased property. 6.1.23 PROTECTION OF COLLATERAL. The Borrower agrees that the Lender may at any time following the occurrence and during the continuance of an Event of Default take such steps as the Lender deems reasonably necessary to protect the Lender's interest in, and to preserve the Collateral, including, the hiring of such security guards or the placing of other security protection measures as the Lender deems appropriate, may employ and maintain at any of the Borrower's premises a custodian who shall have full authority to do all acts necessary to protect the Lender's interests in the Collateral and may lease warehouse facilities to which the Lender may move all or any part of the Collateral to the extent commercially reasonable. The Borrower agrees to cooperate fully with the Lender's efforts to preserve the Collateral and will take such actions to preserve the Collateral as the Lender may reasonably direct. All of the Lender's expenses of preserving the Collateral, including any reasonable expenses relating to the compensation and bonding of a custodian, shall be part of the Enforcement Costs. 6.1.24 SENIOR MANAGEMENT. The Borrower will promptly notify the Lender of changes in the Borrower's senior management. 6.1.25 APPRAISALS. On or before August 1, 1997, the Lender shall be provided with an appraisal (made on a fair market value basis) by an appraiser chosen by the Lender with respect to the Mortgaged Property and of Norman Levy Company (made on an orderly liquidation value basis) with respect to the Equipment located at the Mortgaged Property. The basis of the appraisal calculations shown on such appraisal report and all other aspects of the appraisal report must be reasonably satisfactory to the Lender in all respects. 6.1.26 Application of Net Proceeds. (a) Net Proceeds must be applied to either the payment of the Obligations or to the restoration, repair or -62- 64 replacement of the Equipment or other Fixed or Capital Asset which gave rise to the Net Proceeds. (b) In the event that, and to the extent that, Net Proceeds are to be applied to the restoration or repair of a Fixed or Capital Asset subject to the Lien of the Mortgage or other Financing Document encumbering real property, the Borrower shall so notify the Lender and the restoration or repair shall be subject to the conditions contained in Section 4.4 of the Mortgage. (c) In the event that, and to the extent that, Net Proceeds are to be applied to the replacement, restoration or repair of Equipment or other Fixed or Capital Assets, or the replacement of Equipment or other Fixed or Capital Assets, the Borrower shall so notify the Lender, such replacement, restoration or repair shall be promptly undertaken, diligently pursued and, to the extent reasonably practicable, completed no later than one (1) year following a Borrower's receipt of such Net Proceeds. Until so used, such Net Proceeds shall be applied to and reserved against future advances under, the Revolving Loan. (d) In the event that, and to the extent that, Net Proceeds are not used as provided in subparagraphs (b) or (c) above, such unused Net Proceeds shall be paid to the Lender and applied by the Lender to, or held as additional security for, the Obligations. (e) Notwithstanding the foregoing, in the event the Lender reasonably determines that a Casualty or Condemnation could reasonably be expected to result in an Event of Default under Section 6.1.15 of this Agreement, the Lender shall so notify the Borrower and five (5) Business Days thereafter Net Proceeds shall be applied to, or held as additional security for, the Obligations in such order and manner of application as the Lender may from time to time in its sole and absolute discretion determine. SECTION 6.2 NEGATIVE COVENANTS. So long as any of the Obligations (other than Contingent Indemnification Obligations) or the Commitment shall be outstanding hereunder, the Borrower agrees with the Lender as follows: 6.2.1 MERGER, ACQUISITION OR SALE OF ASSETS. The Borrower will not enter into any merger or consolidation or amalgamation, windup or dissolve itself (or suffer any liquidation or dissolution) or acquire all or substantially all the assets of any Person (unless in the case of a merger or acquisition, other than a Permitted Acquisition with respect to which the Borrower has complied with Section 6.1.11(a) and is the survivor in the case of a merger), or make any Asset Disposition other than Permitted Asset Dispositions made at time when no Event of Default is continuing. -63- 65 Any required consent to an Asset Disposition other than a Permitted Asset Disposition may be conditioned on a specified use of the Net Proceeds generated by such Asset Disposition. 6.2.2 PURCHASE OR REDEMPTION OF SECURITIES, DIVIDEND RESTRICTIONS. The Borrower will not make any payment or take any action which would be a Restricted Payment, other than those which are permitted under Section 4.09 of the Indenture on the Closing Date, except that payments or actions which would result in a Default or an Event of Default under any provision of this Agreement (other than this Section) or under any of the other Financing Documents, shall not be permitted notwithstanding any provision of Section 4.09 of the Indenture. 6.2.3 INDEBTEDNESS. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness for Borrowed Money, or permit any Subsidiary so to do, except: (a) the Obligations; (b) Indebtedness of a Subsidiary to a Borrower; (c) Indebtedness represented by the Senior Notes; (d) Indebtedness secured by Permitted Liens; (e) Subordinated Indebtedness; (f) Indebtedness of the Borrower existing on the date hereof and reflected on the financial statements furnished pursuant to Section 4.1.11 (Financial Condition); and (g) other Indebtedness not exceeding $500,000 in the aggregate and not secured by any Lien. 6.2.4 INVESTMENTS, LOANS AND OTHER TRANSACTIONS. Except as otherwise provided in this Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, (a) make, assume, acquire or continue to hold any investment in any realproperty (unless used in connection with its business and treated as a Fixed or Capital Asset of the Borrower or the Subsidiary) or any Person, whether by stock purchase, capital contribution, acquisition of indebtedness of such Person or otherwise (including, without limitation, investments in any joint venture or partnership), (b) guaranty or otherwise become contingently liable for the indebtedness or obligations of any -64- 66 Person, or (c) make any loans or advances, or otherwise extend credit to any Person, except: (a) any advance to an officer of the Borrower or of any Subsidiary for travel or other business expenses in the ordinary course of business, provided that the aggregate amount of all such advances by the Borrower and its Subsidiaries (taken as a whole) outstanding at any time shall not exceed Two Hundred Fifty Thousand Dollars ($250,000); (b) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (c) any investment in Cash Equivalents in the ordinary course of business; (d) trade credit extended to customers in the ordinary course of business; (e) those investments, if any, more particularly set forth in SCHEDULE 6.2.4 attached hereto and made a part hereof; (f) Unsecured letters of credit, bankers' acceptances and/or unsecured interest rate protection agreements between a Borrower and any other financial institution reasonably acceptable to the Lender, providing for the transfer or mitigation of foreign exchange risks or interest rate risks either generally or under specific contingencies; (g) advances and loans to officers and employees of any Borrower to enable such officers and employees to purchase stock issued by one or more of the Borrowers in the ordinary course of business, provided that the aggregate amount of all such advances and loans by all of the Borrowers (taken as a whole) outstanding at any time shall not exceed Five Hundred Thousand Dollars ($500,000); (h) deposits or pledges to secure obligations under leases in the ordinary course of business; (i) Securities acquired by and issued to the Borrower in connection with the reorganization or bankruptcy of any of its Account Debtors or suppliers; provided that the Lender is granted a first priority perfected Lien on and security interest in such Securities; (j) Securities acquired by and issued to the Borrower as part of the closing and consummation of a Permitted Asset Disposition; provided that the Lender is -65- 67 granted a first priority perfected Lien on and security interest in such Securities; (k) loans by the Borrower, not to exceed $700,000 in the aggregate, to Holding to be paid by Holding to cover a portion of the income tax liability of the holders of Holding's Class C shares as a result of those holders' election under Section 83(b) of the Internal Revenue Code with respect to those shares; and (l) Permitted Acquisitions in an aggregate amount not to exceed at any time One Million Five Hundred Thousand Dollars ($1,500,000). 6.2.5 SUBORDINATED INDEBTEDNESS. The Borrower will not, and will not permit any Subsidiary to make: (a) any payment of principal of, or interest on, any of the Subordinated Indebtedness, if a Default or an Event of Default then exists hereunder or would result from such payment; (b) any payment of the principal or interest due on the Subordinated Indebtedness as a result of acceleration thereunder or a mandatory prepayment thereunder; (c) any material amendment or modification of or supplement to the documents evidencing or securing the Subordinated Indebtedness; or (d) payment of principal or interest on the Subordinated Indebtedness other than when due (without giving effect to any acceleration of maturity or mandatory prepayment). 6.2.6 LIENS; CONFESSED JUDGMENT. The Borrower agrees that it (a) will not create, incur, assume or suffer to exist any Lien upon any of its properties or assets, whether now owned or hereafter acquired, or permit any Subsidiary so to do, except for Liens securing the Obligations and Permitted Liens, (b) will not agree to, assume or suffer to exist any provision in any instrument or other document for confession of judgment, cognovit or other similar right or remedy, except that, with respect to the items covered in the definition of Permitted Liens, a Lien superior to the Liens securing all or any part of the Obligations may exist (i) under item (a) of that definition, only for Liens for real and personal property taxes, items (b), (c), (e), (g), (h), (i), (j), (k), (m) and (ii) for no Liens under items (d) or (l) of that definition, (iii) only for possessory Liens arising under item (f) of that definition, and (iv) to no Liens under item (n) of that definition except to the extent the same is expressly identified as superior on Schedule 1.1 (Permitted Liens), provided, however, by -66- 68 agreeing that a Lien may have priority, the Lender shall not be deemed to have conceded that such Lien in fact is entitled to or has priority or to have waived or subordinated, or to be estopped from asserting, the priority of the Lender's Liens, (d) will not enter into any contracts for the consignment of goods to the Borrower, (e) will not execute or suffer the filing of any financing statements or the posting of any signs giving notice of consignments to the Borrower, (f) will not, as a material part of its business, engage in the sale of goods belonging to others, and (g) will not allow or suffer to exist the failure of any Lien described in the Security Documents to attach to, and/or remain at all times perfected on, any of the property described in the Security Documents. 6.2.7 TRANSACTIONS WITH AFFILIATES. The Borrower and its Subsidiaries will not enter into or participate in any transaction with any Affiliate other than (a) an advisory fee payable to Key Equity Capital Corporation, which will not exceed $250,000 in any twelve-month period and which shall not be paid at any time during which there shall exist a Default or Event of Default under Section 7.1.1, or under Section 7.1.3 on account of the Borrower's failure to comply with Section 6.1.1 or 6.1.15; or (b) transactions (other than transactions which involve Indebtedness for Borrowed Money or which would constitute a Default or an Event of Default under this Agreement) in the ordinary course of business of the Borrower and such Affiliate upon terms no less favorable to the Borrower than the Borrower could obtain in a comparable arm's-length transaction; (c) provided there shall exist and there shall be caused no Default or Event of Default, payment to Holding to cover the reasonable and necessary expenses incurred by Holding on account of the Borrower (for example, accounting fees incurred in the preparation of Holding's consolidated financial statements); and (d) payment to Holding to cover cash Taxes to be paid immediately by Holding on account of the Borrower's income being reported by Holding on a consolidated basis. 6.2.8 PROHIBITION ON HAZARDOUS MATERIALS. The Borrower shall not place, manufacture or store or permit to be placed, manufactured or stored any Hazardous Materials on any property owned, operated or controlled by the Borrower or for which the Borrower is responsible other than Hazardous Materials placed or stored on such property in accordance with applicable Laws in the ordinary course, the violation of which would reasonably be expected to have a Material Adverse Effect. 6.2.9 METHOD OF ACCOUNTING; FISCAL YEAR. (a) The Borrower shall not change the method of accounting employed in the preparation of any financial statements furnished to the Lender under the provisions of Section (Financial Statements) of this Agreement, unless required to conform to GAAP and on the condition that the Borrower's -67- 69 accountants shall furnish such information as the Lender may request to reconcile the changes with the Borrower's prior financial statements. (b) The Borrower will not change its fiscal year from a year ending on June 30. 6.2.10 COMPENSATION. Except as permitted by Section 6.2.7, neither the Borrower nor any of its Subsidiaries will pay any bonuses, fees, compensation, commissions, salaries, drawing accounts, or other payments (cash and non-cash), whether direct or indirect, to any stockholders of the Borrower or its Subsidiaries, or any Affiliate of the Borrower or its Subsidiaries, other than reasonable compensation for actual services rendered by stockholders in their capacity as officers or employees of the Borrower. 6.2.11 TRANSFER OF COLLATERAL. Unless the Borrower has complied with Section 6.1.19 and Section 6.1.20, the Borrower and the Subsidiaries will not transfer, or permit the transfer, to another location of any of the Collateral or the books and records related to any of the Collateral. 6.2.12 INVENTORY. With respect to the Inventory with an aggregate fair market value of greater than $500,000, the Borrower and the Subsidiaries will not store any of its Inventory with a consignee, bailee, warehouseman or similar Person without prior written notice to the Lender. ARTICLE 7 DEFAULT AND RIGHTS AND REMEDIES SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default" under the provisions of this Agreement: 7.1.1 FAILURE TO PAY. The failure of the Borrower to pay any of the Obligations as and when due and payable in accordance with the provisions of this Agreement, the Notes and/or any of the other Financing Documents and, except in the case of the failure make any payment of principal and in the case of the failure to pay any Obligation at its maturity (whether by acceleration or otherwise) or when due on demand, such failure continues uncured for a period of five (5) Business Days. 7.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or warranty made in this Agreement or in any report, statement, schedule, certificate, financial statement or other document furnished in connection with this Agreement, any of the other Financing Documents, or the Obligations, shall prove -68- 70 to have been false or misleading when made (or, if applicable, when reaffirmed) in any material respect. 7.1.3 FAILURE TO COMPLY WITH COVENANTS. The failure of the Borrower to perform, observe or comply with any covenant, condition or agreement contained in this Agreement and, (i) only with respect to a failure under Section (a) through (e), such failure continues uncured for a period of five (5) days after notice thereof from the Lender to the Borrower, or (ii) only with respect to a failure under Sections 6.1.2(a) (Recordkeeping), 6.1.3 (Corporate Existence), 6.1.5(a) (Preservation of Properties), or Section 6.1.9 (Taxes) which does not relate to Taxes due or claimed to be due in excess of $250,000 in the aggregate, if the Borrower after discovering such failure, fails to diligently and continuously pursue the cure of such failure or such failure continues uncured thirty (30) days after discovery. 7.1.4 DEFAULT UNDER OTHER FINANCING DOCUMENTS OR OBLIGATIONS. A default shall occur under any of the other Financing Documents or under any other Obligations, and such default is not cured within any applicable grace period provided therein. 7.1.5 RECEIVER; BANKRUPTCY. The Borrower or any Subsidiary shall (a) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or any of its property, (b) admit in writing its inability to pay its debts as they mature, (c) make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition or an answer seeking or consenting to reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or take corporate action for the purposes of effecting any of the foregoing, or (f) by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of its property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a period of sixty (60) days, or (g) by any act indicate its consent to, approval of or acquiescence in any order, judgment or decree by any court of competent jurisdiction or any Governmental Authority enjoining or otherwise prohibiting the operation of a material portion of the Borrower's or any Subsidiary's business or the use or disposition of a material portion of the Borrower's or any Subsidiary's assets. 7.1.6 INVOLUNTARY BANKRUPTCY, ETC. (a) An order for relief shall be entered in any involuntary case brought against the Borrower or any Subsidiary under the Bankruptcy Code, or (b) -69- 71 any such case shall be commenced against the Borrower or any Subsidiary and shall not be dismissed within sixty (60) days after the filing of the petition, or (c) an order, judgment or decree under any other Law is entered by any court of competent jurisdiction or by any other Governmental Authority on the application of a Governmental Authority or of a Person other than the Borrower or any Subsidiary (i) adjudicating the Borrower, or any Subsidiary bankrupt or insolvent, or (ii) appointing a receiver, trustee or liquidator of the Borrower or of any Subsidiary, or of a material portion of the Borrower's or any Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise limiting the operation of a material portion of the Borrower's or any Subsidiary's business or the use or disposition of a material portion of the Borrower's or any Subsidiary's assets, and such order, judgment or decree continues unstayed and in effect for a period of thirty (30) days from the date entered. 7.1.7 JUDGMENT. Unless adequately insured in the opinion of the Lender, the entry of a final judgment for the payment of money involving more than $1,500,000 against the Borrower or any Subsidiary, and the failure by the Borrower or such Subsidiary to discharge the same, or cause it to be discharged, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, or to secure a stay of execution pending appeal of such judgment. 7.1.8 EXECUTION; ATTACHMENT. Any execution or attachment, if together with all other existing executions or attachments aggregates more than $1,500,000, shall be levied against the Collateral, or any part thereof, and such execution or attachment shall not be set aside, discharged or stayed within thirty (30) days after the same shall have been levied. 7.1.9 DEFAULT UNDER OTHER BORROWINGS. Default shall be made with respect to any Indebtedness for Borrowed Money (other than the Loans) in the aggregate in excess of $1,500,000 if the effect of such default is to accelerate the maturity of such Indebtedness for Borrowed Money or to permit the holder or obligee thereof or other party thereto to cause any such Indebtedness for Borrowed Money to become due prior to its stated maturity, except that to the extent Indebtedness for Borrowed Money arises under item (d) of that term with respect to security interests in favor of the Borrower's customers to secure amounts which the customer paid to Borrower as a deposit or progress payment for the manufacture of identified equipment, the Borrower shall not be deemed to be in default under this Section 7.1.9 so long as such customer's claims (i) are being diligently contested (by way of assertions of offsets or otherwise) by the Borrower in good faith and by appropriate proceedings, and (ii) no Lien (other than a Permitted Lien), injunction or other restraining order has been obtained by such customer. -70- 72 7.1.10 CHALLENGE TO AGREEMENTS. The Borrower or any guarantor of any Obligations shall challenge the validity and binding effect of any provision of any of the Financing Documents or shall state its intention to make such a challenge of any of the Financing Documents or any of the Financing Documents shall for any reason (except to the extent permitted by its express terms) cease to be effective or to create a valid and perfected first priority Lien (except for Permitted Liens) on, or security interest in, any of the Collateral purported to be covered thereby. 7.1.11 MATERIAL ADVERSE CHANGE. If the Lender reasonably determines that an event which has a Material Adverse Effect has occurred, notifies the Borrower of that determination and such condition continues unremedied to the reasonable satisfaction of the Lender for thirty (30) days after such notice. 7.1.12 CHANGE IN CONTROL. If there shall occur a "change of control," meaning any event or circumstance upon which (a) Holding ceases to own one hundred percent (100%) (minus no more than forty-nine percent (49.9%) of the capital stock granted to management of the Borrower as compensation for services) of the capital stock of the Borrower, or (b) Key Equity Capital Corporation, Key Equity Partners 97 or any other Person wholly owned by Key Corp. (a "Key Entity") ceases to own collectively at least fifty and one-tenth percent (50.1%) of the voting power of Holding (determined as if all equity securities convertible into voting securities were so converted) entitled to vote in the election of members of the board of directors of Holding; PROVIDED, that a "change of control" shall not be deemed to have occurred hereunder upon any transfer of all of the debt and equity securities of Holding owned by the Key Entities to any Person if (i) at least a majority of the voting power and equity interests in such Person is owned by at least a majority of the officers (including all members of the Board of Directors of Holding designated by Key Equity Capital Corporation) of Key Equity Capital Corporation at the time of such transfer, (ii) such Person has at least $50,000,000 in cash funds available for investment and (iii) such Person is under no contractual restriction (whether pursuant to its governing documents or otherwise) to make further investments in Holding or its subsidiaries. 7.1.13 LIQUIDATION, TERMINATION, DISSOLUTION, ETC. The Borrower shall liquidate, dissolve or terminate its existence or shall suspend or terminate a substantial portion of its business operations. SECTION 7.2 REMEDIES. Upon the occurrence of and during the continuance of an Event of Default, the Lender may at any time thereafter exercise any one or more of the following rights, powers or remedies: -71- 73 7.2.1 ACCELERATION. The Lender may declare the Obligations to be immediately due and payable, notwithstanding anything contained in this Agreement or in any of the other Financing Documents to the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other notice of any kind, all of which the Borrower hereby waives. 7.2.2 FURTHER ADVANCES. The Lender may from time to time without notice to the Borrower suspend, terminate or limit any further loans or other extensions of credit under this Agreement and under any of the other Financing Documents. Further, upon the occurrence of an Event of Default or Default specified in Sections 7.1.5 (Receiver; Bankruptcy) or 7.1.6 (Involuntary Bankruptcy, etc.) above, the Revolving Credit Commitment and any agreement in any of the Financing Documents to provide additional credit shall immediately and automatically terminate and the unpaid principal amount of the Notes (with accrued interest thereon) and all other Obligations then outstanding, shall immediately become due and payable without further action of any kind and without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower. Upon termination of the Revolving Credit Facility, the outstanding principal balance under the Revolving Loan, and any accrued and unpaid interest thereon, shall be immediately due and payable, and the Lender shall not make any further advances under the Revolving Loan, unless it elects to do so in the exercise of its sole and absolute discretion. 7.2.3 UNIFORM COMMERCIAL CODE. The Lender shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code and other applicable Laws. Upon demand by the Lender, the Borrower shall assemble the Collateral and make it available to the Lender, at a place designated by the Lender. The Lender or its agents may without notice from time to time enter upon the Borrower's premises to take possession of the Collateral, to remove it, to render it unusable, to process it or otherwise prepare it for sale, or to sell or otherwise dispose of it. Any written notice of the sale, disposition or other intended action by the Lender with respect to the Collateral which is sent by regular mail, postage prepaid, to the Borrower at the address set forth in Section 8.1 of this Agreement, or such other address of the Borrower which may from time to time be shown on the Lender's records, at least ten (10) days prior to such sale, disposition or other action, shall constitute commercially reasonable notice to the Borrower. The Lender may alternatively or additionally give such notice in any other commercially reasonable manner. Nothing in this Agreement shall require the Lender to give any notice not required by applicable Laws. -72- 74 If any consent, approval, or authorization of any state, municipal or other governmental department, agency or authority or of any person, or any person, corporation, partnership or other entity having any interest therein, should be necessary to effectuate any sale or other disposition of the Collateral, the Borrower agrees to execute all such applications and other instruments, and to take all other action, as may be required in connection with securing any such consent, approval or authorization. The Borrower recognizes that the Lender may be unable to effect a public sale of all or a part of the Collateral consisting of securities by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and other applicable federal and state Laws. The Lender may, therefore, in its discretion, take such steps as it may deem appropriate to comply with such Laws and may, for example, at any sale of the Collateral consisting of securities restrict the prospective bidders or purchasers as to their number, nature of business and investment intention, including, without limitation, a requirement that the Persons making such purchases represent and agree to the satisfaction of the Lender that they are purchasing such securities for their account, for investment, and not with a view to the distribution or resale of any thereof. The Borrower covenants and agrees to do or cause to be done promptly all such acts and things as the Lender may request from time to time and as may be necessary to offer and/or sell the securities or any part thereof in a manner which is valid and binding and in conformance with all applicable Laws. Upon any such sale or disposition, the Lender shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral consisting of securities so sold. 7.2.4 THE COLLATERAL ACCOUNT. If the Lender shall direct in the exercise of its sole and absolute discretion, the Borrower will deposit, or cause to be deposited, all Items of Payment to a bank account designated by the Lender and from which the Lender alone has power of access and withdrawal (the "Collateral Account"). Each deposit shall be made not later than the next Business Day after the date of receipt of the Items of Payment. The Items of Payment shall be deposited in precisely the form received, except for the endorsements of the Borrower where necessary to permit the collection of any such Items of Payment, the Borrower hereby agreeing to make such endorsement. In the event the Borrower shall fail to do so, the Lender is hereby authorized by the Borrower to make the endorsement in the name of the Borrower. Prior to such a deposit, the Borrower will not commingle any Items of Payment with any of the other funds or property of the Borrower, but will hold them separate and apart in trust and for the account of the Lender. In addition, if so directed by the Lender in the exercise of its sole and absolute discretion, the Borrower shall direct the -73- 75 mailing of all Items of Payment from its Account Debtors to a post-office box designated by the Lender, or to such other additional or replacement post-office boxes pursuant to the request of the Lender from time to time (collectively, the "Lockbox"). The Lender shall have unrestricted and exclusive access to the Lockbox. The Borrower hereby authorizes the Lender to inspect all Items of Payment, endorse all Items of Payment in the name of the Borrower, and deposit Items of Payment in the Collateral Account. The Lender reserves the right, exercised in its sole and absolute discretion from time to time, to provide to the Collateral Account credit prior to final collection of an Item of Payment and to disallow credit for any Item of Payment which is unsatisfactory to the Lender. In the event Items of Payment are returned to the Lender for any reason whatsoever, the Lender may, in the exercise of its discretion from time to time, forward such Items of Payment a second time. Any returned Items of Payment shall be charged back to the Collateral Account, the Revolving Loan Account, or other account, as appropriate. The Lender will apply the whole or any part of the collected funds credited to the Collateral Account against the Revolving Loan (or with respect to Items of Payment which are not proceeds of accounts or inventory or after an Event of Default, against any of the Obligations) or credit such collected funds to the depository account of the Borrower with the Lender (or an Affiliate of the Lender), the order and method of such application to be in the sole discretion of the Lender. 7.2.5 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL. In addition to all other rights and remedies provided hereunder or as shall exist at law or in equity from time to time, the Lender may (but shall be under no obligation to), without notice to the Borrower, and the Borrower hereby irrevocably appoints the Lender as its attorney-in-fact, with power of substitution, in the name of the Lender or in the name of the Borrower or otherwise, for the use and benefit of the Lender, but at the cost and expense of the Borrower and without notice to the Borrower: (a) request any account debtor obligated on any of the Accounts to make payments thereon directly to the Lender, with the Lender taking control of the cash and non-cash proceeds thereof; (b) compromise, extend or renew any of the Collateral or deal with the same as it may deem advisable; (c) make exchanges, substitutions or surrenders of all or any part of the Collateral; -74- 76 (d) copy, transcribe, or remove from any place of business of the Borrower or any Subsidiary all books, records, ledger sheets, correspondence, invoices and documents, relating to or evidencing any of the Collateral or without cost or expense to the Lender, make such use of the Borrower's or any Subsidiary's place(s) of business as may be reasonably necessary to administer, control and collect the Collateral; (e) repair, alter or supply goods if necessary to fulfill in whole or in part the purchase order of any Account Debtor; (f) demand, collect, receipt for and give renewals, extensions, discharges and releases of any of the Collateral; (g) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral; (h) settle, renew, extend, compromise, compound, exchange or adjust claims in respect of any of the Collateral or any legal proceedings brought in respect thereof; (i) endorse or sign the name of the Borrower upon any Items of Payment, certificates of title, Instruments, Securities, stock powers, documents, documents of title, financing statements, assignments, notices, or other writing relating to or part of the Collateral and on any Proof of Claim in Bankruptcy against an Account Debtor; (j) notify the Post Office authorities to change the address for the delivery of mail to the Borrower to such address or Post Office Box as the Lender may designate and receive and open all mail addressed to the Borrower; and (k) take any other action necessary or beneficial to realize upon or dispose of the Collateral or to carry out the terms of this Agreement. 7.2.6 APPLICATION OF PROCEEDS. Any proceeds of sale or other disposition of the Collateral will be applied by the Lender to the payment of the Enforcement Costs, and any balance of such proceeds will be applied by the Lender to the payment of the balance of the Obligations in such order and manner of application as the Lender may from time to time in its sole and absolute discretion determine. If the sale or other disposition of the Collateral fails to fully satisfy the Obligations, the Borrower shall remain liable to the Lender for any deficiency, except as applicable Laws provide otherwise. -75- 77 7.2.7 PERFORMANCE BY LENDER. Upon the occurrence and continuation of an Event of Default, the Lender without notice to or demand upon the Borrower and without waiving or releasing any of the Obligations or any Default or Event of Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Borrower, and may enter upon the premises of the Borrower for that purpose and take all such action thereon as the Lender may consider necessary or appropriate for such purpose and the Borrower hereby irrevocably appoints the Lender as its attorney-in-fact to do so, with power of substitution, in the name of the Lender or in the name of the Borrower or otherwise, for the use and benefit of the Lender, but at the cost and expense of the Borrower and without notice to the Borrower. All sums so paid or advanced by the Lender together with interest thereon from the date of payment, advance or incurring until paid in full at the Post-Default Rate and all costs and expenses, shall be deemed part of the Enforcement Costs, shall be paid by the Borrower to the Lender on demand, and shall constitute and become a part of the Obligations. 7.2.8 OTHER REMEDIES. The Lender may from time to time proceed to protect or enforce its rights by an action or actions at law or in equity or by any other appropriate proceeding, whether for the specific performance of any of the covenants contained in this Agreement or in any of the other Financing Documents, or for an injunction against the violation of any of the terms of this Agreement or any of the other Financing Documents, or in aid of the exercise or execution of any right, remedy or power granted in this Agreement, the Financing Documents, and/or applicable Laws. The Lender is authorized to offset and apply to all or any part of the Obligations all moneys, credits and other property of any nature whatsoever of the Borrower now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with, the Lender. 7.2.9 EXERCISE OF REMEDIES. Notwithstanding any provision of this Agreement to the contrary, the Lender acknowledges and agrees that the rights and remedies under SECTION 7.2 may only be exercised upon the occurrence of and during the continuance of an Event of Default. ARTICLE 8 MISCELLANEOUS SECTION 8.1 NOTICES. All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the -76- 78 Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows: Borrower: with a copy to: Key Equity 127 Public Square 6th Floor Cleveland, Ohio 44144 Attention: Sean P. Ward with a copy to: Baker & Hostetler 3200 National City Center 1900 East 9th Street Cleveland, Ohio 44114-3485 Attention: R. Steven Kestner, Esquire Lender: NationsBank, N.A. NationsBank Business Credit 100 South Charles Street MD4-325-04-14 Baltimore, Maryland 21201 Attention: Melba B. Quizon with a copy to: Frederick W. Runge, Jr., Esquire Miles & Stockbridge 10 Light Street Baltimore, Maryland 21202 By written notice, each party to this Agreement may change the address to which notice is given to that party, provided that such changed notice shall include a street address to which notices may be delivered by overnight courier in the ordinary course on any Business Day. SECTION 8.2 AMENDMENTS; WAIVERS. This Agreement and the other Financing Documents may not be amended, modified, or changed in any respect except by an agreement in writing signed by the Lender and the Borrower. No waiver of any provision of this Agreement or of any of the other Financing Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing. No course of dealing between the Borrower and the Lender and no act or failure to act from time to time on the part of the Lender shall constitute a waiver, amendment or modification of any provision of this -77- 79 Agreement or any of the other Financing Documents or any right or remedy under this Agreement, under any of the other Financing Documents or under applicable Laws. Without implying any limitation on the foregoing: (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as the Lender may specify in any such instrument. (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto. (c) No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in the same, similar or other circumstance. (d) No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude the Lender from exercising any such right, power or remedy at any time or times. (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a default for failure to effect such prompt payment of any such other amount. SECTION 8.3 CUMULATIVE REMEDIES. The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as the Lender shall determine and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle the Lender to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing, the Lender may: (a) proceed against the Borrower with or without proceeding against any Person who may be liable (by endorsement, guaranty, indemnity or otherwise) for all or any part of the Obligations; -78- 80 (b) proceed against the Borrower with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations; (c) without reducing or impairing the obligation of the Borrower and without notice, release or compromise with any guarantor or other Person liable for all or any part of the Obligations under the Financing Documents or otherwise; (d) without reducing or impairing the obligations of the Borrower and without notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral, (ii) approve the making of advances under the Revolving Loan under this Agreement, (iii) waive any provision of this Agreement or the other Financing Documents, (iv) exercise or fail to exercise rights of set-off or other rights, or (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations. SECTION 8.4 SEVERABILITY. In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action: (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby; (b) the obligation to be fulfilled shall be reduced to the limit of such validity; (c) if such provision or part thereof pertains to repayment of the Obligations, then, at the sole and absolute discretion of the Lender, all of the Obligations of the Borrower to the Lender shall become immediately due and payable; and (d) if the affected provision or part thereof does not pertain to repayment of the Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or in part, then such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect. SECTION 8.5 ASSIGNMENTS BY LENDER. The Lender may sell, assign or transfer (x) to any Person at any time with the prior written consent of the Borrower, which consent shall not be -79- 81 unreasonably delayed or withheld, or (y) if there shall exist an Event of Default, to any Person without notice to or the consent of the Borrower, all or any part of the Obligations, and each such Person or Persons shall have the right to enforce the provisions of this Agreement and any of the other Financing Documents as fully as the Lender, provided that the Lender shall continue to have the unimpaired right to enforce the provisions of this Agreement and any of the other Financing Documents as to so much of the Obligations that the Lender has not sold, assigned or transferred. SECTION 8.6 PARTICIPATIONS BY LENDER. The Lender may at any time sell participating interests in any of the Lender's Obligations or Commitments; provided, however, that (a) no such participation shall relieve the Lender from its obligations under this Agreement or under any of the other Financing Documents to which it is a party, (b) the Lender shall remain solely responsible for the performance of its obligations under this Agreement and under all of the other Financing Documents to which it is a party, (c) the Borrower shall continue to deal solely and directly with such Lender in connection with the Lender's rights and obligations under this Agreement and the other Financing Documents, and (d) unless there shall exist an Event of Default at the time of sale, the purchaser shall be a Financial Institution or an affiliate of a Financial Institution. SECTION 8.7 DISCLOSURE OF INFORMATION BY LENDER. Each of the Lender, each assignee of and participant in the Commitment hereby (a) acknowledges that each of the Borrower and its Subsidiaries have trade secrets and financial, marketing and other data and information the confidentiality of which is important to its business and (b) agrees to keep confidential (i) any trade secret of the Borrower and its Subsidiaries and (ii) any financial, marketing and other data and information of the Borrower or any of its Subsidiaries designated by it as confidential or that such Lender knows is confidential, PROVIDED that this Section shall not preclude any Lender from furnishing any such trade secret, data or information (i) as may be required by order of any court of competent jurisdiction or requested by any governmental agency having any regulatory authority over that Lender or its securities, (ii) to any other party to this Agreement, (iii) to any actual or prospective transferee (so long as such prospective transferee is a financial institution) of all or part of that Lender's rights arising out of or in connection with this Agreement so long as such prospective transferee to whom disclosure is made agrees to be bound by the provisions of this Section 9.7, (iv) to anyone if it shall have been already publicly disclosed (other than by that Lender in contravention of this Section 9.7, (v) to the extent reasonably required in connection with the exercise of any right or remedy under this Agreement or applicable Laws and (vi) to that Lender's legal counsel, auditors and accountants. -80- 82 SECTION 8.8 SUCCESSORS AND ASSIGNS. This Agreement and all other Financing Documents shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender. SECTION 8.9 CONTINUING AGREEMENTS. All covenants, agreements, representations and warranties made by the Borrower in this Agreement, in any of the other Financing Documents, and in any certificate delivered pursuant hereto or thereto shall survive the making by the Lender of the Loans and the execution and delivery of the Notes, shall be binding upon the Borrower regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon the Lender's request, and as a condition of the release of any one or more of the Security Documents, the Borrower and other Persons obligated with respect to the Obligations shall provide the Lender with such acknowledgments and agreements as the Lender may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against the Lender, its agents and others, or to the extent there are, the same are waived and released. SECTION 8.10 ENFORCEMENT COSTS. The Borrower shall pay to the Lender on demand all Enforcement Costs, together with interest thereon from the date incurred or advanced until paid in full at a per annum rate of interest equal at all times to the Post-Default Rate. Enforcement Costs shall be immediately due and payable at the time advanced or incurred, whichever is earlier. Without implying any limitation on the foregoing, the Borrower shall pay, as part of the Enforcement Costs, upon demand any and all stamp and other Taxes and fees payable or determined to be payable in connection with the execution and delivery of this Agreement and the other Financing Documents and to save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any Taxes or fees referred to in this Section. The provisions of this Section shall survive the execution and delivery of this Agreement, the repayment of the other Obligations and shall survive the termination of this Agreement. SECTION 8.11 APPLICABLE LAW; JURISDICTION. 8.11.1 As a material inducement to the Lender to enter into this Agreement, the Borrower acknowledges and agrees that the Financing Documents, including, this Agreement, shall be governed by the Laws of the State, as if each of the Financing Documents and this Agreement had each been executed, delivered, administered and performed solely within the State even though for -81- 83 the convenience and at the request of the Borrower, one or more of the Financing Documents may be executed elsewhere. The Lender acknowledges, however, that remedies under certain of the Financing Documents which relate to property outside the State may be subject to the laws of the state in which the property is located. 8.11.2 The Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Financing Documents. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that 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. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction, by a suit upon such judgment, PROVIDED that service of process is effected upon the Borrower in one of the manners specified in this Section or as otherwise permitted by applicable Laws. 8.11.3 The Borrower hereby irrevocably designates and appoints The Corporation Trust, Incorporated, 32 South Street, Baltimore, Maryland 21202, as the Borrower's authorized agent to receive on the Borrower's behalf service of any and all process that may be served in any suit, action or proceeding of the nature referred to in this Section in any state or federal court sitting in the State. If such agent shall cease so to act, the Borrower shall irrevocably designate and appoint without delay another such agent in the State satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such other agent's acceptance of such appointment and its agreement that such appointment shall be irrevocable. 8.11.4 The Borrower hereby consents to process being served in any suit, action or proceeding of the nature referred to in this Section by (a) the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to the Borrower at the Borrower's address designated in or pursuant to Section hereof, and (b) serving a copy thereof upon the agent, if any, designated and appointed by the Borrower as the Borrower's agent for service of process by or pursuant to this Section. The Borrower irrevocably agrees that such service (y) shall be deemed in every respect effective service of process upon the Borrower in any such suit, action or proceeding, and (z) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon the Borrower. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender other- -82- 84 wise to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions. SECTION 8.12 DUPLICATE ORIGINALS AND COUNTERPARTS. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. SECTION 8.13 HEADINGS. The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. SECTION 8.14 NO AGENCY. Nothing herein contained shall be construed to constitute the Borrower as the Lender's agent for any purpose whatsoever or to permit the Borrower to pledge any of the Lender's credit. The Lender shall not be responsible nor liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. The Lender shall not, by anything herein or in any of the Financing Documents or otherwise, assume any of the Borrower's obligations under any contract or agreement assigned to the Lender, and the Lender shall not be responsible in any way for the performance by the Borrower of any of the terms and conditions thereof. SECTION 8.15 DATE OF PAYMENT. Should the principal of or interest on any of the Notes become due and payable on other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and in the case of principal, interest shall be payable thereon at the rate per annum specified in the Notes during such extension. SECTION 8.16 ENTIRE AGREEMENT. This Agreement is intended by the Lender and the Borrower to be a complete, exclusive and final expression of the agreements contained herein. Neither the Lender nor the Borrower shall hereafter have any rights under any prior agreements pertaining to the matters addressed by this Agreement but shall look solely to this Agreement for definition and determination of all of their respective rights, liabilities and responsibilities under this Agreement. SECTION 8.17 WAIVER OF TRIAL BY JURY. THE BORROWER AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. -83- 85 This waiver is knowingly, willingly and voluntarily made by the Borrower and the Lender, and the Borrower and the Lender hereby represent that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrower and the Lender further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel. SECTION 8.18 LIABILITY OF THE LENDER. The Borrower hereby agrees that the Lender shall not be chargeable for any negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by the Lender in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations. By inspecting the Collateral or any other properties of the Borrower or by accepting or approving anything required to be observed, performed or fulfilled by the Borrower or to be given to the Lender pursuant to this Agreement or any of the other Financing Documents, the Lender shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by the Lender. IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this Agreement under their respective seals as of the day and year first written above. WITNESS: NATIONSBANK, N.A. /s/ Sean P. Ward By: /s/ Joseph J. Virzi (SEAL) - ------------------------- ---------------------------- Joseph J. Virzi Vice President WITNESS: GLASSTECH, INC. /s/ Kenneth H. Wetmore By: /s/ Mark D. Christman (SEAL) - ------------------------- ---------------------------- Mark D. Christman President -84- 86 LIST OF EXHIBITS ---------------- A-1. Revolving Credit Note B. Security Procedures C. Form of Compliance Certificate D. Indenture -85- 87 EXHIBIT B NATIONSBANK BUSINESS CREDIT WIRE TRANSFER PROCEDURES The transfer of funds by means of wire may be made by NationsBank (lender) at the request of its customer (borrower). Such wire transfers are categorized by lender as either repetitive or non-repetitive. Repetitive: - ---------- Repetitive wire transfers may vary in amount, but are consistent in terms of the payee, the location to which funds are wired, the bank name, account number and the routing transit number. Either borrower or lender may initiate a repetitive wire transfer. The borrower may identify the repetitive nature of transfers and request they be established as such via the "Repetitive Wire Transfer Authorization Form" (copy attached). Lender, after observing numerous transfers to the same recipient and destination, may initiate the repetitive process by faxing or mailing the "Repetitive Wire Authorization Form" to the borrower for completion and return. Although a first request for a repetitive wire transfer may be honored from a faxed copy of the "Repetitive Wire Transfer Authorization Form", a copy of the form containing an original signature must be received from the borrower. All transfer authorization forms must be approved by and contain the signature of a person authorized by the borrower to advance funds from borrower's line of credit with the lender. After receipt of the original "Repetitive Wire Transfer Authorization Form" by the lender, subsequent wire transfers to the recipient named thereon may be initiated by telephone request, provided the requesting party is identified by the lender as a person authorized by borrower to advance funds from the borrower's line of credit with lender. Non-Repetitive: - -------------- Non-Repetitive wire transfers are directed to recipients on a one-time or infrequent basis or are directed to varied destinations. Non-repetitive wire transfers require that written notification be provided to lender by borrower, showing payee, location, account number, routing transit number and name and location of bank into which funds are to be transferred. Such written notification may be provided by means of a "Non-Repetitive Wire Transfer Authorization Form" (copy attached). -86- 88 Required information may be faxed to lender in order to expedite the transfer; however, a copy of the transfer authorization form with an original signature(s) must be received by lender from borrower. The transfer authorization form must be approved by and contain the signature of a person authorized by the borrower to advance funds from borrower's line of credit with the lender. For any non-repetitive wire transfer, Lender may, at its discretion, perform a telephone verification with an authorized representative (the original signer or another authorized representative) of borrower prior to initiating the transfer. -87- 89 NATIONSBANK BUSINESS CREDIT REPETITIVE WIRE TRANSFER AUTHORIZATION CUSTOMER INFORMATION CUSTOMER NAME: ___________________________ DATE: ___________________________ NAME OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER:_____________________________ NOTE:MUST BE PERSON AUTHORIZED TO ADVANCE FUNDS SIGNATURE OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER: ________________________ PAYEE NAME OF RECIPIENT OF FUNDS: ___________________________________________________ LOCATION: _____________________________________________________________________ ACCOUNT NUMBER INTO WHICH FUNDS ARE TO BE TRANSFERRED: ________________________ DESTINATION OF FUNDS NAME AND LOCATION OF BANK RECEIVING FUNDS: BANK NAME: ___________________________________________________________________ ROUTING INFORMATION (ABA NUMBER): ____________________________________________ BANK LOCATION: CITY:_____________________________________________________ STATE: ___________________________________________________ (FOR INTERNATIONAL WIRES) COUNTRY: ___________________________________________ SPECIAL INSTRUCTIONS: ________________________________________________________ ________________________________________________________ ________________________________________________________ BANK USE ONLY BUSINESS CREDIT DEPARTMENT BUSINESS CREDIT AUTHORIZATION:__________________________________________________ PRINT NAME OF PERSON AT BANK APPROVED TO AUTHORIZE WIRE TRANSFERS BUSINESS CREDIT AUTHORIZATION: _________________________________________________ SIGNATURE OF PERSON AT BANK APPROVED TO AUTHORIZE WIRE TRANSFERS WIRE TRANSFER DEPARTMENT F.D. NUMBER ASSIGNED: __________________________________________________________ ACCOUNT NUMBER TO DEBIT: _______________________________________________________ -88- 90 NATIONSBANK BUSINESS CREDIT NON-REPETITIVE WIRE TRANSFER AUTHORIZATION CUSTOMER INFORMATION CUSTOMER NAME: ___________________________ DATE: ___________________________ NAME OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER:_______________________________ NOTE: MUST BE PERSON AUTHORIZED TO ADVANCE FUNDS SIGNATURE OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER: _________________________ PAYEE NAME OF RECIPIENT OF FUNDS: ___________________________________________________ LOCATION: _____________________________________________________________________ ACCOUNT NUMBER INTO WHICH FUNDS ARE TO BE TRANSFERRED: ________________________ DESTINATION OF FUNDS NAME AND LOCATION OF BANK RECEIVING FUNDS: BANK NAME: ____________________________________________________________________ ROUTING INFORMATION (ABA NUMBER): _____________________________________________ BANK LOCATION: CITY:___________________________________________________ STATE: _________________________________________________ (FOR INTERNATIONAL WIRES) COUNTRY: ____________________________________________ SPECIAL INSTRUCTIONS: _________________________________________________________ -89- 91 EXHIBIT C FINANCING AGREEMENT COMPLIANCE CERTIFICATE ---------------------- THIS CERTIFICATE is made as of __________________, 199_ , by ____________________________________, a ________________ organized under the laws of the State of ___________________ (the "Borrower"), to _______________________________, a national banking association (the "Lender"), pursuant to Section of the Financing and Security Agreement dated ______________, 199_, (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement") by and between the Borrower and the Lender. I, ____________________, hereby certify that I am the ______________ of the Borrower and am a Responsible Officer (as that term is defined in the Financing Agreement) authorized to certify to the Lender on behalf the Borrower as follows: 1. This Certificate is given to induce the Lender to make advances to the Borrower under the Financing Agreement. 2. This Certificate accompanies the _____________ financial statements for the period ended ___________________, 199__ (the "Current Financials") which the Borrower is furnishing to the Lender pursuant to Section 6.1.1(__) of the Financing Agreement. The Current Financials have been prepared in accordance with GAAP (as that term is defined in the Financing Agreement). 3. As required by Section 6.1.1(__) of the Financing Agreement, I have set forth on SCHEDULE 1 a detailed computation of each financial covenant in Financing Agreement and a cash flow projection report. 4. No change has occurred to the information contained in the Collateral Disclosure List except as set forth on SCHEDULE 2 to this Certificate. By way of example and not limitation, the Collateral Disclosure List, together with SCHEDULE 2, contains a listing of all of the Borrower's Patents, Trademarks, Copyrights (as those terms are defined in the Financing Agreement), all locations (owned, leased, warehouses or otherwise) where any Collateral (as that term is defined in the Financing Agreement) is located, all Subsidiaries (as that term is defined in the Financing Agreement). 5. As of the date hereof, there exists no Default or Event of Default, as defined in the Article 7 of the Financing Agreement, nor any event which, upon notice or the lapse of time, or both, would constitute such an Event of Default. 6. On the date hereof, the representations and warranties contained in Article 4 of the Financing Agreement are true with the same effect as though such representations and warranties had been made on the date hereof. WITNESS my signature this _____ day of ____________, 199_. -90- 92 ------------------------------ Name: Title: -91- 93 Schedule 1 ---------- -92- 94 Schedule 2 ---------- -93- 95 LIST OF SCHEDULES ----------------- Schedule 4.1.10 Litigation - --------------- Schedule 4.1.14 Other Indebtedness - --------------- Schedule 4.1.20 Permitted Liens - --------------- Schedule 6.2.4 Investments - -------------- -94- 96 LITIGATION ---------- -95- 97 SCHEDULE 4.1.14 OTHER INDEBTEDNESS ------------------ -96- 98 Schedule 4.1.20 -------- LIENS ON COLLATERAL Unpaid Principal Asset Covered Lienholder Balance - ------------- ---------- ------- -97- 99 Schedule 6.2.4 -------- Other Investments ----------------- NONE -98- 100
ARTICLE 1 DEFINITIONS SECTION 1.1 Certain Defined Terms........................................................................ 1 --------------------- ARTICLE 2 THE CREDIT FACILITIES SECTION 2.1 The Revolving Credit Facility................................................................ 22 ----------------------------- 2.1.1 Revolving Credit Facility.................................................................... 22 ------------------------- 2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans................................................................ 22 ----------------------------- 2.1.3 Revolving Credit Note........................................................................ 23 --------------------- 2.1.4 Revolving Loan Account....................................................................... 23 ---------------------- 2.1.5 Revolving Credit Unused Line Fee............................................................. 24 -------------------------------- 2.1.6 Early Termination Fee........................................................................ 24 --------------------- SECTION 2.2 The Letter of Credit Facility................................................................ 25 ----------------------------- 2.2.1 Letters of Credit............................................................................ 25 ----------------- 2.2.2 Letter of Credit Fees........................................................................ 25 --------------------- 2.2.3 Terms of Letters of Credit................................................................... 26 -------------------------- 2.2.4 Procedure for Letters of Credit.............................................................. 26 ------------------------------- 2.2.5 Change In Law; Increased Cost................................................................ 26 ----------------------------- SECTION 2.3 Interest..................................................................................... 27 -------- 2.3.2 Selection of Interest Rates.................................................................. 27 --------------------------- 2.3.3 Inability to Determine LIBOR Base Rate....................................................... 29 -------------------------------------- 2.3.4 Indemnity.................................................................................... 29 --------- 2.3.5 Payment of Interest.......................................................................... 30 ------------------- SECTION 2.4 General Financing Provisions................................................................. 30 ---------------------------- 2.4.1 Borrower's Representatives................................................................... 30 -------------------------- 2.4.2 Use of Proceeds of the Loans................................................................. 31 ---------------------------- 2.4.3 Origination Fee.............................................................................. 31 --------------- 2.4.4 Servicing Fees............................................................................... 31 -------------- 2.4.5 Computation of Interest and Fees............................................................. 31 -------------------------------- 2.4.6 Payments..................................................................................... 31 -------- 2.4.7 Liens; Setoff................................................................................ 32 ------------- 2.4.8 Requirements of Law.......................................................................... 32 ------------------- SECTION 3.1 Debt and Obligations Secured................................................................. 34 ---------------------------- SECTION 3.2 Grant of Liens............................................................................... 34 -------------- SECTION 3.3 Collateral Disclosure List................................................................... 35 -------------------------- SECTION 3.4 Personal Property............................................................................ 35 ----------------- 3.4.1 Securities, Chattel Paper, Promissory Notes, etc............................................. 35 ------------------------------------------------- 3.4.2 Patents, Copyrights and Other Property Requiring Additional Steps to Perfect.................................................................. 36 --------------------------- SECTION 3.5 Record Searches.............................................................................. 36 --------------- SECTION 3.6 Real Property................................................................................ 36 ------------- SECTION 3.7 Costs........................................................................................ 38 ----- SECTION 3.8 Release...................................................................................... 38 ------- SECTION 3.9 Inconsistent Provisions...................................................................... 38 -----------------------
i 101
ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.1 Representations and Warranties............................................................... 38 ------------------------------ 4.1.1 Subsidiaries................................................................................. 39 ------------ 4.1.2 Good Standing................................................................................ 39 ------------- 4.1.3 Power and Authority.......................................................................... 39 ------------------- 4.1.4 Binding Agreements........................................................................... 39 ------------------ 4.1.5 No Conflicts................................................................................. 39 ------------ 4.1.6 No Defaults, Violations...................................................................... 40 ----------------------- 4.1.7 Compliance with Laws......................................................................... 40 -------------------- 4.1.8 Margin Stock................................................................................. 40 ------------ 4.1.9 Investment Company Act; Margin Securities.................................................... 40 ----------------------------------------- 4.1.10 Litigation................................................................................... 41 ---------- 4.1.11 Financial Condition.......................................................................... 41 ------------------- 4.1.12 Proforma Financial Statements................................................................ 41 ----------------------------- 4.1.13 Full Disclosure.............................................................................. 42 --------------- 4.1.14 Indebtedness for Borrowed Money.............................................................. 42 ------------------------------- 4.1.15 Taxes........................................................................................ 42 ----- 4.1.16 ERISA........................................................................................ 42 ----- 4.1.17 Title to Properties.......................................................................... 43 ------------------- 4.1.18 Patents, Trademarks, Etc. .................................................................. 43 ------------------------- 4.1.19 Presence of Hazardous Materials or Hazardous -------------------------------------------- Materials Contamination...................................................................... 43 ----------------------- 4.1.20 Perfection and Priority of Collateral........................................................ 44 ------------------------------------- 4.1.21 Places of Business and Location of Collateral................................................ 44 --------------------------------------------- 4.1.22 Merger Agreement Transaction................................................................. 44 ---------------------------- 4.1.23 Securities Acts.............................................................................. 45 --------------- 4.1.24 Governmental Regulation...................................................................... 45 ----------------------- SECTION 4.2 Survival; Updates of Representations and ---------------------------------------- Warranties................................................................................... 45 ---------- ARTICLE 5 CONDITIONS PRECEDENT SECTION 5.1 Conditions to the Initial Advance............................................................ 45 --------------------------------- 5.1.1 Organizational Documents - Borrower. ....................................................... 46 ----------------------------------- 5.1.2 Opinion of Borrower's Counsel................................................................ 46 ----------------------------- 5.1.3 Consents, Licenses, Approvals, Etc. ........................................................ 47 ----------------------------------- 5.1.4 Notes........................................................................................ 47 ----- 5.1.5 Financing Documents and Collateral........................................................... 47 ---------------------------------- 5.1.6 Other Financing Documents.................................................................... 47 ------------------------- 5.1.7 Other Documents, Etc. ...................................................................... 47 --------------------- 5.1.8 Payment Of Fees.............................................................................. 47 --------------- 5.1.9 Collateral Disclosure List................................................................... 47 -------------------------- 5.1.10 Recordings and Filings....................................................................... 47 ---------------------- 5.1.11 Insurance Certificate........................................................................ 48 --------------------- 5.1.12 Landlord's Waivers........................................................................... 48 ------------------ 5.1.13 Bailee Acknowledgements...................................................................... 48 ----------------------- 5.1.14 Field Examination............................................................................ 48 ----------------- 5.1.15 Proforma Balance Sheet and Projections....................................................... 48 -------------------------------------- 5.1.16 Offering..................................................................................... 48 -------- 5.1.17 Capital Funds................................................................................ 49 -------------
ii 102 5.1.18 Merger Agreement Transaction................................................................. 49 ---------------------------- SECTION 5.2. Conditions to all Extensions of Credit....................................................... 49 -------------------------------------- 5.2.1 Compliance................................................................................... 49 ---------- 5.2.2 Default...................................................................................... 49 ------- 5.2.3 Representations and Warranties............................................................... 49 ------------------------------ 5.2.4 Legal Matters................................................................................ 50 ------------- ARTICLE 6 COVENANTS OF THE BORROWER SECTION 6.1 Affirmative Covenants........................................................................ 50 --------------------- 6.1.1 Financial Statements......................................................................... 50 -------------------- 6.1.2 Recordkeeping, Rights of Inspection, Field Examination, Etc.................................. 52 ----------------------------------------------------------- 6.1.3 Corporate Existence.......................................................................... 53 ------------------- 6.1.4 Compliance with Laws......................................................................... 53 -------------------- 6.1.5 Preservation of Properties................................................................... 53 -------------------------- 6.1.6 Line of Business............................................................................. 53 ---------------- 6.1.7 Insurance.................................................................................... 53 --------- 6.1.8 Insurance with Respect to Equipment, Inventory and -------------------------------------------------- Mortgaged Property........................................................................... 54 6.1.9 Taxes........................................................................................ 55 ----- 6.1.10 ERISA........................................................................................ 55 ----- 6.1.11 Notification of Mergers and Acquisitions and Ownership Changes............................................................................ 55 ----------------- 6.1.12 Notification of Events of Default and Adverse Developments................................................................................. 56 ------------ 6.1.13 Hazardous Materials; Contamination........................................................... 57 ---------------------------------- 6.1.14 Disclosure of Significant Transactions....................................................... 58 -------------------------------------- 6.1.15 Financial Covenants.......................................................................... 58 ------------------- 6.1.16 Collection of Receivables.................................................................... 59 ------------------------- 6.1.17 Assignments of Receivables................................................................... 59 -------------------------- 6.1.18 Government Accounts.......................................................................... 60 ------------------- 6.1.19 Defense of Title and Further Assurances...................................................... 60 --------------------------------------- 6.1.20 Business Names; Locations.................................................................... 61 ------------------------- 6.1.21 Subsequent Opinion of Counsel as to Recording --------------------------------------------- Requirements................................................................................. 61 ------------ 6.1.22 Use of Premises and Equipment................................................................ 62 ----------------------------- 6.1.23 Protection of Collateral..................................................................... 62 ------------------------ 6.1.24 Senior Management............................................................................ 62 ----------------- 6.1.25 Appraisals................................................................................... 62 ---------- 6.1.26 Application of Net Proceeds.................................................................. 62 SECTION 6.2 Negative Covenants........................................................................... 63 ------------------ 6.2.1 Merger, Acquisition or Sale of Assets........................................................ 63 ------------------------------------- 6.2.2 Purchase or Redemption of Securities, Dividend Restrictions................................................................................. 64 ------------ 6.2.3 Indebtedness................................................................................. 64 ------------ 6.2.4 Investments, Loans and Other Transactions.................................................... 64 ----------------------------------------- 6.2.5 Subordinated Indebtedness.................................................................... 66 ------------------------- 6.2.6 Liens; Confessed Judgment.................................................................... 66 ------------------------- 6.2.7 Transactions with Affiliates................................................................. 67 ---------------------------- 6.2.8 Prohibition on Hazardous Materials........................................................... 67 ---------------------------------- 6.2.9 Method of Accounting; Fiscal Year............................................................ 67 --------------------------------- 6.2.10 Compensation................................................................................. 68 ------------
iii OP 103 6.2.11 Transfer of Collateral....................................................................... 68 ---------------------- 6.2.12 Inventory.................................................................................... 68 --------- ARTICLE 7 DEFAULT AND RIGHTS AND REMEDIES SECTION 7.1 Events of Default............................................................................ 68 ----------------- 7.1.1 Failure to Pay............................................................................... 68 -------------- 7.1.2 Breach of Representations and Warranties..................................................... 68 ---------------------------------------- 7.1.3 Failure to Comply with Covenants............................................................. 69 -------------------------------- 7.1.4 Default Under Other Financing Documents or Obligations.................................................................................. 69 ----------- 7.1.5 Receiver; Bankruptcy......................................................................... 69 -------------------- 7.1.6 Involuntary Bankruptcy, etc.................................................................. 69 ---------------------------- 7.1.7 Judgment..................................................................................... 70 -------- 7.1.8 Execution; Attachment........................................................................ 70 --------------------- 7.1.9 Default Under Other Borrowings............................................................... 70 ------------------------------ 7.1.11 Material Adverse Change...................................................................... 71 ----------------------- 7.1.12 Change in Control............................................................................ 71 ----------------- 7.1.13 Liquidation, Termination, Dissolution, Etc................................................... 71 ------------------------------------------- SECTION 7.2 Remedies..................................................................................... 71 -------- 7.2.1 Acceleration................................................................................. 72 ------------ 7.2.2 Further Advances............................................................................. 72 ---------------- 7.2.3 Uniform Commercial Code...................................................................... 72 ----------------------- 7.2.4 The Collateral Account....................................................................... 73 ---------------------- 7.2.5 Specific Rights With Regard to Collateral.................................................... 74 ----------------------------------------- 7.2.6 Application of Proceeds...................................................................... 75 ----------------------- 7.2.7 Performance by Lender........................................................................ 76 --------------------- 7.2.8 Other Remedies............................................................................... 76 -------------- 7.2.9 Exercise of Remedies......................................................................... 76 -------------------- ARTICLE 8 MISCELLANEOUS Section 8.1 Notices...................................................................................... 76 ------- Section 8.2 Amendments; Waivers.......................................................................... 77 ------------------- Section 8.3 Cumulative Remedies.......................................................................... 78 ------------------- Section 8.4 Severability................................................................................. 79 ------------ Section 8.5 Assignments by Lender........................................................................ 79 --------------------- Section 8.6 Participations by Lender..................................................................... 80 ------------------------ Section 8.7 Disclosure of Information by Lender.......................................................... 80 ----------------------------------- Section 8.8 Successors and Assigns....................................................................... 81 ---------------------- Section 8.9 Continuing Agreements........................................................................ 81 --------------------- Section 8.10 Enforcement Costs............................................................................ 81 ----------------- Section 8.11 Applicable Law; Jurisdiction................................................................. 81 ---------------------------- Section 8.12 Duplicate Originals and Counterparts......................................................... 83 ------------------------------------ Section 8.13 Headings..................................................................................... 83 -------- Section 8.14 No Agency.................................................................................... 83 --------- Section 8.15 Date of Payment.............................................................................. 83 --------------- Section 8.16 Entire Agreement............................................................................. 83 ---------------- Section 8.17 Waiver of Trial by Jury...................................................................... 83 ----------------------- Section 8.18 Liability of the Lender...................................................................... 84 -----------------------
iv EX-10.2 10 EXHIBIT 10.2 1 Exhibit 10.2 LEASE THIS INSTRUMENT OF LEASE, made and entered into on the day and year hereinafter set forth by and between H.N.F. REALTY CO., an Ohio General Partnership, ("Landlord") and GLASSTECH, INC., a Delaware corporation, ("Tenant"). WITNESS THAT: WHEREAS, Landlord is the owner of the property described in Exhibit A attached hereto and made a part hereof ("Premises"). WHEREAS, the parties mutually desire to enter into this Lease Agreement setting forth the terms and conditions whereby Tenant will lease the Premises from Landlord. NOW THEREFORE, In consideration of the rents and covenants hereinafter stipulated to be paid and performed by Tenant, Landlord does hereby demise, let and lease unto Tenant the Premises to have and to hold the same unto said Tenant for the terms as hereinafter set forth, on the conditions hereinafter set forth, and the parties do agree as follows. 1. PREMISES. The premises leased hereunder shall be the Premises, including all improvements thereon. 2. CONDITION OF PREMISES. Tenant accepts the Premises in the condition it exists at the commencement of the term. 3. USE OF PREMISES. Tenant may occupy and use the Premises for any and all lawful purposes but shall not permit the same to be occupied or used contrary to any statute, rule, order, ordinance, requirement or regulation applicable thereto of any public authority or in a manner which would cause injury to the improvements or the value or usefulness of the Premises. Any changes or alterations on the Premises which may be required by any governmental authority after the beginning of the term of this Lease, including without limitation on the generality of the foregoing, any pollution control or conservation orientated structure or equipment required as a condition for the continued use of the Premises shall be made and installed at the sole cost and expense of Tenant. 4. INSPECTION OF PREMISES. Tenant shall not commit or permit any waste to the Premises and shall permit Landlord and its agents to enter the Premises at all reasonable times, after notice, (a) to examine the condition thereof; or (b) upon breach by Tenant of the provisions of paragraph 11 below, and after notice of such breach and of Tenant's apparent failure to cure, to make repairs. additions or alterations for the safety, preservation or improvement thereof; or (c) to exhibit the Premises during the last six (6) months of any term, in the event Tenant has not exercised its options to extend or purchase as provided herein. 5. SURRENDER OF PREMISES. Tenant shall deliver up and surrender the Premises to Landlord upon expiration or termination of this Lease, in as good order and condition as the same 2 are at the commencement of the Lease, reasonable use, wear and tear, fire, unavoidable casualty and acts of God excepted. 6. TERM. The term of this Lease shall be for a period of five (5) years commencing on January 1, 1995 and ending December 31, 1999 (the "First Term"). 7. RENT. Tenant shall pay a rent of Three Hundred Thousand Dollars ($300,000.00) per annum during the First Term, payable in equal monthly installments of Twenty-Five Thousand Dollars ($25,000.00) each without demand upon the first day of each calendar month in advance during the First Term. Such monthly payments which are sometimes referred to as "Net Monthly Rental' shall be paid to Landlord at its address as hereinafter set forth or at such other place as Landlord may from time to time designate in writing. 8. OPTIONS TO EXTEND. Tenant shall have the right and option to extend the term of this Lease for the periods set forth below, provided Tenant is not in default of any of the material terms of the Lease. Tenant shall exercise its option by delivering to Landlord written notice of Its intent to exercise its option at least six (6) months prior to the expiration of any term. If Tenant exercises its option to extend the term, the rent due to Landlord shall be in the following amounts. NET TERM DATES ANNUAL RENT MONTHLY RENTAL ---- ----- ----------- -------------- Second Term January 1, 2000 - December 31, 2004 $330,000.00 $27,500.00 Third Term January 1, 2005 - December 31, 2009 $360,000.00 $30,000.00 9. TAXES AND ASSESSMENTS. Tenant shall pay all real estate taxes and assessments against the Premises during the term as the same shall become due and payable without permitting any of them to become delinquent and shall provide Landlord with satisfactory evidence of payment thereof. In the event the methods of taxation prevailing at the execution of this Lease shall be changed so that in lieu or as a supplement to in whole or in part of the real estate taxes and assessments now levied on the Premises, there shall be levied any tax or assessment on the rental received therefrom, whether designated as a license fee, capital charge, or however designated, then for purposes of this Lease, any such tax or assessment shall be included in the real estate taxes and assessments payable by Tenant hereunder. Nothing contained in this Lease shall require Tenant to pay any estate, inheritance, succession, capital levy, corporate franchise, gross receipts, transfer or income tax of Landlord or any tax payable by Tenant on rentals, nor shall any of the same be deemed real estate taxes or assessments. 10. UTILITIES. Tenant shall pay all charges for electricity, sewer, heating and air conditioning, telephone service, water or other services furnished to or used upon the Premises, together with all taxes or other charges levied on such utility services. -2- 3 11. MAINTENANCE AND REPAIR. Tenant shall maintain at its sole cost and expense, the Premises, both exterior and interior, structural and non-structural, in good state of repair. If Tenant neglects to complete repairs within a reasonable period of time after such repairs become necessary, Landlord may, but shall not be required to, complete said repairs and Tenant shall pay the cost thereof to Landlord upon demand. 12. INSURANCE. Tenant shall insure the improvements on the Premises against loss by fire and other risks customarily included within the term "Extended Coverage" in an amount equal to 100% of the replacement cost thereof. Tenant shall keep and maintain a comprehensive public liability insurance policy with respect to the Premises with liability limits of at least $2,000,000.00 per occurrence and property Units of at least $500,000.00 per occurrence. The liability insurance policy shall protect Landlord, Tenant and any designee of Landlord against any liability which arises from any occurrence on or about the Premises. All insurance policies required hereunder shall be issued by insurance companies rated A+ or better by Best's Insurance Reports and shall be reasonably satisfactory to Landlord in form and substance. Tenant shall furnish Landlord with certificates evidencing such coverage with provisions requiring at least 30 days notice to Landlord and any mortgagee of the Premises prior to any cancellation or nonrenewal thereof. Landlord and any mortgagee shall be named as additional insured on all such policies of insurance. Upon request, policies of such insurance shall be delivered to Landlord. 13. FIRE OR CASUALTY. If, during the term of this Lease, the Premises or any part thereof shall be destroyed or damaged by fire or other casualty, the Tenant will give immediate written notice of such damage or destruction to Landlord. The Tenant, at its own cost and expense, shall promptly repair, replace and restore the same to at least as good a condition as the Premises immediately prior to such occurrence; provided, however, that in the event the Premises are destroyed or damaged to the extent of 40% or more of then value of the improvements therein, then Tenant may terminate this Lease as of the date of such damage or destruction by giving written notice to the Landlord within 30 days thereafter of its election to terminate, and all insurance proceeds shall be promptly paid to Landlord. Unless this Lease is terminated in accordance with the first paragraph in this Section 13, this Lease shall not be affected in any way by reason of the untenantability of the Premises or any part thereof, due to any damage, destruction or other cause whatsoever, and all rents, including taxes, Insurance and other charges, shall continue to be paid by Tenant in accordance with the terms, covenants and conditions hereof, without reduction or abatement. It is Tenant's responsibility to protect itself against such contingency by insurance or otherwise. 14. WAIVER OF SUBROGATION. Each party does hereby waive any and all claims against the other for any loss or damage to the Premises covered by insurance to the extent of such insurance. The policies evidencing such insurance shall contain waiver of subrogation clauses for the benefit of all the parties hereto, their respective heirs, successors and assigns. -3- 4 15. INDEMNIFICATION. Tenant shall protect, indemnify and save harmless Landlord from and against any liability or damages on account of any injury to any persons, including death or damage to any property of any nature arising out of the Tenant's use, occupation and control of the Premises during the term. 16. ALTERATIONS. Tenant shall have no right to make material changes or alterations to the Premises without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld. All alterations and changes will be made in conformance with good engineering and building practices and shall attach tot he freehold and the property of Landlord. 17. TRADE FIXTURES. If Tenant shall install any trade fixtures or signs, they shall remain the property of Tenant and may be removed by the Tenant at any time during the term of this Lease or promptly after its termination, provided that any damage caused by such removal shall be promptly repaired at Tenant's expense. 18. MECHANIC'S LIENS. Tenant will not permit any mechanic's or other liens to stand against the Premises for work, labor, services or materials furnished to Tenant, provided however, If Tenant share contest the validity of any lien or claim, Tenant share first post bond to insure that upon a final determination of the validity thereof said lien shall be released without cost to Landlord. 19. CONDEMNATION. If all or a substantial portion of the improvements on the Premises shall be taken by virtue of eminent domain or condemnation proceedings such that the Premises can no longer be used by Tenant for its intended purposes, the total amount of the award for the portion of the Premises taken and damages to the remainder, excepting any awards made for Tenant's moving expenses, or for Tenant's costs relating to condemnation proceedings, shall be paid to Landlord, and this Lease shall terminate on the date the condemning authority takes possession of the Premises. If the Premises can continue to be used by Tenant for its intended purposes after any taking by eminent domain or condemnation proceedings, then this Lease shall continue in effect, the proceeds of any such award share be paid to Landlord and future rent will be adjusted proportionately to the extent of any reduction in the value of the Lease to Tenant. 20. QUIET ENJOYMENT. So long as Tenant shall pay the rent and additional rents reserved under this Lease whenever the same shall become due and payable, and shall keep all the covenants and agreements required herein, Tenant shall peaceably hold and enjoy the Premises during the term hereof without hindrance or molestation by Landlord or any person lawfully claiming by, through or under Landlord. 21. DEFAULT. In the event that Tenant shall fail to pay any rent when due and the same shall remain unpaid for a period of thirty (30) days, or share be in default under any other material provisions of this Lease for a period of thirty (30) days after notice of such default, or shall file a voluntary petition in bankruptcy or make an assignment for benefit of creditors, or shall be adjudicated a bankrupt in any involuntary bankruptcy proceeding, or shall vacate or abandon the Premises, then Landlord may elect by written notice to Tenant to terminate the Tenant's right to possession only without terminating the Lease, and Landlord may, at Landlord's -4- 5 option, enter into the Premises and take and hold possession thereof without terminating the Lease or releasing the Tenant from Tenant's obligations to pay the rent hereunder for the full stated term. In any such event, Landlord may in its sole discretion, relet the Premises to others for the account of Tenant upon such terms as Landlord shall determine, and in connection therewith, Landlord may make alterations, repairs and decorate the Premises to the extent Landlord deems necessary or desirable. and Tenant shall. upon demand. pay the cost thereof together with Landlord's expense of reletting. If any such rentals collected by Landlord for Tenant's account are not sufficient to pay the full amount of all rents reserved in this Lease, Tenant shall pay Landlord the deficiency upon demand. Landlord shall also have the right to elect at any time after default or at any time after Landlord has terminated Tenant's right to possession only, to cancel and terminate this Lease by serving written notice on Tenant of such election, and to pursue any remedy at law or in equity that may be available to Landlord. All installments of rent not paid by Tenant when due hereunder shall bear interest at the rate of ten percent (10%) per annum until paid. AR other payments which Landlord may make by virtue of Tenant's default under the terms and conditions of this Lease on behalf of Tenant shall be payable upon demand and. if not paid upon demand, shall bear interest from the date such payments are made at the rate of ten percent (10%) per annum. No waiver by Landlord of any breach hereunder shall be construed to be a waiver of any other or future breach. No receipt of money by Landlord from Tenant after notice of default, or after the termination of this Lease, or after the commencement of any suit or after final judgment of possession of the Premises, shall reinstate, continue or extend the term of this Lease or affect any notice, demand or suit. The rights and remedies hereby created are cumulative and the use of one remedy shall not be taken to exclude or waive the right to the use of another. 22. INDEMNIFICATION AND ENVIRONMENTAL MATTERS. Tenant shall defend, indemnify and hold harmless Landlord, its agents, employees and assigns, from and against any and all loss, liability, cost or expense, including defense costs and attorney's fees, incurred by Landlord in connection with or arising out of any and all claims, demands actions, or causes of action, of any description whatsoever, arising directly or indirectly out of Tenant's use, occupation and control of the Premises during the term of this Lease, or any extension hereof. Tenant shall not maintain or cause to be maintained on the Premises any toxic or hazardous substance or waste or any other pollutants in violation of any provision of any material federal, state or local law or regulation. Tenant shall indemnify Landlord for any and all claims, obligations and liabilities, based upon or arising out of any obligation, liability, loss, damage or expense incurred by or imposed by any provision of federal, state or local law or regulation or by common law pertaining to health, safety or environmental protection (including without limitation, costs incurred for Investigation, testing, remedial or corrective action) and arising out of any contract, strict liability or any act or omission of Tenant, its employees, agents, subcontractors, representatives or assigns arising out of Tenant's lease, use or possession of the Premises including, without limitation, such loss pertaining to the storage, transportation, handling, disposal, discharge, release, presence or -5- 6 use of any hazardous material, hazardous substance, toxic material, toxic substance, or pollutant or contaminant as defined under state laws, laws of the State of Ohio, or any federal law including but not limited to, RCRA, CERCLA, SARA, TSCA, CWA, Clean Air Act, Safe Drinking Water Act, or Hazardous Materials Transportation Act. 23. AMERICANS WITH DISABILITIES ACT. Landlord and Tenant acknowledge that landlords and tenants may both be subject to the commercial facility provisions of the Americans With Disabilities Act (the "ADA") and that this Lease may be used to determine the extent of each parties responsibility. Landlord and Tenant agree to the following allocation of responsibility. Tenant shall be responsible for ensuring any and all compliance with commercial facility requirements of the ADA required on the Premises, including but not limited to, any responsibility for accommodation of employees, agents, clients, customers and visitors within the Premises, including any obligation to provide auxiliary aids. Tenant hereby agrees to indemnify the Landlord for any costs, damages or attorneys fees to the extent permissible by law, incurred in defending any claims by any private or governmental person or entity under the ADA which claims arise from the obligations described herein as the responsibility of the Tenant. 24. NON-WAIVER. The waiver of any provision, term or condition of this Lease shall not be taken to be a waiver of any subsequent breach of the same or any other provision, term or condition. 25. ASSIGNMENT AND SUBLETTING. Tenant shall have no right to assign this Lease nor to sublet the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld, and in the event of any assignment or subletting, Tenant shall continue to remain liable for the performance of all of Tenant's obligations hereunder. Notwithstanding anything contained herein to the contrary, Landlord's consent shall not be required to a transfer of this Lease to a corporation into or with which Tenant is merged or consolidated or to which substantially all of Tenant's assets are transferred or to any corporation which controls or is controlled by Tenant or is under common control with Tenant. For purposes of this Section 25, the term "control" shall mean, in the case of a corporation, ownership, directly or indirectly, of at least fifty percent (50%) of all the voting stock, and in the case of a joint venture or partnership or similar entity, ownership, directly or indirectly, of at least fifty percent (50%) of all the interests therein. 26. OPTION TO PURCHASE. Tenant shall have the right and option to purchase the Premises hereunder ("Option") at the applicable price set forth as follows ("Option Price") during any term hereof, provided Tenant is not in default of any of the material terms of the Lease. The Option price shall be in accordance with the following schedule: AT ANY TIME DURING THE: OPTION PRICE ----------------------- ------------ First Term $2,000,000.00 Second Term $2,100,000.00 Third Term $2,200,000.00 -6- 7 27. EXERCISE OF OPTION TO PURCHASE. Tenant may exercise its Option at any time by delivering to Landlord written notice of its intent to exercise its Option; provided however, that Tenant may not exercise its Option within six months of the end of a term unless Tenant has first exercised its option to extend pursuant to paragraph 8 hereof. Landlord will convey good and marketable title to the Premises insurable by a reputable title insurance company at standard rates, free and clear of all defects and encumbrances other than defects created by Tenant, easements and restrictions of record, ordinances and zoning regulations which do not materially interfere with Tenant's use of the Premises, and real estate taxes and assessments due and payable after delivery of title to the Premises to Tenant. Closing of the purchase of the Premises ("Closing") shall take place within sixty (60) days of the date of receipt by Landlord of notice of Tenant's election to exercise Its Option. During the period between exercise of Option and Closing, all terms and provisions of this Lease shall continue in full force and effect. At Closing, title shall be conveyed to Tenant by a warranty deed. 28. MORTGAGES. Tenant's rights in the Premises shall be subordinate to the lien of any present or future mortgage against the Premises which may be given by Landlord, provided however, Tenant shall not be disturbed in its possession of the Premises under this Lease for any reason other than that which would entitle Landlord to terminate Tenant's possession or to terminate the Lease. Tenant shall have no right to terminate this Lease by reason of the foreclosure of any such mortgage. Until Closing, all the terms of the Lease shall continue to apply. Any such mortgagee shall provide Tenant with written confirmation of its recognition of the provisions of paragraphs 20 and 26 of this Lease. 29. ESTOPPEL CERTIFICATES. Each party agrees, upon the request of the other party to execute and deliver a statement certifying that this Lease is in full force and effect, the dates to which the rent, additional rent and other charges have been paid, and whether or not the other party is in default in the performance of any material covenants, terms or conditions in this Lease which may be relied upon by any prospective purchaser or mortgagee of the Premises or the lease period. 30. RECORDING. This Lease shall not be recorded but upon the request of either party a short form of this Lease in recordable form for filing in the office of the Recorder of the county in which the Premises are located shall be executed which short form of Lease shall identify the parties, the Premises, the use thereof, the term of the Lease and shall incorporate the balance of this Lease by reference. 31. HOLDING OVER. It is specifically agreed between the parties that in the event Tenant remains on the Premises after termination of this Lease, said occupancy shall not constitute a renewal of any of the provisions hereunder. 32. ARBITRATION. Landlord and Tenant agree that upon written notice by either party hereto to the other any dispute arising under this Lease shall be submitted to binding arbitration to be conducted in Toledo, Ohio under the Commercial Arbitration Rules then in effect of the American Arbitration Association. No arbitrator may award punitive damages. The award of any arbitration shall be final, binding and nonappealable. -7- 8 33. NOTICE. No notice, request, consent, approval, waiver or other communication under this Lease shall be effective unless the same is in writing and is mailed by registered or certified mail, postage pre-paid, as follows: LANDLORD: Norman C. Nitschke H.N.F. Realty Co. 29737 E. River Rd. Perrysburg, OH 43551 TENANT: Mark D. Christman, President Glasstech, Inc. 995 Fourth St. Perrysburg, OH 43552 34. GENERAL. This Lease contains the entire agreement between the parties and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns. 35. AMENDMENTS. This Lease may be altered, amended or revoked during the term hereof only by a written agreement signed by all of the parties hereto. -8- 9 36. OHIO LAW. The validity, nature, obligations, effect and interpretation of this Lease Agreement, or of any of the terms and conditions hereof, and any and all questions arising hereunder or in connection herewith shall be governed by the laws of the State of Ohio. IN WITNESS WHEREOF, the parties hereto have executed this Lease this 28th day of December, 1994. Witness: H.N.F. REALTY CO., an Ohio General Partnership, Landlord: /s/ Katherine Raup O'Connell By: /s/ Scott J. Savage - ----------------------------- ---------------------------------- Scott J. Savage, as Attorney in Fact for /s/ Julia A. Probasco Harold A. McMaster - ----------------------------- /s/ Katherine Raup O'Connell By: /s/ Norman C. Nitschke - ----------------------------- ---------------------------------- Norman C. Nitschke /s/ Julia A. Probasco - ----------------------------- /s/ Katherine Raup O'Connell By: /s/ Ronald M. Cooperman - ----------------------------- ---------------------------------- Ronald M. Cooperman, as Attorney in Fact /s/ Julia A. Probasco for Frank A. Larimer - ----------------------------- GLASSTECH, INC., a Delaware Corporation /s/ Diane S. Tymiak By: /s/ Mark D. Christman - ----------------------------- ---------------------------------- Mark D. Christman, President /s/ Jennifer M. Bierley - ----------------------------- -9- 10 PARTNERSHIP ACKNOWLEDGEMENT STATE OF OHIO COUNTY OF LUCAS The foregoing instrument was acknowledged before me this 28th day of December, 1994 by Scott J. Savage, as Attorney in Fact for HAROLD A. MCMASTER, partner, on behalf of H.N.F. REALTY CO., An Ohio General Partnership. /s/ Katherine Raup O'Connell ----------------------------------- Notary Public PARTNERSHIP ACKNOWLEDGEMENT STATE OF OHIO COUNTY OF WOOD The foregoing instrument was acknowledged before me this 28th of December, 1994 NORMAN C. NITSCHKE, partner, on behalf of H.N.F. REALTY CO., an Ohio General Partnership. /s/ Sandra Fore ----------------------------------- Notary Public -10- 11 PARTNERSHIP ACKNOWLEDGEMENT STATE OF OHIO COUNTY OF LUCAS The foregoing instrument was acknowledged before me this 28th day of December, 1994 by Ronald M. Cooperman, as Attorney in Fact for Frank A. Larimer, partner, on behalf of H.N.F. REALTY CO., An Ohio General Partnership. ----------------------------------- Notary Public CORPORATE ACKNOWLEDGEMENT STATE OF OHIO COUNTY OF WOOD The foregoing instrument was acknowledged before me this 28th day of December, 1994 MARK D. CHRISTMAN, PRESIDENT of GLASSTECH, INC., a Delaware corporation, on behalf of the corporation. ----------------------------------- Notary Public -11- EX-10.3 11 EXHIBIT 10.3 1 Exhibit 10.3 LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease") made and entered into as of this 1st day of February, 1995, by and between AMPOINT, a division of Webb Corporation, an Ohio corporation ("Lessor"), and GLASSTECH, INC., an Ohio corporation ("Lessee"). WITNESSETH: WHEREAS, Lessor desires to lease to Lessee and Lessee desires to lease and take from Lessor the premises identified on Exhibit "C" (the "Premises") and consisting of approximately 43,200 square feet of space located in Building 9, Zone 3, at 350 "J" Street, in that certain industrial park located in Perrysburg Township, Wood County, Ohio, and commonly known as Ampoint Industrial Complex (the "Complex") upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the rents herein reserved, the other terms and conditions hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, Lessor and Lessee hereby agree as follows: SECTION 1. PREMISES. Upon the terms and conditions hereinafter set forth, Lessor hereby leases to Lessee and Lessee hereby hires and takes from Lessor the Premises. In addition, Lessee shall have the non-exclusive right during the Term (as hereinafter defined) for Lessee and its agents, employees, and invitees to use those parking areas adjacent to the Premises and which are designated on Exhibit "A," for the purpose of passenger vehicle (and truck) parking, subject to Section 4. SECTION 2. TERM. The term of this Lease (the "Term"), shall commence on February 1, 1995, and unless sooner terminated as hereinafter provided, shall end at 11:59 p.m. on January 31, 1998. SECTION 3. RENT AND SURVIVAL OF OBLIGATIONS. 3.1 Lessee shall pay Lessor as base rent (the "Base Rent") for the Premises during the Term of this Lease the total sum of Two Hundred Fifty Two Thousand, Seven Hundred Twenty Dollars ($252,720), payable in monthly installments as set forth on Exhibit "B," each in advance on the first day of each calendar month, in lawful money of the United States of America at the address of Lessor specified for notices to Lessor in Section 34 or at such other place designated from time to time by written notice from Lessor to Lessee, except that the first monthly installment shall be paid at the signing of this Lease. To the extent that the Term commences on a day other than the first day or ends other than on the last day of a calendar month, Base Rent for such month shall be prorated based on the number of days of such month which are included in the Term divided by the total number of days in such month. 2 3.2 In addition to the Base Rent, during the Term Lessee shall pay to Lessor promptly (and in no event later than twenty (20) days after written request therefor from Lessor or such shorter period provided herein) any and all charges, costs and expenses of every kind and nature whatsoever, other than the Base Rent, payable by Lessee to Lessor, pursuant to this Lease ("Additional Rent"). For the purposes of this Lease, the term "Rent" shall mean Base Rent and Additional Rent. 3.3 In the event real estate taxes and assessments payable with respect to the Premises exceed such taxes and assessments paid with respect to the 1994 calendar year, Lessee shall pay as Additional Rent thereafter the entire increase in such real property taxes and assessments attributable to the Premises during the entire period of the Term. 3.4 The covenant and obligation of Lessee to pay Rent hereunder shall be unconditional and independent of any other covenant or condition imposed on either Lessor or Lessee whether under this Lease, at law, or in equity. 3.5 Any Rent or other amounts payable by Lessee to Lessor which are not paid on or before the date provided in this Lease (or, in the case of amounts due pursuant to Sections 18 or 21, from the date paid, advanced, or expended by Lessor) shall bear interest at a rate equal to the lesser of: (a) the highest rate permitted by law or (b) two percent (2%) per annum above the prime rate published from time to time in the WALL STREET JOURNAL. 3.6 Any and all covenants and obligations of Lessee pursuant to this Lease which are not or may not be fully observed and performed by Lessee prior to the termination or expiration of this Lease (by lapse of time or otherwise) shall survive such termination or expiration unless and except to the extent hereafter expressly released by Lessor in writing. SECTION 4. USE OF PREMISES. 4.1 Lessee shall occupy and use the Premises ceramic casting, manufacturing, storage, and for no other purpose whatsoever. Lessee shall not use, occupy, or permit the Premises or any portion thereof to be used or occupied for any illegal purpose or for any business, use or purpose deemed by Lessor to be disreputable or inconsistent with the character, quality, or operation of the Complex as warehouse, distribution, or office facilities. Lessee, in its use and occupancy of the Premises, shall not permit storage or the accumulation of debris of any kind whatsoever on the exterior of the building of which the Premises are a part. 4.2 Lessee shall, in its use and occupancy of the Premises and in the exercise of its rights and the observance and performance of its covenants and obligations hereunder, comply at its sole expense with all laws, rules, regulations, orders, permits, and other requirements imposed by federal, state, or local authorities having competent jurisdiction over the subject matter thereof (collectively, "Applicable Legal Requirements") and with the requirements of all policies of insurance of whatsoever nature which Lessor or Lessee are required or permitted to maintain pursuant to this Lease (collectively, "Insurance Requirements") and shall perform all construction of and maintenance, repairs, alterations, additions and -2- 3 improvements to the Premises permitted or required by this Lease in a first-class and workmanlike manner. 4.3 In its use and occupancy of the Premises, Lessee, its agents, employees, and invitees shall observe faithfully and comply strictly with the reasonable rules and regulations set by Lessor with respect to the Premises as such rules and regulations exist on the date of execution of this Lease and as the same may be amended from time to time hereafter. SECTION 5. ENVIRONMENTAL MATTERS, 5.1 Lessee shall not cause or permit: (i) the presence of any Hazardous Materials (as hereinafter defined) at, in or on the Premises, or (ii) the release on or in, or other contamination of, the Premises with any Hazardous Materials. Lessee shall indemnify, defend, and hold Lessor harmless from and against any and all liability, damage, claims, causes of action, suits, proceedings, costs and expenses (including without limitation reasonable attorneys' and consultants' fees) of every kind or nature (collectively, "Liabilities and Costs"), including, but not limited to, any liability under or pursuant to any Environmental Laws (as hereinafter defined), arising from or related to, or alleged to have arisen from or related to, the use, handling, generation, storage, treatment, disposal, transportation or release of any Hazardous Materials by, or permitted or authorized by, Lessee or its agents, employees, or invitees. The provisions of this Section 5 shall survive the termination or expiration of this Lease. 5.2 As used in this Section 5: (i) the term "Hazardous Materials" shall mean asbestos or asbestos-containing materials, polychlorinated byphenyls, urea formaldehyde, or waste, materials, chemicals or other substances the use, disposal, storage, generation or treatment of which is governed or regulated by any Environmental Laws; and (ii) the term "Environmental Laws" shall mean any Applicable Legal Requirements now in effect or hereinafter enacted, published, promulgated or issued relating to any Hazardous Materials, health and safety, or pollution or protection of the environment. SECTION 6. UTILITIES AND SERVICES. 6.1 During the Term, Lessor shall provide water, fire lines, and sanitary sewer services to the Premises and shall charge Lessee therefor as Additional Rent on the same basis and rate from time to time generally charged for similar volume, or rate of water, or sewage to other tenants of the Complex receiving such services and being separately charged therefor. Lessee shall neither take nor suffer or permit any act, whether of commission or omission, which would or might change, alter or modify the type or composition or which would or might materially increase the volume or accelerate the rate of flow of the sanitary sewage to be transported from the Premises from that existing on the commencement date of the Term (without limiting the generality of the foregoing, Lessee shall not use, suffer, or permit the use of, the sanitary sewer system serving the Premises for the transportation of any materials, chemicals or substances other than lavatory wastes). Notwithstanding anything to the contrary in this Section 6.1, Lessor may at any time: (a) dedicate, sell, or otherwise transfer to any governmental or quasi-governmental authority or other person or entity the sanitary sewer system serving the Premises, or (b) elect to have said water, fire lines or sewer services provided to the Premises by a third party, in either of which events Lessee shall thereafter pay all charges -3- 4 therefor directly in the same manner provided for other utilities in Section 6.2 and Lessor shall have no further obligation pursuant to this Section 6.1 with respect thereto. 6.2 Lessee shall pay as and when due and payable, directly to the utility or third party providing the same, all charges for all gas, electricity, telephone and other utilities, security systems, garbage collection and similar services used or consumed in the Premises during the Term (other than services provided by Lessor pursuant to Section 6.1). SECTION 7. CONDITION OF PREMISES. Lessee acknowledges and agrees that prior to the execution of this Lease Lessee has inspected the Premises, that Lessee accepts the Premises "as is," and that there have been no representations or warranties made by or on behalf of Lessor with respect to the Premises or with respect to the suitability of the Premises for the conduct of Lessee's business. The taking of possession of the Premises by Lessee shall conclusively establish that the Premises were at that time in satisfactory condition, order, and repair. SECTION 8. LIABILITY OF LESSOR. 8.1 Neither Lessor nor any of its agents, employees, directors or officers shall be liable for any injury, damage, or loss of any nature whatsoever to persons or property (whether of Lessee or any other person) occurring in, upon, or about the Premises, even if such injury, damage, or loss arises out of or is due to or is asserted or alleged to arise out of or be due to any act (whether of commission or omission) of Lessor or any of its agents, employees, directors or officers; excepting any physical injury to persons or physical damage to tangible property of third parties (expressly excluding Lessee) caused solely by the negligence or willful misconduct of Lessor or Lessor's employees acting within the scope of their employment. The liability of Lessor under this Lease shall in any event be strictly limited to the interest of Lessor in the Complex, and Lessor shall not be liable, either personally or otherwise, for any deficiency. 8.2 Lessor shall not be responsible for and Lessee shall not be entitled to any compensation or any abatement or diminution of Rent (or the release from any of its other covenants or obligations under this Lease) or be considered to be evicted due to any suspension, interruption or termination of utilities or other services to the Premises, the necessity or desirability of any maintenance, repairs, alterations, additions, improvements or replacements in or to the Premises or the Complex, the existence, imposition or enforcement of any Applicable Legal Requirements or Insurance Requirements, or the existence pursuant to Section 26 of any event of force majeure. SECTION 9. INDEMNIFICATION OF LESSOR BY LESSEE. Lessee shall indemnify, defend, and hold Lessor harmless from and against any and all Liabilities and Costs (including without limitation claims for injury to any person or damage to property of Lessor, Lessee, or any third party), whenever arising on or after the date hereof arising out of or due to, or asserted or alleged to arise out of or be due to, any act (whether of commission or omission) of Lessee or any of its agents, employees, or invitees with respect to the Premises or in the exercise of Lessee's rights or the observance or performance -4- 5 of Lessee's covenants and obligations under this Lease (or in breach or excess thereof) or the use or occupancy of the Premises by Lessee or any of its agents, employees, or invitees, whether or not any such Liabilities or Costs are asserted by an agent, employee, or invitee of Lessee, and whether or not any such Liabilities or Costs are based upon negligence; provided, however, that Lessee shall not be responsible to indemnify, defend or hold Lessor harmless with respect to any Liabilities or Costs caused solely by the negligence or willful misconduct of Lessor or Lessor's employees acting within the scope of their employment. Lessor shall have the right (but shall have no obligation) to conduct its own defense with attorneys of its own selection, and Lessor shall have the absolute right to approve or disapprove in its sole discretion any settlement or compromise proposed by Lessee with any third party relating to any claim asserted against or alleged liability of Lessor. SECTION 10. INSURANCE. 10.1 At all times during the Term, Lessor at its sole expense shall maintain fire and extended coverage insurance on a replacement cost basis with such co-insurance and deductible provisions as Lessor may elect from time to time covering the Premises; provided, however, that any such policy or policies shall not insure the contents of the Premises which are the property of any party other than Lessor or any improvements or installations made by Lessee. Lessor may at its sole election obtain such insurance under a blanket insurance policy or policies which cover not only the Premises but other properties. All claims under such policies may be adjusted and all proceeds thereof shall be received by and belong to Lessor only and Lessee shall have no rights thereto or interest therein. 10.2 At all times during the Term, Lessee shall maintain at its sole expense commercial general liability insurance (including without limitation broadened coverage provisions insuring liability for explosion, collapse, and damage to underground property) against claims for personal injury, bodily injury, wrongful death and property damage occurring upon, in or about the Premises or the Complex endorsed to cover all contractual and other liabilities of Lessee pursuant to this Lease, affording at a minimum insurance protection with a combined single limit of not less than $3,000,000. Such insurance shall be underwritten by a reputable insurance company licensed to do business in the State of Ohio and reasonably approved by Lessor. Lessor (and at Lessor's request any mortgagees of the Premises) shall be named as an additional insured on each such policy with the same single limit of coverage any additional premium therefor to be paid by Lessee. Each such policy of insurance shall to the extent obtainable at no extra premium provide: (a) that any claim shall be payable notwithstanding any act, whether of commission or omission, negligent or otherwise, of Lessor or Lessee, or of any agent, employee, or invitee of either of them, which act might otherwise result in the forfeiture of the insurance afforded by such policy and (b) that the policy will not be canceled or modified to reduce coverage as to risk, amount or named insured without at least fifteen (15) days prior written notice to both Lessor and Lessee. Certificates evidencing such insurance and all replacements thereof shall be delivered to Lessor prior to the commencement of the Term, and thereafter, promptly and in no event later than fifteen (15) days prior to the expiration of the policy being replaced. All certificates of insurance must indicate thirty (30) days of cancellation or non-renewal to be provided to Lessor. -5- 6 SECTION 11. WAIVER OF SUBROGATION. Each policy of insurance required by either Sections 10. 1 or 10.2 shall provide an unconditional waiver and release by the insurer of any and all claims and rights (including without limitation any and all rights of subrogation) which said insurer might otherwise have against Lessor or Lessee, as the case may be, for any casualty or liability insured by said insurance even if such casualty or liability shall be caused or contributed to by any act (whether of commission or omission, negligent or otherwise) of Lessor or Lessee, as the case may be, or its agents, employees, invitees, or anyone for whom it may be responsible (any additional premium or expense for which shall be paid by Lessee or in the case of the insurance provided in Section 10.1 reimbursed to Lessor by Lessee). SECTION 12. DAMAGE AND DESTRUCTION. 12.1 In the event of any damage to or destruction of the Premises or any portion thereof (or any building of which the Premises may then be part) by fire or other casualty ("Damage or Destruction"), Lessor shall have the obligation, to the extent and only to the extent of any recovery under the fire and extended coverage insurance maintained by Lessor from time to time with respect to the Premises, to repair or restore the Premises (as applicable) as promptly and reasonably as possible (after first allowing a sufficient period for the exercise of any right pursuant to Section 12.2). There shall be no abatement or diminution of Rent with respect to any deprivation of Lessee of the use or occupancy of the Premises or of any common areas of the Premises whatsoever in connection with any such Damage or Destruction for the period in which any portion of the Premises is unusable. 12.2 Notwithstanding anything contained in Section 12.1 to the contrary, in the event of any Damage or Destruction which, in the judgment of a reputable architect (the "Architect") selected by Lessor within thirty (30) days thereof, cannot reasonably be repaired or restored within a period of six (6) months of the occurrence of such Damage or Destruction, Lessor and (only in the event of Damage or Destruction to the Premises) Lessee shall each have the right to terminate this Lease by notice to the other party within ten (10) days after notice of the determination by the Architect. Lessor may (but shall have no obligation to) request a determination by the Architect unless Lessee shall, within five (5) days after any Damage or Destruction occurs with respect to the Premises request in writing to Lessor that such determination be made, in which event such determination shall be made at Lessee's expense. In the event of the termination of this Lease pursuant to this Section 12.2: (a) such termination shall be effective sixty (60) days after the giving of such notice to terminate, (b) there shall be no abatement or diminution of Rent prior to the date of such termination, and (c) Lessor shall have no obligation to repair or restore the Premises. SECTION 13. EMINENT DOMAIN. 13.1 If the Premises shall be permanently taken as a result of or in lieu of condemnation or eminent domain, this Lease shall terminate upon the transfer of title in connection therewith. 13.2 If any of the following events occur: (a) any portion, but less than all of the Premises (or any building of which the Premises may then be a part), shall be permanently -6- 7 taken as a result of or in lieu of condemnation or eminent domain and as a result of such event structural alterations or reconstruction of a portion of the Premises are necessary or desirable in Lessor's judgment, or (b) as a result of any such event specified in Subsection 13.2(a) hereof or as a result of any other portion or portions of the Complex being so taken or as a result of all or any portion of the Premises or the Complex being temporarily so taken, the area of the Premises (as the case may be) remaining after such taking (taking into consideration the period of time involved if a temporary taking), is such as to render continued operation of either the Premises or the Complex economically unfeasible by Lessor, then Lessor may at its sole option terminate this Lease by notice given to Lessee within thirty (30) days after the latter of the following: (i) the date upon which the proposed taking by such entity as a result of or in lieu of condemnation or eminent domain becomes final or (ii) the date upon which title to or possession of such portion of the Premises or Lessee's interest in such portion of the Premises transfers to such entity. If any of the foregoing events shall have occurred and this Lease is not terminated by Lessor pursuant to this Section 13.2, this Lease shall be and remain in full force and effect for the balance of the Term except that Base Rent shall abate in the proportion which that portion of the Premises of which Lessee is so deprived (if any, and only for the period of deprivation in the event of a temporary taking) bears to the entire Premises. 13.3 Lessor shall be entitled to receive the entirety of any and all proceeds, awards, damages, or other compensation received in connection with such taking and Lessee shall have no right to share in such proceeds, awards, damages, or other compensation. Lessee hereby forever assigns to Lessor all right, title, and interest which Lessee may now or hereafter have in any such proceeds, awards, damages, or other compensation whatsoever; provided, however, that nothing in this Section 13 shall preclude Lessee from separately claiming or receiving from any such person, if legally payable, compensation for the taking of Lessee's tangible property and for Lessee's removal and relocation costs to the extent that the same are specifically and separately awarded by not otherwise. SECTION 14. LIENS AND ENCUMBRANCES. Lessee shall not suffer or permit any lien or encumbrance whatsoever to exist upon the Premises or the Complex or any of Lessee's right, title, or interest in this Lease by reason of any act (whether of commission or omission) of Lessee or any of its agents, employees, or invitees. If any such lien or encumbrance suffered or permitted by Lessee shall at any time exist; (a) Lessee shall cause any such lien or encumbrance suffered or permitted by Lessee to be removed by bonding or discharge within fifteen (15) days after notice from Lessor to do so, and (b) Lessee shall at Lessee's sole cost and expense defend Lessor against any action, suit or proceeding which may be brought thereon for the enforcement of the same, and shall indemnify, defend, and hold Lessor, the Premises and the Complex, harmless from and against any and all Liabilities and Costs and all judgments, liens, or charges arising by reason of or in connection with any such action, suit, or proceeding. SECTION 15. MAINTENANCE AND REPAIR. 15.1 Lessor shall, at its sole expense (except to the extent chargeable to Lessee pursuant to Section 6.1) make all repairs necessary to maintain in as good condition as on the date hereof the roof, gutters and downspouts, foundation, floor slab, exterior walls (excluding -7- 8 windows, window frames, doors, door checks, door jams, overhead doors and operators, door and window locks and hardware, and all glass), and structural supporting columns. Lessor shall have no obligation to make any such repairs until the expiration of a reasonable period of time after written notice that such repair is needed is received by Lessor from Lessee. Lessor shall to the extent reasonably feasible make all repairs required to be made by Lessor in such a manner as will not unreasonably interfere with Lessee's use and occupancy of the Premises. Lessor shall not be liable or responsible for any injury or inconvenience to or interference with Lessee's use or occupancy of the Premises or Lessee's business arising from the making of any repairs, alterations, additions, or improvements in or to the Premises or to any fixtures, appurtenances, or equipment therein and there shall be no abatement or diminution of Rent by virtue of any such repairs, alterations, additions, or improvements. Nothing in this Section 15.1 shall relieve Lessee from any liability to Lessor pursuant to this Lease for any damage to the Premises or the Complex caused by Lessee or any of its agents, employees, or invitees. 15.2 Lessee shall at its sole expense take good care of the Premises and the fixtures, appurtenances, and equipment therein and shall keep the same in good order and condition, excepting only normal wear and tear and those matters as to which Lessor has the obligation to repair pursuant to Section 12.1 or Section 15.1. Lessee shall not permit the accumulation of garbage, rubbish, or other waste upon, in, or about the Premises. 15.3 Lessee shall at its sole cost and expense replace plate glass and glass in doors in the Premises and shall repair or replace windows, window frames, door checks, door jams, door and window locks and hardware, overhead doors and operators, and any door operators in the Premises. In the event Lessee substitutes tangible personal property or fixtures for any portion of the Premises, the personal property or fixtures so substituted shall be included under this Lease as part of the Premises. SECTION 16. ALTERATIONS. Lessee shall have the right at its sole expense to make from time to time non-structural alterations, additions, improvements, and replacements in and to the Premises; provided, however, that Lessee shall have first obtained the written consent of Lessor in each instance. Lessee shall comply with all terms and conditions established by Lessor in connection with Lessor's consent. Lessee shall have no right to make any structural alterations, additions, improvements, or replacements in or to the Premises. SECTION 17. POSSESSION AND REMOVAL OF PROPERTY. All alterations, additions, improvements and replacements made by Lessee in and to the Premises as permitted or required by this Lease (including without limitation Sections 15.2 and 16) shall become the property of Lessor automatically upon construction or installation in the Premises and without any payment to Lessee. Upon or before the termination or expiration of this Lease, Lessee shall have the right to remove all of its furniture and other personal property located upon, in, or about the Premises; provided, however, that Lessee shall at its own expense repair any damage or injury caused to the Premises by such removal. At the request of Lessor and at Lessee's sole expense, Lessee shall remove any alterations, additions, improvements, and replacements made by Lessee in and to the Premises as permitted or required -8- 9 by this Lease and shall restore the Premises to their condition prior to the time such alterations, additions, improvements, or replacements were made. SECTION 18. LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS. If Lessee shall at any time fail or refuse to perform any of its covenants or obligations hereunder, Lessor shall have the right upon five (5) days' prior notice to Lessee, but shall not be obligated, to perform such covenant or obligation without waiving or releasing Lessee from any liability. All sums paid, advanced, or expended by Lessor pursuant to this Section 18 shall be repaid to Lessor by Lessee on demand. SECTION 19. SUBORDINATION AND ATTORNMENT; ESTOPPEL CERTIFICATE. This Lease is subject and subordinate to any and all mortgages and other financings (and modifications) and to any dedication to any governmental or quasi-governmental authority of a fee interest or easement in the Premises for public rights of way, public utilities and related facilities, or any similar purpose which may now or hereafter affect the Premises. Lessee shall execute such estoppel certificates, attornments, and other instruments in connection therewith as reasonably requested by Lessor or any such mortgagee or other holder. The holder of any interest to which this Lease is subordinate or any such purchaser or transferee shall not be (a) subject to any offsets or deficiencies which Lessee might be entitled to assert against Lessor, (b) bound by any payment of rent by Lessee to Lessor for more than one (1) month in advance, or (c) bound by any amendment or modification to this Lease made without the consent of such mortgagee or other holder. The provisions of this Section 19 shall be self-operative, and no further instrument of subordination shall be required by the mortgagee or other holder of any interest to which this Lease is subordinate. Lessee agrees, however, whenever requested to do so upon reasonable notice by Lessor, to execute such instruments and documents reasonably necessary or desirable to confirm the provisions of this Section 19. SECTION 20. SIGNS. Lessee shall not place, install, affix, or permit any sign of any nature on the exterior or in the windows of the Premises without first obtaining the written consent of Lessor. All such approved signs shall be installed and maintained by Lessee in compliance with all Applicable Legal Requirements. Lessee shall pay all expenses and all license and permit fees relating to the installation and maintenance of authorized signs and shall pay all expenses for removal and costs of repairs resulting therefrom. SECTION 21. SURRENDER OF PREMISES. 21.1 Upon the expiration or termination of this Lease (by lapse of time or otherwise), Lessee shall deliver up and surrender the Premises to Lessor, together with all additions, alterations, improvements and replacements thereto (whether the same shall have been made by Lessor or Lessee and without compensation or credit whatsoever to Lessee) in broom clean condition and in good order and repair, normal wear and tear which Lessee is not obligated under this Lease to repair only excepted, failing which Lessor may restore the Premises to such condition, order, and repair at Lessee's sole expense payable by Lessee to Lessor within ten (10) days after the date upon which Lessee receives an invoice from Lessor. In connection with such delivery and surrender of the Premises, Lessee shall subject to Section -9- 10 17 hereof remove all personal property located upon, in or about the Premises whether belonging to Lessee or any person claiming under or through Lessee and any such personal property not so removed by Lessee upon the termination of this Lease (or in the case of any termination of this Lease by Lessor other than by lapse of time within ten (10) business days after notice of such termination) shall be considered abandoned by Lessee and Lessor may dispose of the same as it deems expedient without any liability therefor to Lessee or any third party, at Lessee's sole expense, payable by Lessee to Lessor within ten (10) days after the date upon which Lessee receives an invoice from Lessor. Lessee shall deliver up and surrender the Premises to Lessor at the end of the Term of this Lease without notice of any kind and Lessee hereby waives all right to any such notice as may be provided under any present or future laws. 21.2 Upon the expiration or termination of this Lease (by lapse of time or otherwise), Lessee shall, if no Event of Default (as hereinafter defined) then exists, have the right prior to such expiration or termination to remove any trade fixtures owned by Lessee installed upon, in or about the Premises and Lessee shall promptly repair and restore the Premises to their condition prior to the time such trade fixtures were so installed. In any event, Lessee shall at Lessee's sole expense remove any and all such trade fixtures at Lessor's request and shall so repair and restore the Premises. SECTION 22. RIGHT OF LESSOR TO CHANGE PUBLIC PORTIONS OF PROJECT. At any time Lessor shall have the right in its sole and absolute discretion: (a) to change and to relocate the common areas of the Complex from time to time; provided, however, that in no event shall Lessor make any change which shall diminish the area of the Premises or which shall unreasonably deprive Lessee of access to the Premises, and (b) to change the name of the Complex from time to time hereafter and Lessor shall have no obligation for any loss or damage to Lessee by reason thereof. SECTION 23. HOLDOVER. 23.1 If, at the expiration of the Term, Lessee continues to occupy the Premises with the written consent of Lessor, Lessee shall be a tenant from month to month at a monthly base rent equivalent to 150% of Base Rent paid by Lessee at the expiration of the then Term of this Lease, subject to all of the other terms and conditions of this Lease and Lessee shall perform all of Lessee's covenants and obligations hereunder (including without limitation all obligations to pay Additional Rent as provided herein). 23.2 If, at the expiration of the Tenn or other termination of this Lease, Lessee continues to occupy the Premises without the written consent of Lessor or if no new agreement shall have been entered into by the parties hereto, Lessee shall be a tenant at will only and such continued occupancy shall not defeat Lessor's right to possession of the Premises at any time with or without notice. In such event, Lessee shall pay to Lessor all damages sustained by reason of Lessee's retention or possession of the Premises after such expiration. SECTION 24. DEFAULT. 24.1 Any of the following shall constitute an event of default by Lessee under this Lease ("Event of Default"): -10- 11 a. the failure of Lessee to pay Rent or any other amounts payable by Lessee hereunder at the time and in the manner provided herein; b. the failure of Lessee to perform any other covenant or obligation or to comply with any other term or condition imposed upon Lessee under this Lease, if such failure shall continue for a period of ten (10) days after Lessee receives written notice thereof from Lessor; c. if Lessee becomes insolvent (either in the bankruptcy sense or equity sense), makes an assignment for the benefit of creditors, applies for the appointment of a trustee, liquidator, or receiver of any substantial part of its assets, or commences any proceeding relating to itself under any bankruptcy, reorganization, arrangement, or similar law; or d. if any such application is filed, any such proceeding is commenced against Lessee and Lessee indicates its consent thereto, or an order is entered appointing any such trustee, liquidator, or receiver, or approving a petition in any such proceeding and with such order remaining in effect for sixty (60) days. 24.2 If an Event of Default shall have occurred, then, in addition to all other rights and remedies which Lessor may have whether hereunder, at law, or in equity, Lessor may by three (3) days' prior notice to Lessee terminate this Lease or without terminating this Lease and without notice re-enter the Premises by summary proceedings or otherwise and in any event may dispossess Lessee. No re-entry or taking of possession of the Premises by Lessor shall be construed as an election on Lessor's part to terminate this Lease, unless a written notice of such intention is given to Lessee. Lessee agrees to be and remain liable for: (a) all Rent and other charges and sums due hereunder; and (b) all Liabilities and Costs that may be based upon any breach of or default under any of the terms, covenants, obligations, and conditions of this Lease by Lessee which liability shall survive the termination of this Lease, the re-entry of Lessor, and the issuance of any action to secure possession of the Premises. Lessor shall have the right to maintain successive actions against Lessee for recovery of all Liabilities and Costs or for said Rent and other charges and sums payable hereunder as and when said Rent and other charges and sums are payable hereunder and Lessor shall not be required to wait to begin such actions or legal proceedings until the date this Lease would have expired. In the event of re-entry, Lessor may, on behalf of Lessee, or, if this Lease is terminated, on its own behalf, without being obliged to do so in either event, relet the Premises, in whole or in part, for any period for any sum (including without limitation any rental concession and rent-free occupancy) which it may deem reasonable to any tenant which it may deem suitable and satisfactory and for any use and purpose which it may deem appropriate. In the event of reletting, Lessor may apply the rent therefrom first to the payment of its expenses (including without limitation attorneys' fees) in reletting the Premises or any part thereof, commissions, and the repair, improvement and alteration of the Premises or the portions so leased, and then to the payment of Rent and all other charges and sums due from Lessee hereunder, Lessee remaining liable for any deficiency. The failure of Lessor to relet, or if relet, to collect the rent under such reletting, shall not -11- 12 release or affect Lessee's liability hereunder for all Liabilities and Costs. Lessee waives all right and privilege of redemption of the Premises or continuation of this Lease which it might otherwise have hereunder, at law, or in equity after an Event of Default. SECTION 25. RIGHT OF ACCESS. 25.1 Lessor, any mortgagee or holder of any interest in the Premises or the Complex, and their agents and employees shall have the right to enter any portion of the Premises at all reasonable times for the purpose of examining and inspecting the Premises, for any purpose whatsoever related to the safety and preservation of the Premises, exhibiting the same to any prospective purchaser or mortgagee or tenant, making such repairs, replacements, alterations, or improvements to the Premises or the Complex as Lessor may deem necessary or desirable, and performing or carrying out any of Lessor's rights under this Lease. 25.2 Lessor shall have the right to erect, use, and maintain in and through the Premises plumbing and electrical pipes, conduits, wire, heating, ventilating, and air-conditioning ducts serving the Complex as Lessor shall deem necessary or desirable in and through the Premises providing that installation will not unreasonably interfere with Lessee's use of the Premises. SECTION 26. FORCE MAJEURE. Lessor shall have no responsibility or liability whatsoever for and shall be excused from the observance or performance of any covenant or obligation of Lessor hereunder (including without limitation Lessor's obligations pursuant to Section 6.1 hereof) to the extent that the same is rendered impossible, impracticable or economically unfeasible in whole or in part, by an act of God (including without limitation lightning, storm, flood, tornado or earthquake); fire; explosion; Applicable Legal Requirements (including without limitation any prohibition or restriction upon the charges which may be made by Lessor to Lessee or other tenants or third parties receiving the types of services contemplated by Section 6.1 hereof); strikes; lockouts; shortages of labor, fuel or materials; acts of the public enemy; war (declared or undeclared); riot or insurrection; the discontinuation, suspension, or interruption of or interference with any utility service supplied to Lessor or Lessee by any third party; or any other cause or circumstance beyond the control of Lessor. In no event shall any such delay or hindrance in or prevention from the performance of any such covenant or obligation constitute a termination of this Lease or the eviction of Lessee from the Premises. Lessor shall in no event be required to settle or compromise any strike, lockout or other labor difficulties or disputes, the resolution thereof being within the sole discretion of Lessor. SECTION 27. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy specified herein or otherwise conferred upon or reserved to Lessor or Lessee, as the case may be, shall be considered exclusive of any other right or remedy, but the same shall be cumulative and shall be in addition to every other right and remedy whether hereunder, at law, or in equity, and every such right and remedy may be exercised by Lessor or Lessee as the case may be from time to time and as often as occasion may arise or as may be deemed expedient. -12- 13 SECTION 28. WAIVER. No waiver by either party to this Lease of any default or breach by the other party in the performance of any of the covenants or obligations of such other party under this Lease shall be deemed to have been made unless contained in writing executed by the party waiving the breach or default. No such consent or waiver shall be deemed or construed to be a consent to or waiver of any other such breach or default. Failure or delay on the part of either party hereto to complain of any act (whether of commission of omission) of the other party hereto or to declare a breach of or default under this Lease, irrespective of how long such failure or delay continues, shall not constitute a waiver by such party hereto of its rights hereunder. No acceptance by Lessor of any payment of Rent or other amount due or owing under this Lease shall be deemed a waiver of any default or breach by Lessee in the performance of any of Lessee's covenants or obligations under this Lease. The receipt by Lessor of less than the full Rent due under this Lease shall not be construed to be other than a payment on account of Rent then due under this Lease, nor shall any statement on Lessee's check or any letter accompanying Lessee's check be deemed an accord and satisfaction with respect to any such Rent, and Lessor may accept such payment without prejudice to Lessor's right to recover the balance of Rent due or to pursue any other rights and remedies provided in this Lease, at law, or in equity. No act (whether of commission or omission) of Lessor or Lessor's agents, employees, directors or officers during the Term of this Lease shall be deemed an acceptance of the surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Lessor. SECTION 29. MORTGAGEE'S APPROVALS, CONSENT AND REQUIREMENTS. Any provisions of this Lease requiring the approval or consent of Lessor shall not be deemed to have been unreasonably withheld if any mortgagee or other holder of an interest in the Premises or any portion thereof shall refuse or withhold its approval or consent thereto. Any requirement of Lessor pursuant to this Lease which is imposed pursuant to the direction of any mortgagee of the Premises or any portion thereof shall be deemed to have been reasonably imposed by Lessor if made in good faith. SECTION 30. SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and shall inure to the benefit of Lessor and Lessee and their respective heirs, administrators, executors, successors, and permitted assigns. SECTION 31. THIRD PARTY RIGHTS. Nothing herein expressed or implied is intended to or shall be construed to confer upon or give to any person or entity other than the parties hereto any right or remedy under or by reason of this Lease. SECTION 32. TIME OF THE ESSENCE, Time is of the essence of this Lease and each and every term and condition hereof. -13- 14 SECTION 33. BROKERS. Lessee represents and warrants to Lessor that it has negotiated this Lease solely and directly with Lessor and that no other person or entity assisted in or brought about on Lessee's behalf the negotiation of this Lease in the capacity of broker, agent, finder or originator. Lessee agrees to indemnify and hold harmless Lessor from any Liabilities and Costs that may be based upon or may be asserted or alleged to be based upon any broker's or agent's commission or finder's or originator's fee or any other compensation to any person or entity with respect to the transaction contemplated by this Lease where such Liabilities and Costs arise out of or are asserted or alleged to arise out of any act (whether of commission or omission) of Lessee or any of its agents, employees, officers and directors. SECTION 34. NOTICES. 34.1 All notices and other communications required or permitted hereunder to be given by either party to the other party shall be in writing and shall be deemed to have been given if delivered personally to a corporate officer or managing agent of such other party or two (2) days after mailed by certified or registered mail, postage prepaid, return receipt requested, and addressed to such other party as follows: If to Lessor: AMPOINT P.O. Box 9040 Toledo, Ohio 43697-9040 Attention: Susan W. Webb If to Lessee: GLASSTECH, INC. 995 4th Street - Ampoint Perrysburg, Ohio 43551 or to such other address or representative as may be designated from time to time by such other party by notice given in the manner provided in this Section 34.1 or with respect to Lessee by leaving said notice at the Premises. 34.2 In the event that the Premises or any part thereof are now or at any time hereafter during the Term subject to a mortgage or other interest and provided that Lessee has been notified in writing of the name and address of the holder thereof, Lessee shall, as long as said mortgage interest shall exist, simultaneously with the giving of any notice to Lessor give a copy of said notice to the mortgagee or other holder of said interest. SECTION 35. FLOOR LOAD. Lessee shall not place or permit to be placed upon any floor of the Premises any item of any nature or items the aggregate weight of which shall exceed the floor's rated floor load limit of one thousand pounds (1,000 lbs.) per square foot. SECTION 36. ASSIGNMENT AND SUBLETTING. Lessee shall not assign or in any manner transfer this Lease or any estate or interest therein or sublet the Premises or any part thereof without the prior written consent of -14- 15 Lessor in each instance, which consent shall not be unreasonably withheld. Notwithstanding any assignment or subletting, Lessee shall at all times remain fully responsible and liable for the performance of all of Lessee's covenants and obligations under this Lease. Lessee shall not mortgage, pledge or otherwise encumber its interest or estate in this Lease or in the Premises. The consent of Lessor to any assignment, subletting, or transfer shall not constitute a waiver of Lessor's right to consent to any subsequent assignment, subletting, or transfer. SECTION 37. QUIET ENJOYMENT. Upon observing and performing the covenants and obligations on Lessee's part to be observed and performed under this Lease, Lessee shall and may peaceably and quietly have, hold, and enjoy the Premises during the Term without any hindrance of any person whomsoever claiming by or through Lessor, subject, however, to all the terms and provisions of this Lease. SECTION 38. SEVERABILITY. If any term or condition of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Lease and the application of such term or condition to any other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. SECTION 39. ENTIRE AGREEMENT: NO ORAL MODIFICATIONS. Lessor and Lessee acknowledge and agree that as between them there are no terms, conditions, covenants, obligations, representations, or warranties, expressed or implied, collateral or otherwise, forming part of or in any way affecting or relating to this Lease, except as expressly set forth herein, and that this Lease constitutes the entire agreement between them. This Lease may not be modified, amended, or supplemented, except by a subsequent agreement in writing, executed by both Lessor and Lessee. SECTION 40. APPLICABLE LAW. This Lease has been executed in the State of Ohio and shall be governed in all respects by the laws of the State of Ohio. SECTION 41. EXECUTION. This Lease shall become effective when it has been signed by a duly authorized officer or representative of each of the parties and has been delivered to the other party hereto. This Lease is being executed simultaneously in multiple counterparts. Each fully executed counterpart shall be deemed an original and it shall not be necessary in making proof of this Lease to produce or account for more than one such counterpart. SECTION 42. CAPTIONS AND EXHIBITS. The section captions contained in this Lease are for convenience of reference only and are not intended and shall not be deemed or construed to limit, enlarge or affect the scope or meaning of this Lease or any term or condition hereof. Section references are TO the corresponding Sections of this Lease. All capitalized references to "Exhibit" in this Lease shall mean the corresponding exhibit attached to, and made a part of, this Lease. -15- 16 SECTION 43. MEMORANDUM OF LEASE. Each of the parties hereto agrees that it shall not publicly record this Lease. Each of the parties agrees to execute and deliver, upon the request of the other party hereto, a memorandum of this Lease in form and substance reasonably satisfactory to each party hereto ("Memorandum of Lease") which may be publicly recorded by either party. SECTION 44. RELOCATION 44.1 Lessor shall have the right at any time from the date of this Lease through the end of the Term, inclusive, to relocate the Premises or any part thereof to another part of the Complex upon the following conditions: (1) the Premises or such part thereof as so relocated shall be substantially the same in size, dimensions, configuration, decor and nature as the Premises or such part thereof before such relocation, and shall be placed in that condition by Lessor at its sole cost and expense, (2) Lessor shall give Lessee at least thirty (30) days written notice of Lessor's intention to so relocate the Premises or such part thereof, (3) the physical relocation of the personal property of Lessee upon, in and about the Premises or such part thereof at the time of such relocation shall be accomplished (a) at the sole cost and expense of Lessor, and (b) in a manner so as to interrupt and inconvenience Lessee and its use and occupancy of the premises or such part thereof to the minimum extent reasonably possible, and (4) if the Premises or such part thereof as so relocated comprise a greater amount of rentable space than that in the Premises or such part thereof before such relocation, the Base Rent shall be increased by a proportion equal to the proportion of such increase in such rentable space. 44.2 Upon the occurrence of any such relocation pursuant to Section 44.1, the parties hereto shall immediately execute an amendment to this Lease reflecting the relocation of the Premises and the increase of Base Rent, if any, and at the request of either party hereto an amendment to the Memorandum of Lease (as defined in Section 43), if any, which amendment to the Memorandum of Lease may thereafter be recorded by either party. SECTION 45. SECURITY DEPOSIT. ($6,840) as security for the full and faithful performance of each of the obligations and covenants imposed upon Lessee under this Lease. If Lessee shall default in the payment of Rent or in the performance of any other covenant or obligation, Lessee hereby authorizes Lessor, at Lessor's election, without notice and without terminating this Lease, to apply the funds so deposited as security in the payment of any Rent due hereunder or in remedying any other default hereunder. Any action taken by Lessor under this Section 45 shall not be construed to be a waiver of any other rights or remedies of Lessor whether under this Lease, at law, or in equity, or any of Lessor's rights in case of any subsequent default to enforce any such right or remedy including without limitation the rights and remedies set forth in this Section 45. If said security or any part thereof is used, applied, or retained in curing any such default, Lessee upon demand shall immediately deposit with Lessor as additional security an amount in cash equal to the amounts so used, applied, or retained, and if Lessee shall fail to do so, such failure shall constitute a default under this Lease, affording Lessor the same rights and remedies as a default in payment of Rent. Within sixty (60) days after the expiration of the Term, whether by lapse of time or otherwise, provided Lessee shall not be in default under this Lease and shall have complied with all of the covenants and obligations imposed upon Lessee under this Lease, -16- 17 including, without limitation, the yielding up of the immediate possession of the Premises to Lessor, Lessor shall upon being furnished with affidavits and other satisfactory evidence by Lessee that Lessee has paid all bills incurred by Lessee in connection with Lessee's performance of all such covenants and obligations, return to Lessee said sum on deposit or such portion thereof then remaining on deposit with Lessor hereunder. No interest shall be payable on Lessee's security deposit, which deposit shall not be held in trust by Lessor and may be co-mingled with Lessor's other funds. IN WITNESS WHEREOF, the parties hereto have executed or caused to be executed this Lease on the day and year first above written. AMPOINT, a division of Webb Corporation By: /s/ Susan W. Webb ------------------------------- Susan W. Webb, President GLASSTECH, INC. By: /s/ Thomas Hulane ------------------------------- V.P. Manufacturing (Title) ------------------ -17- EX-10.4 12 EXHIBIT 10.4 1 EXHIBIT 10.4 ADVISORY AGREEMENT ADVISORY AGREEMENT ("Agreement"), dated July 2, 1997, by and between Key Equity Capital Corporation ("KECC"), and Glasstech Sub Co., a Delaware corporation (the "Company"). BACKGROUND The Company desires to receive general financial and other business advisory services from KECC, and thereby obtain the benefit of the experience of KECC in business and financial matters generally and its knowledge of the Company and the Company's financial affairs in particular. KECC is willing to provide general financial and other business advisory services to the Company. Accordingly, the compensation arrangements set forth in this Agreement are designed to compensate KECC for such services. NOW, THEREFORE, in consideration of the foregoing premises and the respective agreements hereinafter set forth and the mutual benefits to be derived herefrom, KECC and the Company hereby agree as follows: TERMS 1. ENGAGEMENT. The Company hereby engages KECC as a general financial and business advisor, and KECC hereby agrees to provide only general financial and business advisory 2 services to the Company, all on the terms and subject to the conditions set forth below. This Agreement shall be effective as of the date the Company merges (the "Merger") with and into Glasstech, Inc., a Delaware corporation (the "Effective Date"). This Agreement shall survive the Merger and shall be binding upon Glasstech, Inc. in all respects after the consummation of the Merger. All references in this Agreement to the Company shall mean and include Glasstech Sub Co. and Glasstech, Inc., after the consummation of the Merger. 2. SERVICES OF KECC. (a) KECC hereby agrees during the term of this engagement to consult with the Company's board of directors (the "Board") and management of the Company and its subsidiaries in such manner and on such general business and financial matters as may be reasonably requested from time to time by the Board, including but not limited to: (i) corporate strategy; (ii) budgeting of future corporate investments; and (iii) acquisition and divestiture strategies. The parties hereto agree that the services to be provided hereunder shall include only general financial and other advisory services. In the event the Company -2- 3 requests extraordinary services (e.g., obtaining debt or equity financing or coordinating or negotiating the consummation of acquisitions or divestitures), additional fees may be charged pursuant to arrangements to be mutually agreed upon by the Company and KECC. (b) The services provided pursuant to this Agreement are advisory only and the Company is free to accept or reject the advice rendered by officers or employees of KECC or its affiliates. 3. COMPENSATION. (a) The Company agrees to pay to KECC as compensation for services to be rendered by KECC hereunder, a fee based upon the number of hours of service rendered by KECC at such rates as are in effect from time to time; provided that the fee for all services hereunder ("Advisory Fees") shall in no event exceed $200,000 for each calendar year. Payments shall be made quarterly in arrears on the last business day of March, June, September and December each year and any hours actually worked during a period which exceed the number of hours charged for such period shall be carried forward to future periods. -3- 4 (b) The parties hereto reasonably believe that services rendered pursuant to this Agreement will require payment of Advisory Fees averaging $50,000 per calendar quarter. Therefore, the Company many, in its sole discretion, choose to make estimated payments of $50,000 per calendar quarter. 4. EXPENSE REIMBURSEMENT. The Company shall promptly reimburse KECC for such reasonable travel expenses and other out-of- pocket fees and expenses as may be incurred by KECC, its directors, officers and employees in connection with the rendering of services hereunder. Such expenses shall be in addition to any Advisory Fees and shall not affect the maximum amount of Advisory Fees payable pursuant to paragraph 3 above. 5. TERM. (a) This Agreement shall be in effect for an initial term commencing on the Effective Date and terminating on the tenth anniversary date of the Effective Date; provided, however, that this Agreement may be terminated upon 30 days notice at any time by the Company's Board of Directors, and further provided that this Agreement shall terminate on the first to occur of (i) the date of a Qualified Public Offering (as defined below), (ii) the date of the sale of all or substantially all of the -4- 5 assets of the Company or all of its material subsidiaries, (iii) the date of the delivery by the Company to KECC of a notice of termination for Cause, or (iv) 30 days after the date of the delivery by KECC to the Company of a notice of termination for any reason, including any breach of this Agreement by the Company. No termination of this Agreement, whether pursuant to this paragraph or otherwise, shall affect the Company's obligations with respect to the fees, costs and expenses incurred by KECC in rendering services hereunder and not reimbursed by the Company as of the effective date of such termination. (b) "Cause" means (i) the conviction of KECC or any individual employed by KECC and providing consulting services hereunder on behalf of KECC (a "Consultant") of any crime involving dishonesty or moral turpitude or (ii) the commission by any Consultant of any act which in any material respect undermines the integrity, reputation or financial viability of the Company (other than acts based upon the exercise of good faith business judgment), all as determined by a resolution of the Board. (c) "Affiliate" means, with respect to any person, any other person which, directly or indirectly, controls, is controlled by or under common control with, such -5- 6 person and includes any person that would be deemed to be an "affiliate" or "associate" of such person as each term is defined in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities and Exchange Act of 1934, as amended. (d) "Qualified Public Offering" means the sale of shares of the Company's common stock by the Company in one or more public offerings pursuant to a registration statement (other than (i) a registration statement on Forms S-4 or S-8 or any successor forms or any other registration statement relating to a special offering to the Company's employees or then-existing security holders or (ii) a registration statement registering shares of the Company's common stock to be sold in an underwritten public offering of a combination of debt and the Company's common stock in which not more than 20% of the gross proceeds received from the sale of such securities is attributed to such common stock) filed with, and declared effective by, the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, resulting in receipt by the Company of at least [$30,000,000] in aggregate gross proceeds' provided that at or about the time of such sale shares of the Company's common stock shall be listed for trading on the New York Stock Exchange or the American Stock Exchange, or shall be quoted on the -6- 7 National Association of Securities Dealers Automated Quotations System. 6. INDEMNIFICATION. The Company agrees to indemnify and hold harmless KECC, its directors, officers and employees against and from any and all loss, liability, suits, claims, costs, damages and expenses (including attorneys' fees) arising from their performance hereunder, except as a result of their gross negligence or intentional wrongdoing. 7. KECC AN INDEPENDENT CONTRACTOR. KECC and the Company agree that KECC shall perform services hereunder as an independent contractor, retaining control over and responsibility for its own operations and personnel. Neither KECC nor its directors, officers, or employees shall be considered employees or agents of the Company as a result of this Agreement nor shall any of them have authority under this Agreement to contract in the name of or bind the Company, except as expressly agreed to in writing by the Company. 8. NOTICES. Any notice, report or payment required or permitted to be given or made under this Agreement by one party to the other shall be deemed to have been duly given or made if personally delivered or, if mailed, when mailed by registered or certified mail, postage prepaid, to the other party at the following addresses (or at such other -7- 8 address as shall be given in writing by one party to the other): If to KECC: Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114-1306 Attention: David Given If to the Company: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 9. ENTIRE AGREEMENT. This Agreement (a) contains the complete and entire understanding and agreement of KECC and the Company with respect to the subject matter hereof; and (b) supersedes all prior and contemporaneous understandings, conditions and agreements, oral or written, express or implied, respecting the engagement of KECC in connection with the subject matter hereof. 10. AMENDMENT. This Agreement may be amended only with the written consent of both KECC and the Company. 11. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of that provision or any other provision hereof. -8- 9 12. ASSIGNMENT. Neither KECC nor the Company may assign its rights or obligations under this Agreement without the express written consent of the other. 13. CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Ohio, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Ohio or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Ohio. IN WITNESS WHEREOF, KECC and the parties hereto have caused this Agreement to be duly executed and delivered on the date and year first above written. KEY EQUITY CAPITAL CORPORATION By: /s/ David P. Given Its: President GLASSTECH SUB CO. By: /s/ Mark D. Christman Its: President -9- EX-10.5 13 EXHIBIT 10.5 1 Exhibit 10.5 __________, 1997 EXCHANGE AGENT AGREEMENT United States Trust Company of New York 111 Broadway, Lower Level New York, New York 10006 Attention: Corporate Trust Ladies and Gentlemen: Glasstech, Inc., a Delaware corporation ("the Company"), proposes to make an offer (the "Exchange Offer") to exchange its 12 3/4% Senior Notes Due 2004 (the "Old Notes") for its Series B 12 3/4% Senior Notes Due 2004 which we expect to be registered under the Securities Act of 1933, as amended (the "New Notes"). The terms and conditions of the Exchange Offer, as currently contemplated are set forth in a prospectus, dated ___________, 1997 (the "Prospectus"), proposed to be distributed to all record holders of the Old Notes. The Old Notes and the New Notes are collectively referred to herein as the "Notes." The Company hereby appoints United States Trust Company of New York to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to United States Trust Company of New York. The Exchange Offer is expected to be commenced by the Company on or about ____________, 1997. The Letter of Transmittal accompanying the Prospectus (or in the case of book entry securities, the ATOP system) is to be used by the holders of the Old Notes to accept the Exchange Offer and contains instructions with respect to the delivery of certificates for Old Notes tendered in connection therewith. The Exchange Offer shall expire at 5:00 P.M., New York City time, on ____________, 1997, or on such later date or time to which the Company may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (confirmed in writing within 24 hours) or written notice to you before 9:00 A.M., New York City time, on the business day following the previously scheduled Expiration Date. The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Old Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified in the Prospectus under the caption "The Exchange Offer - -- Conditions." The Company will give oral (confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. 2 In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth in the Prospectus or as specifically set forth herein; provided, however, that in no way will your general duty to act in good faith be discharged by the foregoing. 2. You will establish an account with respect to the Old Notes at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within two business days after the date of the Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of the Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into your account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. 3. You are to examine each of the Letters of Transmittal and certificates for Old Notes (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility) and any other documents delivered or mailed to you by or for holders of the Old Notes to ascertain whether: (i) the Letters of Transmittal and any such other documents are duly executed and properly completed in accordance with instructions set forth therein and (ii) the Old Notes have otherwise been properly tendered. In each case where the Letter of Transmittal or any other document has been improperly completed or executed or any of the certificates for Old Notes are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will use all reasonable efforts to inform the presenters of the need for fulfillment of all requirements and to take any other action as may be necessary or advisable to cause such irregularity to be corrected. 4. With the approval of Mark D. Christmann or Kenneth H. Wetmore of the Company (such approval, if given orally, to be confirmed in writing) or any other party designated by such officers in writing, you are authorized to waive any irregularities in connection with any tender of Old Notes pursuant to the Exchange Offer. 5. Tenders of Old Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer -- Procedures for Tendering," and Old Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 5, Old Notes which Mark D. Christmann or Kenneth H. Wetmore of the Company shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be confirmed in writing). 6. You shall advise the Company with respect to any Old Notes received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Old Notes. -2- 3 7. You shall accept tenders: (a) in cases where the Old Notes are registered in two or more names only if signed by all named holders; (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and (c) from persons other than the registered holder of Old Notes provided that customary transfer requirements, including any applicable transfer taxes, are fulfilled. You shall accept partial tenders of Old Notes where so indicated, and as permitted in the Letter of Transmittal, and deliver certificates for Old Notes to the transfer agent for split-up and return any untendered Old Notes to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. 8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify you (such notice if given orally, to be confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Old Notes properly tendered and you, on behalf of the Company, will exchange such Old Notes for New Notes and cause such Old Notes to be canceled. Delivery of New Notes will be made on behalf of the Company by you at the rate of $1,000 principal amount of New Notes for each $1,000 principal amount of Old Notes tendered promptly after notice (such notice if given orally, to be confirmed in writing) of acceptance of said Old Notes by the Company; provided, however, that in all cases, Old Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Old Notes (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, and any other required documents. You shall issue New Notes only in denominations of $1,000 or any integral multiple thereof. 9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. 10. The Company shall not be required to exchange any Old Notes tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to exchange any Old Notes tendered shall be given (and confirmed in writing) by the Company to you. 11. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Old Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "The Exchange Offer -- -3- 4 Conditions" or otherwise, you shall (as soon as practicable after the expiration or termination of the Exchange Offer) return those certificates for unaccepted Old Notes (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them. 12. All certificates for reissued Old Notes, unaccepted Old Notes or for New Notes shall be forwarded by first-class mail. 13. You are not authorized to pay or offer to pay any concessions, commissions or solicitation fees to any broker, dealer, bank or other persons or to engage or use any person to solicit tenders. 14. As Exchange Agent hereunder you: (a) shall have no duties or obligations other than those specifically set forth herein or as may be subsequently agreed to in writing by you and the Company; (b) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates or the Old Notes represented thereby deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; (c) shall not be obligated to take any legal action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with reasonable indemnity; (d) may reasonably rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed by the proper party or parties; (e) may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or represented by a proper person or persons; (f) may rely on and shall be protected in acting upon written or oral instructions from any officer of the Company; (g) may consult with your counsel with respect to any questions relating to your duties and responsibilities, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the advice or opinion of such counsel; and -4- 5 (h) shall not advise any person tendering Old Notes pursuant to the Exchange Offer as to the appropriateness of making such tender or as to the market value or decline or appreciation in market value of any Old Notes. 15. You shall take such action as may from time to time be requested by the Company or its counsel (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms as may be approved from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. All other requests for information relating to the Exchange Offer shall be directed to the Company, Attention: Kenneth H. Wetmore. 16. You shall advise by facsimile transmission or telephone, and promptly thereafter confirm in writing to Kenneth H. Wetmore of the Company and such other person or persons as it may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested) up to and including the Expiration Date, as to the number of Old Notes which have been tendered pursuant to the Exchange Offer and the items received by you pursuant to this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Company or any such other person or persons authorized by the Company, upon oral request made from time to time prior to the Expiration Date, such other information as it or he or she reasonably requests. Such cooperation shall include, without limitation, the granting by you to the Company, and such person as the Company may request, of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company shall have received information in sufficient detail to enable it to decide whether to extend the Exchange Offer. You shall prepare a final list of all persons whose tenders were accepted, the aggregate principal amount of Old Notes tendered, the aggregate principal amount of Old Notes accepted, and shall deliver said list to the Company. 17. Letters of Transmittal and Notices of Guaranteed Delivery shall be stamped by you as to the date and the time of receipt thereof and shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities. You shall dispose of unused Letters of Transmittal and other surplus materials by returning them to the Company. 18. You hereby expressly waive any lien, encumbrance or right of setoff whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Company, or any of its subsidiaries or affiliates, pursuant to any loan or credit agreement with you or for compensation owed to you hereunder. -5- 6 19. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation as set forth on the fee schedule delivered pursuant to the initial offering of the Old Notes. 20. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time) on the other hand, shall be resolved in favor of the latter two documents, except with respect to the duties, liabilities and indemnification of you as Exchange Agent, which shall be controlled by this Agreement. 21. The Company covenants and agrees to indemnify and hold you harmless in your capacity as Exchange Agent hereunder against any loss, liability, cost or expense, including attorneys' fees and expenses, arising out of or in connection with any act, omission, delay or refusal made by you in reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Old Notes reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Old Notes; provided, however, that the Company shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of your gross negligence or willful misconduct. In no case shall the Company be liable under this indemnity with respect to any claim against you unless the Company shall be notified by you, by letter or by facsimile confirmed by letter, of the written assertion of a claim against you or of any other action commenced against you, promptly after you shall have received any such written assertion or notice of commencement of action. The Company shall be entitled to participate at its own expense in the defense of any such claim or other action, and, if the Company so elects, the Company shall assume the defense of any suit brought to enforce any such claim. In the event that the Company shall assume the defense of any such suit, the Company shall not be liable for the fees and expenses of any additional counsel thereafter retained by you so long as the Company shall retain counsel satisfactory to you to defend such suit. 22. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. The Company understands that you are required to deduct 31% on payments to holders who have not supplied their correct Taxpayer Identification Number or required certification. Such funds will be turned over to the Internal Revenue Service in accordance with applicable regulations. 23. You shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Old Notes, your check in the amount of all transfer taxes so payable, and the Company shall reimburse you for the amount of any and all transfer taxes payable in respect of the exchange of Old Notes; provided, however, that you shall reimburse the Company for amounts refunded to you in respect of your payment of any such transfer taxes at such time as such refund is received by you. -6- 7 24. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, and without regard to conflicts of law principles, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto. 25. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 26. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 27. This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally. 28. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Company: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Facsimile: (419) 661-9366 Attention: Kenneth H. Wetmore If to the Exchange Agent: United States Trust Company of New York 111 Broadway, Lower Level New York, New York 10006 Facsimile: (212) 780-0592 Attention: Corporate Trust Corporate Trust Window 29. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this Agreement. Upon any termination of this -7- 8 Agreement, you shall promptly deliver to the Company any certificates for funds or property then held by you as Exchange Agent under this Agreement. 30. This Agreement shall be binding and effective as of the date hereof. Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. GLASSTECH, INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- Accepted as of the date first above written: United States Trust Company of New York, as Exchange Agent By: -------------------------------- Name: ------------------------------ Title: ----------------------------- -8- EX-10.6 14 EXHIBIT 10.6 1 Exhibit 10.6 EMPLOYMENT AGREEMENT OF JOHN S. BAXTER WITH GLASSTECH, INC. This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING CO., a Delaware corporation with its principal place of business at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and JOHN S. BAXTER (SSN ###-##-####), an individual residing at 9689 Oakhaven, Perrysburg, Ohio 43551 (the "Executive Employee"). BACKGROUND ---------- This Employment Agreement covers the employment of the Executive Employee by Glasstech. Now therefore, Glasstech and the Executive Employee, in consideration of the mutual promises herein contained and intending to be legally bound hereby, agree as follows: 1. TERM. Glasstech hereby employs the Executive Employee as Senior Vice President, Marketing & Sales, and the Executive Employee hereby accepts such employment, from the date of this Employment Agreement to June 30, 2002 unless sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual anniversary thereafter, this Employment Agreement shall automatically renew for an additional one (1) year period (the "Renewal Term" or the "Renewal Terms") unless either party notifies -1- 2 the other party in writing of its or his intention not to renew the Employment Agreement (the "Renewal Termination Notice") not less than six (6) months prior to the expiration of the last year of the Term or of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this Employment Agreement. 2. DUTIES. The Executive Employee, in his capacity as Senior Vice President, Marketing & Sales of Glasstech (or such other and comparable titles and positions as shall be given the Executive Employee by Holding Board of Directors), shall perform for Glasstech the services currently performed by him for Glasstech (or comparable services or other reasonable duties as he and Glasstech may agree upon), subject to the reasonable direction of Holding's Board of Directors. The Executive Employee shall perform such services in Wood County, Ohio, or at such other location or locations where he may be assigned by Glasstech from time to time, provided, however, that the Executive Employee shall not be required, in connection with his performance of such services, to travel on behalf of Glasstech in a manner inconsistent with the scope of his duties and the past practices of Glasstech. The Executive Employee shall devote his business time and effort to the Employment Agreement performance of his duties as described herein as reasonably required. It is understood that the Executive Employee may attend to outside investments, serve as a director and/or officer of a non-competing company and serve as an officer, director, or participant in educational, welfare, social, religious, and civic organizations so long as such activities do -2- 3 not materially interfere with the Executive Employee's employment hereunder. 3. COMPENSATION. 3.1 BASE SALARY. Glasstech shall pay the Executive Employee during each calendar year of the Term and each Renewal Term hereunder, a minimum salary of Two Hundred Thirteen Thousand Four Hundred Thirty-Eight Dollars ($213,438) per calendar year adjusted as provided in Section 3.5 (hereinafter referred to as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly installments, less such deductions as shall be required to be withheld by applicable law and regulations. Part of this salary may be payable by Glasstech Limited in the United Kingdom as renumeration for duties there. 3.2 PERFORMANCE BONUS. Executive Employee shall participate in Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal year (commencing with the fiscal year ending June 30, 1998), Holding's Board of Directors will establish the Pool which, at a minimum, shall be calculated according to the following bonus chart (the "Bonus Chart"): Percentage of Total Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool - ---------------------------- ------------------ ---------- $14,000,000 to $14,999,999 5.0% $700,000 to $750,000 $15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000 $16,000,000 and Above 10.0 $1,600,000 and Above For purposes of this Section, EBITDA shall be subject to the following adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses paid to middle managers other than -3- 4 executive managers; and (Z) EBITDA shall be increased in the amount of any advisory fees paid to Key Equity Capital Corporation or its affiliates. Notwithstanding the foregoing, in the event Glasstech's EBITDA for any fiscal year after the year ending June 30, 1998 (the "Base Year") is less than $16,000,000 (the "Target"), the Board of Directors shall calculate the average EBITDA of Glasstech from the Base Year through and including the fiscal year in which the Target was not achieved. Using the Bonus Chart above, the Board of Directors shall pay the participants (including but not limited to the Executive Employee) the greater of (i) the amount of the Pool using the actual EBITDA for such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for such fiscal year. If the Pool is not ten (10%) percent of the EBITDA in any fiscal year during the Term of this Employment Agreement, such as in year 2001 in the example below, the Board of Directors shall, in each succeeding fiscal year during the Term of this Employment Agreement, calculate the average EBITDA of Glasstech from the Base Year through and including such succeeding fiscal year. If the average EBITDA is greater than the actual EBITDA for any prior fiscal year (or the average EBITDA used in a prior fiscal year), then the Board of Directors, using the Bonus Chart, shall pay the participants (including but not limited to the Executive Employee) an amount equal to (i) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA calculated in such succeeding fiscal year, multiplied by the actual EBITDA for such -4- 5 fiscal year less (ii) the amount of the Pool actually distributed to participants in such prior fiscal year. EXAMPLE: - -------- Fiscal Year Percentage of Total Bonus Year EBITDA Fiscal Year EBITDA Pool - ---- ------ ------------------ ---- 1998 $18,000,000 10% $1,800,000 1999 $20,000,000 10% $2,000,000 2000 $13,000,000(1) 10% $1,300,000 2001 $12,000,000(2) 7.5% $ 900,000 2002 $20,000,000 10% $2,000,000 $ 300,000(3) ---------- $2,300,000 Not later than 10 business days after delivery to Glasstech of its fiscal year audit at the end of each fiscal year commencing with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in consultation with the President and Chief Executive Officer, shall distribute the Pool to the participants therein (including but not limited to the Executive Employee) in such percentages as the Board of Directors determines appropriate; provided, that, in no event shall the Board of Directors distribute less than the entire Pool as calculated above in any fiscal year commencing with the fiscal year ending June 30, 1998. - -------- 1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 + $20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10% of EBITDA for that year. 2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 + $20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated based upon 7.5% of EBITDA for that year. 3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal year 2001 ($900,000). -5- 6 3.3 RESTRICTED STOCK PROGRAM. (a) Holding hereby awards to Executive Employee 266.72 shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"), which shall be subject to forfeiture in accordance with the provisions set forth herein. On each of the first four anniversary dates of this Employment Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long as his employment has not been terminated on or before such date pursuant to the provisions of Section 6 of this Employment Agreement. Subject to the forfeiture provisions set forth herein, Executive Employee shall be entitled to full and complete ownership of the Class C Shares and will be treated as the record and beneficial owner of such for all purposes including, but not limited to, payment of dividends and liquidation rights, provided that Executive Employee shall be bound by all of the provisions of the Stockholders' Agreement of even date herewith, among the Company, Executive Employee and the other stockholders of the Company (the "Stockholders' Agreement). (b) The certificates representing awarded Class C Shares shall not be delivered to Executive Employee until the restrictions as to such Class C Shares have lapsed. If Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a), Executive Employee shall forfeit to Holding all such Class C Shares for which the restrictions have not yet lapsed. In this regard, simultaneously with the issuance of certificates representing awarded Class C Shares, Executive Employee shall execute and deliver stock powers forfeiting to -6- 7 Holding Class C Shares awarded hereunder for which the restrictions have not yet lapsed in the event Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a). Executive Employee acknowledges that Class C Shares awarded hereunder shall be subject to the restrictions and risks of forfeiture contained herein and in the Stockholders' Agreement. (c) Subject to Section 3.3(h), Executive Employee hereby agrees that he shall pay to Holding, in cash, any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to him hereunder. If Executive Employee does not make such payment to Holding, then Holding shall have the right to deduct from any payment of any kind otherwise due to Executive Employee from Holding (or from any subsidiary of Holding), any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to Executive Employee hereunder. (d) Holding shall not issue Preferred Stock, Options or Warrants or any otherwise dilutive securities without the consent of the representative(s) of Key Equity Capital Corporation and the representative(s) of executive management on the Board of Directors and unless such securities are sold for fair market value, the proceeds of which are used for appropriate corporate purposes as determined by the Board of Directors. All shareholders of Class A, Class B or Class C Common Stock have the pre-emptive rights described in the Stockholders' Agreement. -7- 8 (e) "Change of Control" shall mean any one of the following events: (i) the transfer, sale or other disposition of the Common Stock of Holding which results in the current stockholders of Holding (determined as of the date hereof) owning in the aggregate less than a majority of the outstanding voting capital stock of Holding; (ii) any consolidation of Holding with, or merger of Holding into, any other entity, any merger of another entity into Holding, or any sale or transfer (in any one transaction or a series of transactions) of all or substantially all of the assets of Holding to another entity (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of Holding or (z) any consolidation with or merger of Holding into a wholly owned subsidiary of Holding, or any sale or transfer by Holding of all or substantially all of its assets to one or more of its wholly owned subsidiaries in any one transaction or a series of transactions). Notwithstanding the foregoing, a "Change in Control" shall not include any transaction permitted under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to the contrary in this Employment Agreement, so long as Executive Employee's employment has not been terminated pursuant to the provisions of Section 6 before the date of a Change of Control, the restrictions with respect to all of the Class C Shares shall immediately lapse upon a Change of Control. (f) Executive Employee understands that the Class C Shares have not been registered under the Securities Act of 1993, as amended (the "1933 Act") or any state securities laws. -8- 9 Executive Employee represents that the Class C Shares awarded hereunder are not being acquired by Executive Employee with a view toward resale or distribution and Executive Employee will not sell or otherwise transfer such Class C Shares except in compliance with the 1933 Act. The certificates representing the Class C Shares shall bear such legends and statements evidencing the restrictions contained in this Employment Agreement and as the Board of Directors of Holding shall deem advisable to assure compliance with federal and state securities laws and regulations. (g) The award of the Class C Shares to Executive Employee hereunder shall not confer any right to Executive Employee to continue in the employ of Glasstech or any of its subsidiaries and shall not restrict or interfere in any way with the right of Glasstech to terminate his employment with or without cause, at any time. (h) Executive Employee may file an "83(b) election" with the Internal Revenue Service with respect to the Class C Shares. If Executive Employee does file such an 83(b) election, Holding shall loan Executive Employee an amount equal to 80% of Executive Employee's tax liability resulting from such 83(b) election (the "Loan Amount") subject to the following terms: (i) Executive Employee shall execute and deliver to Holding a Promissory Note in the form of Exhibit A attached hereto and made a part hereof (the "Class C Note"); (ii) the principal amount of the Class C Note shall be equal to the Loan Amount and shall accrue interest at the annual applicable federal rate for mid-term obligations as of the month in which the Class C Note is issued; and (iii) the Executive Employee shall execute and deliver to -9- 10 Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a part hereof with respect to all shares of Class A Voting Common Stock of Holding and all Class C Shares held by Executive Employee. 3.4 CLASS D SHARES. Executive Employee shall also be issued 1,800 shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share Program") and subject to the terms and conditions of Section 9 of the Stockholders' Agreement. 3.5 COST OF LIVING INCREASE. The Base Salary provided for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if any, in the cost of living by adding to the Base Salary an amount obtained by multiplying the Base Salary by the percentage by which the level of the Consumer Price Index North Central Region (for all items for urban wage earners and clerical workers as reported for December 31 of each calendar period by the Bureau of Labor Statistics of the United States Department of Labor) has increased over its level as of January I of the same calendar year. 3.6 BENEFITS. The Executive Employee shall be entitled during the Term and during any Renewal Terms to participate in such group life, hospitalization and/or disability insurance benefits, health programs, qualified or non-qualified deferred compensation plans or similar benefits which are comparable to those made available by Glasstech on the date of this Employment Agreement or thereafter to its executive employees generally, subject to the eligibility provisions of such plans. -10- 11 3.7 VACATIONS. The Executive Employee shall be entitled to vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which relating to vacation and personal leave are hereby incorporated into this Employment Agreement by reference. 3.8 INSURANCE. Glasstech agrees to pay life insurance and/or annuity premiums on a policy(ies) selected by and insuring the life of the Executive Employee with a beneficiary(ies) to be named by the Executive Employee. The parties hereto agree that Glasstech shall not be obligated to pay any premium greater than Five Thousand Dollars ($5,000) during the first year of the Term and such amount shall be increased by Five Hundred Dollars ($500) each year thereafter during the Term or during any of the Renewal Terms. The parties further agree that the Executive Employee shall be permitted from time to time, during the Term, or any Renewal Terms, to maintain such policy(ies), or to exchange such policy(ies), or to acquire any new life insurance and/or annuity products, provided however, that the portion of the premiums and costs to be paid by Glasstech in connection with such policy(ies) shall not exceed the amounts specified above. Glasstech expressly acknowledges that it shall have no right, title or interest in and to such policy(ies), the same being the exclusive property of the Executive Employee. 3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the Executive Employee for all reasonable expenses actually incurred or paid by the Executive Employee during the Term or any Renewal Term in performance of the Executive Employee's -11- 12 services under this Employment Agreement, subject to receipt by Glasstech of reasonable supporting documentation. Glasstech shall pay or reimburse the Executive Employee for round trip coach air travel up to four (4) times per year between Perrysburg and the United Kingdom for the Executive Employee and up to two (2) guests. Glasstech shall pay or reimburse the Executive Employee for costs incurred in connection with the relocation of the Executive Employee and his dependents to the United Kingdom upon the termination of his employment or his death. 4. TERMINATION UPON DEATH. In the event the Executive Employee dies during the Term or any Renewal Term, for a period of six (6) months following such death Glasstech agrees to continue to pay to the surviving spouse of the Executive Employee the Base Salary rate of the deceased Executive Employee in effect at the time of death in equal bi-weekly installments less such deductions required to be withheld by applicable law and regulations. The salary continuation payable as provided herein shall be in addition to any right of the estate of the deceased Executive Employee to (a) participate in the Pool (in accordance with Section 3.2 above) in the fiscal year in which such death occurred and to receive a prorated amount for the portion of the fiscal year in which Executive Employee was alive, provided, however, that the level of such participation shall be subject to the discretion of Holding Board of Directors, and (b) to participate in the Performance Share Program as set forth therein. Upon the death of the Executive Employee, the restrictions on all Class C Shares shall lapse and -12- 13 such Class C Shares shall be released to the estate of the deceased Executive Employee. Glasstech shall also remit to the estate of the deceased Executive Employee any other benefits earned and accrued or payable up to the date of such death and shall reimburse to the estate of the deceased Executive Employee any outstanding unreimbursed expenses incurred by such Executive Employee on behalf of Glasstech and documented as provided herein. In the event the deceased Executive Employee is not survived by a spouse or in the further event the deceased Executive Employee and his spouse are separated at the time of death by agreement, court order or decree, or otherwise, then such salary continuation shall be remitted to the estate of the deceased Executive Employee. 5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY. In the event the Executive Employee becomes disabled during the Term or any Renewal Term by virtue of ill health or other disability and is thereby unable to perform on a full time basis substantially and continuously the duties assigned to him by Glasstech, Glasstech agrees to continue the Executive Employee's Base Salary until such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage. At such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage (a "Disability"), Glasstech shall have no further obligation to compensate the Executive Employee (except that Glasstech shall continue to provide group life and health benefits to Executive Employee consistent with those provided to other executive employees for a period of two (2) years from the -13- 14 date on which Executive Employee's long term disability benefits commence) and further Glasstech shall have the right to terminate the employment of the Executive Employee hereunder upon written notice delivered pursuant to Section 13. In the event of such Disability, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee. Executive Employee shall participate in the Performance Share Program as set forth therein. 6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. (a) Notwithstanding any other provision of this Employment Agreement, Glasstech may terminate the Executive Employee's employment at any time for Cause (as hereinafter defined) and the Executive Employee may voluntarily terminate the Executive Employee's employment with Glasstech. Upon such termination for Cause or upon Executive Employee's voluntary termination, Executive Employee shall not participate in the Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his termination occurred, and Executive Employee shall automatically forfeit those shares of Restricted Stock for which the restrictions would have lapsed (pursuant to Section 3.3) in the contract year in which his termination occurred and any subsequent year and shall participate in the Performance Share Program as set forth therein. Upon such termination for Cause or upon Executive Employee's voluntary termination, the Executive Employee shall be entitled to, except as restricted in the preceding sentence, receive any salary and other benefits earned or accrued, and reimbursement for expenses incurred, prior to the date of termination. -14- 15 (b) "Cause" shall mean (i) the Executive Employee's willful and continuing affirmative refusal to perform his or her duties hereunder (other than as a result of a Disability); (ii) dishonesty in the performance of his or her duties hereunder which results in criminal indictment of the Executive Employee; (iii) the Executive Employee's breach of any material term of this Employment Agreement (provided that Glasstech shall give the Executive Employee written notice of such breach and a thirty (30) day period after notice to cure such breach, except that no notice or cure period shall be given or extended with respect to breach of the provisions of Section 8 of this Employment Agreement); or (iv) the Executive Employee's conviction for a felony or for a crime which, in the reasonable judgment of Glasstech, renders the Executive Employee unable to perform his duties as described in this Employment Agreement. 7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated prior to the end of the Term or any Renewal Term other than pursuant to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a termination "Without Cause"), the Executive Employee shall be entitled to (in addition to such other rights as he may have, or damages to which he may be entitled at law or in equity) (i) all payments when due of any salary and other benefits (including, without limitation, participation in the Performance Bonus pursuant to Section 3.2) accrued through the date of termination, including the payment of all salary due for the remainder of the Term or Renewal Term as though the Executive Employee had remained employed through the full Term (or, if renewed, the Renewal Term) of the Employment Agreement, (ii) the -15- 16 restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee, and (iii) participation in the Performance Share Program as set forth therein. 8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges that (i) the principal business of Glasstech is design, manufacture, marketing, sale, distribution and servicing of glass bending, tempering and annealing equipment worldwide to both automotive glass fabricators and architectural glass producers and the principal business of Stir-Melter, Inc. is the vitrification of hazardous waste (collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited number of persons throughout the world which has developed such business; (iii) the Glasstech Business is, in large part, international in scope and Glasstech's customers, potential customers and competitors are located throughout the world; (iv) the Executive Employee's work for Glasstech has given and will continue to give him access to the confidential affairs and proprietary information of Glasstech; (v) this Employment Agreement has been entered into as part of a series of transactions pursuant to which Executive Employee and others have purchased an equity interest in Glasstech and sold their equity interest in Glasstech; and (vi) Glasstech would not have entered into this Employment Agreement but for the agreements and covenants of the Executive Employee contained in this Section 8. Accordingly, the Executive Employee covenants and agrees that: (a) he shall not, anywhere in the world directly or indirectly, (1) engage in Glasstech Business for his own account or that of any other person; (2) render any services related to the -16- 17 Glasstech Business to any person (other than Glasstech) engaged in such activities; or (3) become interested in any such person (other than Glasstech) as a partner, stockholder, member, principal, agent, trustee, consultant or in any other relationship or capacity for a period commencing on the date of this Employment Agreement and terminating on the day which is: (i) the later of (A) five (5) years following the date hereof, or (B) two (2) years following the termination of the Executive Employee's employment pursuant to a Renewal Termination Notice if given by Executive Employee, or (ii) if the Executive Employee's employment has been terminated for Cause, then two (2) years following termination of Executive Employee's employment; (collectively the "Restricted Period") provided, however, that there shall be no Restricted Period if Executive Employee's employment is terminated Without Cause or if Glasstech delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the above, the Executive Employee may own, directly or indirectly, solely as an investment, securities of any such person which are traded on any national securities exchange or NASDAQ if the Executive Employee is not a controlling person of, or a member of a group which controls such person and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such person. (b) at all times during and after this Employment Agreement is in force he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of Glasstech and its affiliates, all confidential matters relating to Glasstech Business and to Glasstech and its affiliates learned by -17- 18 the Executive Employee heretofore or hereafter directly or indirectly from Glasstech or its affiliates or any of their predecessors or successors (the "Confidential Company Information") and shall not disclose the Confidential Company Information to anyone outside of Glasstech and its affiliates except with Glasstech's express written consent. The requirements of this Section 8(b) shall not apply to Confidential Company Information which is: (1) at the time of receipt or thereafter publicly known through no wrongful act of the Executive Employee: (2) received from a third party not under any obligation to keep such information confidential; or (3) required to be disclosed by law. (c) during the Restricted Period, he shall not, without Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit employees of Glasstech or its affiliates to leave the employ of Glasstech or any of its affiliates or (ii) hire any employee who has left the employ of Glasstech or any of its affiliates within one year of the termination of such employee's employment with Glasstech or any of its affiliates. (d) at any time upon written request from Glasstech, he shall deliver to Glasstech all memoranda, notes, lists, records and other documents (and all copies thereof) made or compiled by the Executive Employee or made available to him concerning Glasstech Business or Glasstech or any of its affiliates all of which shall at all times be the property of Glasstech. 9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech shall have the following rights and remedies (upon compliance with any necessary prerequisites -18- 19 imposed by law upon the availability of such remedies), each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to Glasstech under law or in equity: (a) The right to have the Restrictive Covenants specifically enforced by any court having jurisdiction over the parties to this Employment Agreement; and (b) The right to entry of restraining orders and/or injunctions (preliminary, mandatory, temporary and permanent) against the Executive Employee against violations, threatened or actual, and whether or not then continuing, of such covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Glasstech and that money damages will not provide an adequate remedy to Glasstech; and (c) The right and remedy to require the Executive Employee to account for and pay over to Glasstech all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive Employee shall account for and pay over such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech under this Section 9 against any amounts owed to the Executive Employee. 10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which shall be subject to the provisions of Section 9, neither party shall institute an arbitration proceeding hereunder, before that party has sought to resolve the dispute through direct -19- 20 negotiation with the other party. If the dispute is not resolved within three weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through nonbinding mediation. If the parties do not promptly agree on a mediator, then either party may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator shall be paid one-half each by each party. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "Association"). The place of arbitration shall be Detroit, Michigan. Arbitration may be commenced at any time by any party hereto after giving written notice in the manner described in Section 13 of this Employment Agreement. The arbitrator shall be selected by the joint agreement of each party, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator shall render his decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be -20- 21 specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the arbitrator shall be paid entirely by the nonprevailing party and in addition the nonprevailing party shall reimburse the other party for the fees and expenses of mediation incurred by such party, unless the arbitrator determines that the costs, expenses and attorneys' fees should be apportioned between the parties, then as the arbitrator may assess. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances. As set forth in the first phrase of the first sentence of this section 10, this arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Employment Agreement. 11. BLUE PENCILING. The Executive Employee acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Employment Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, whether because of the duration or geographical scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes -21- 22 enforceable and. in its reduced form, such provision shall then be enforceable and shall be enforced. 12. SEVERABILITY. If any court determines that any covenant or provision of this Employment Agreement is unenforceable for any reason, the remaining covenants or provisions shall remain in full force and effect. 13. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be (a) delivered personally, (b) sent by facsimile transmission, (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by overnight delivery service, to the following addresses: (i) if to Glasstech, to: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: Mark Christman, President Fax: (419) 661-9366 and Kenneth H. Wetmore, Esquire Vice President, General Counsel and Secretary Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Fax: (419) 661-9616 and Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: David P. Given -22- 23 (ii) if to the Executive Employee, to: John S. Baxter 9689 Oakhaven Perrysburg, Ohio 43551 Any such notice shall be deemed given (a) when so delivered personally, (b) if sent by certified or registered mail, return receipt requested, on the date the return receipt is signed, or (c) if sent by overnight delivery service. on the next normal business day after the date of sender receipt. Any such person may, by giving notice in accordance with this section to the other parties hereto, designate another address or person for receipt by such person of notices hereunder. 14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreement(s), written or oral with respect thereto. This Employment Agreement will be effective upon the consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger Agreement is not consummated within the time set forth therein, this Employment Agreement shall be null and void and of no further force and effect. The Employment Agreement dated December 6, 1994 between Glasstech and the Executive Employee is hereby terminated and is null and void and of no further force and effect. 15. INDEMNIFICATION. During the Term or any Renewal Term hereof and subject to the continuing compliance by the Executive Employee with his obligations hereunder, Glasstech shall provide the Executive Employee with indemnification against liabilities or claims arising by reason of the fact that he is an -23- 24 employee. officer and/or director of Glasstech, and against expenses incurred in connection therewith, to the fullest extent of indemnification then available to any officer and/or director of Glasstech under and in accordance with the laws of the State of Delaware. Also, Glasstech shall purchase and/or maintain Directors' and Officers' insurance on or inuring to the Executive Employee's benefit with respect to such liabilities, claims, or expenses as described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding, dated June 5, 1997. 16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended, superseded, canceled, renewed, or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power, or privilege, nor shall any single or partial exercise of any such right, power, or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege. 17. GOVERNING LAW. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed within the State. 18. ASSIGNMENT. This Employment Agreement, and the Executive Employee's rights and obligations hereunder, may not be assigned by either party hereto without the consent of the other and any purported assignment by the Executive Employee or Glasstech -24- 25 in violation hereof shall be null and void; provided, however, that Glasstech may assign its rights and obligations hereunder without the Executive Employee's consent in connection with a sale of all or substantially all of Glasstech's assets. 19. BINDING EFFECT. This Employment Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors, and legal representatives. 20. COUNTERPARTS. This Employment Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two (2) copies hereof each signed by one of the parties hereto. 21. HEADING. The headings in this Employment Agreement are for reference only and shall not affect the interpretation of this Employment Agreement. -25- 26 IN WITNESS WHEREOF, the parties hereto have executed. or caused to be executed, this Employment Agreement as of the day and year first above written. GLASSTECH HOLDING CO. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- GLASSTECH, INC. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- EXECUTIVE EMPLOYEE /s/ John S. Baxter ------------------------------- John S. Baxter -26- EX-10.7 15 EXHIBIT 10.7 1 Exhibit 10.7 EMPLOYMENT AGREEMENT OF MARK D. CHRISTMAN WITH GLASSTECH, INC. This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING CO., a Delaware corporation with its principal place of business at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and MARK D. CHRISTMAN (SSN ###-##-####), an individual residing at 30125 Morningside Drive, Perrysburg, Ohio 43551 (the "Executive Employee"). BACKGROUND ---------- This Employment Agreement covers the employment of the Executive Employee by Glasstech. Now therefore, Glasstech and the Executive Employee, in consideration of the mutual promises herein contained and intending to be legally bound hereby, agree as follows: 1. TERM. Glasstech hereby employs the Executive Employee as President and Chief Executive Officer, and the Executive Employee hereby accepts such employment, from the date of this Employment Agreement to June 30, 2002 unless sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual anniversary thereafter, this Employment Agreement shall automatically renew for an additional one (1) year period (the -1- 2 "Renewal Term" or the "Renewal Terms") unless either party notifies the other party in writing of its or his intention not to renew the Employment Agreement (the "Renewal Termination Notice") not less than six (6) months prior to the expiration of the last year of the Term or of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this Employment Agreement. 2. DUTIES. The Executive Employee, in his capacity as President and Chief Executive Officer of Glasstech (or such other and comparable titles and positions as shall be given the Executive Employee by Holding Board of Directors), shall perform for Glasstech the services currently performed by him for Glasstech (or comparable services or other reasonable duties as he and Glasstech may agree upon), subject to the reasonable direction of Holding's Board of Directors. The Executive Employee shall perform such services in Wood County, Ohio, or at such other location or locations where he may be assigned by Glasstech from time to time, provided, however, that the Executive Employee shall not be required, in connection with his performance of such services, to travel on behalf of Glasstech in a manner inconsistent with the scope of his duties and the past practices of Glasstech. The Executive Employee shall devote his business time and effort to the Employment Agreement performance of his duties as described herein as reasonably required. It is understood that the Executive Employee may attend to outside investments, serve as a director and/or officer of a non-competing company and serve as an officer, director, or participant in educational, welfare, social, religious, and civic organizations so long as such activities do -2- 3 not materially interfere with the Executive Employee's employment hereunder. 3. COMPENSATION. 3.1 BASE SALARY. Glasstech shall pay the Executive Employee during each calendar year of the Term and each Renewal Term hereunder, a minimum salary of Two Hundred Seventy-Two Thousand Seven Hundred Sixty Dollars ($272,760) per calendar year adjusted as provided in Section 3.5 (hereinafter referred to as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly installments, less such deductions as shall be required to be withheld by applicable law and regulations. 3.2 PERFORMANCE BONUS. Executive Employee shall participate in Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal year (commencing with the fiscal year ending June 30, 1998), Holding's Board of Directors will establish the Pool which, at a minimum, shall be calculated according to the following bonus chart (the "Bonus Chart"): Percentage of Total Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool - ---------------------------- ------------------ ---------- $14,000,000 to $14,999,999 5.0% $700,000 to $750,000 $15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000 $16,000,000 and Above 10.0 $1,600,000 and Above For purposes of this Section, EBITDA shall be subject to the following adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses paid to middle managers other than executive managers; and (Z) EBITDA shall be increased in the amount -3- 4 of any advisory fees paid to Key Equity Capital Corporation or its affiliates. Notwithstanding the foregoing, in the event Glasstech's EBITDA for any fiscal year after the year ending June 30, 1998 (the "Base Year") is less than $16,000,000 (the "Target"), the Board of Directors shall calculate the average EBITDA of Glasstech from the Base Year through and including the fiscal year in which the Target was not achieved. Using the Bonus Chart above, the Board of Directors shall pay the participants (including but not limited to the Executive Employee) the greater of (i) the amount of the Pool using the actual EBITDA for such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for such fiscal year. If the Pool is not ten (10%) percent of the EBITDA in any fiscal year during the Term of this Employment Agreement, such as in year 2001 in the example below, the Board of Directors shall, in each succeeding fiscal year during the Term of this Employment Agreement, calculate the average EBITDA of Glasstech from the Base Year through and including such succeeding fiscal year. If the average EBITDA is greater than the actual EBITDA for any prior fiscal year (or the average EBITDA used in a prior fiscal year), then the Board of Directors, using the Bonus Chart, shall pay the participants (including but not limited to the Executive Employee) an amount equal to (i) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA calculated in such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year less (ii) the amount of the Pool actually distributed to participants in such prior fiscal year. -4- 5 EXAMPLE: - -------- Fiscal Year Percentage of Total Bonus Year EBITDA Fiscal Year EBITDA Pool - ---- ------ ------------------ ---- 1998 $18,000,000 10% $1,800,000 1999 $20,000,000 10% $2,000,000 2000 $13,000,000(1) 10% $1,300,000 2001 $12,000,000(2) 7.5% $ 900,000 2002 $20,000,000 10% $2,000,000 $ 300,000(3) ---------- $2,300,000 Not later than 10 business days after delivery to Glasstech of its fiscal year audit at the end of each fiscal year commencing with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in consultation with the President and Chief Executive Officer, shall distribute the Pool to the participants therein (including but not limited to the Executive Employee) in such percentages as the Board of Directors determines appropriate; provided, that, in no event shall the Board of Directors distribute less than the entire Pool as calculated above in any fiscal year commencing with the fiscal year ending June 30, 1998, and further provided that the Executive Employee shall receive a minimum of 40% of the aggregate Pool in any fiscal year. - -------- 1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 + $20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10% of EBITDA for that year. 2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 + $20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated based upon 7.5% of EBITDA for that year. 3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal year 2001 ($900,000). -5- 6 3.3 RESTRICTED STOCK PROGRAM. (a) Holding hereby awards to Executive Employee 833.50 shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"), which shall be subject to forfeiture in accordance with the provisions set forth herein. On each of the first four anniversary dates of this Employment Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long as his employment has not been terminated on or before such date pursuant to the provisions of Section 6 of this Employment Agreement. Subject to the forfeiture provisions set forth herein, Executive Employee shall be entitled to full and complete ownership of the Class C Shares and will be treated as the record and beneficial owner of such for all purposes including, but not limited to, payment of dividends and liquidation rights, provided that Executive Employee shall be bound by all of the provisions of the Stockholders' Agreement of even date herewith, among the Company, Executive Employee and the other stockholders of the Company (the "Stockholders' Agreement). (b) The certificates representing awarded Class C Shares shall not be delivered to Executive Employee until the restrictions as to such Class C Shares have lapsed. If Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a), Executive Employee shall forfeit to Holding all such Class C Shares for which the restrictions have not yet lapsed. In this regard, simultaneously with the issuance of certificates representing awarded Class C Shares, Executive Employee shall execute and deliver stock powers forfeiting to -6- 7 Holding Class C Shares awarded hereunder for which the restrictions have not yet lapsed in the event Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a). Executive Employee acknowledges that Class C Shares awarded hereunder shall be subject to the restrictions and risks of forfeiture contained herein and in the Stockholders' Agreement. (c) Subject to Section 3.3(h), Executive Employee hereby agrees that he shall pay to Holding, in cash, any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to him hereunder. If Executive Employee does not make such payment to Holding, then Holding shall have the right to deduct from any payment of any kind otherwise due to Executive Employee from Holding (or from any subsidiary of Holding), any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to Executive Employee hereunder. (d) Holding shall not issue Preferred Stock, Options or Warrants or any otherwise dilutive securities without the consent of the representative(s) of Key Equity Capital Corporation and the representative(s) of executive management on the Board of Directors and unless such securities are sold for fair market value, the proceeds of which are used for appropriate corporate purposes as determined by the Board of Directors. All shareholders of Class A, Class B or Class C Common Stock have the pre-emptive rights described in the Stockholders' Agreement. -7- 8 (e) "Change of Control" shall mean any one of the following events: (i) the transfer, sale or other disposition of the Common Stock of Holding which results in the current stockholders of Holding (determined as of the date hereof) owning in the aggregate less than a majority of the outstanding voting capital stock of Holding; (ii) any consolidation of Holding with, or merger of Holding into, any other entity, any merger of another entity into Holding, or any sale or transfer (in any one transaction or a series of transactions) of all or substantially all of the assets of Holding to another entity (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of Holding or (z) any consolidation with or merger of Holding into a wholly owned subsidiary of Holding, or any sale or transfer by Holding of all or substantially all of its assets to one or more of its wholly owned subsidiaries in any one transaction or a series of transactions). Notwithstanding the foregoing, a "Change in Control" shall not include any transaction permitted under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to the contrary in this Employment Agreement, so long as Executive Employee's employment has not been terminated pursuant to the provisions of Section 6 before the date of a Change of Control, the restrictions with respect to all of the Class C Shares shall immediately lapse upon a Change of Control. (f) Executive Employee understands that the Class C Shares have not been registered under the Securities Act of 1993, as amended (the "1933 Act") or any state securities laws. -8- 9 Executive Employee represents that the Class C Shares awarded hereunder are not being acquired by Executive Employee with a view toward resale or distribution and Executive Employee will not sell or otherwise transfer such Class C Shares except in compliance with the 1933 Act. The certificates representing the Class C Shares shall bear such legends and statements evidencing the restrictions contained in this Employment Agreement and as the Board of Directors of Holding shall deem advisable to assure compliance with federal and state securities laws and regulations. (g) The award of the Class C Shares to Executive Employee hereunder shall not confer any right to Executive Employee to continue in the employ of Glasstech or any of its subsidiaries and shall not restrict or interfere in any way with the right of Glasstech to terminate his employment with or without cause, at any time. (h) Executive Employee may file an "83(b) election" with the Internal Revenue Service with respect to the Class C Shares. If Executive Employee does file such an 83(b) election, Holding shall loan Executive Employee an amount equal to 80% of Executive Employee's tax liability resulting from such 83(b) election (the "Loan Amount") subject to the following terms: (i) Executive Employee shall execute and deliver to Holding a Promissory Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the principal amount of the Class C Note shall be equal to the Loan Amount and shall accrue interest at the annual applicable federal rate for mid-term obligations as of the month in which the Class C Note is issued; and (iii) the Executive Employee shall execute and deliver to -9- 10 Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a part hereof with respect to all shares of Class A Voting Common Stock of Holding and all Class C Shares held by Executive Employee. 3.4 CLASS D SHARES. Executive Employee shall also be issued 4,000 shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share Program") and subject to the terms and conditions of Section 9 of the Stockholders' Agreement. 3.5 COST OF LIVING INCREASE. The Base Salary provided for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if any, in the cost of living by adding to the Base Salary an amount obtained by multiplying the Base Salary by the percentage by which the level of the Consumer Price Index North Central Region (for all items for urban wage earners and clerical workers as reported for December 31 of each calendar period by the Bureau of Labor Statistics of the United States Department of Labor) has increased over its level as of January I of the same calendar year. 3.6 BENEFITS. The Executive Employee shall be entitled during the Term and during any Renewal Terms to participate in such group life, hospitalization and/or disability insurance benefits, health programs, qualified or non-qualified deferred compensation plans or similar benefits which are comparable to those made available by Glasstech on the date of this Employment Agreement or thereafter to its executive employees generally, subject to the eligibility provisions of such plans. -10- 11 3.7 VACATIONS. The Executive Employee shall be entitled to vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which relating to vacation and personal leave are hereby incorporated into this Employment Agreement by reference. 3.8 INSURANCE. Glasstech agrees to pay life insurance and/or annuity premiums on a policy(ies) selected by and insuring the life of the Executive Employee with a beneficiary(ies) to be named by the Executive Employee. The parties hereto agree that Glasstech shall not be obligated to pay any premium greater than Five Thousand Dollars ($5,000) during the first year of the Term and such amount shall be increased by Five Hundred Dollars ($500) each year thereafter during the Term or during any of the Renewal Terms. The parties further agree that the Executive Employee shall be permitted from time to time, during the Term, or any Renewal Terms, to maintain such policy(ies), or to exchange such policy(ies), or to acquire any new life insurance and/or annuity products, provided however, that the portion of the premiums and costs to be paid by Glasstech in connection with such policy(ies) shall not exceed the amounts specified above. Glasstech expressly acknowledges that it shall have no right, title or interest in and to such policy(ies), the same being the exclusive property of the Executive Employee. 3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the Executive Employee for all reasonable expenses actually incurred or paid by the Executive Employee during the Term or any Renewal Term in performance of the Executive Employee's -11- 12 services under this Employment Agreement, subject to receipt by Glasstech of reasonable supporting documentation. 4. TERMINATION UPON DEATH. In the event the Executive Employee dies during the Term or any Renewal Term, for a period of six (6) months following such death Glasstech agrees to continue to pay to the surviving spouse of the Executive Employee the Base Salary rate of the deceased Executive Employee in effect at the time of death in equal bi-weekly installments less such deductions required to be withheld by applicable law and regulations. The salary continuation payable as provided herein shall be in addition to any right of the estate of the deceased Executive Employee to (a) participate in the Pool (in accordance with Section 3.2 above) in the fiscal year in which such death occurred and to receive a prorated amount for the portion of the fiscal year in which Executive Employee was alive, provided, however, that the level of such participation shall be subject to the discretion of Holding Board of Directors, and (b) to participate in the Performance Share Program as set forth therein. Upon the death of the Executive Employee, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the estate of the deceased Executive Employee. Glasstech shall also remit to the estate of the deceased Executive Employee any other benefits earned and accrued or payable up to the date of such death and shall reimburse to the estate of the deceased Executive Employee any outstanding unreimbursed expenses incurred by such Executive Employee on behalf of Glasstech and documented as provided herein. In the event the deceased Executive Employee is not survived by a spouse or in the further event the deceased Executive -12- 13 Employee and his spouse are separated at the time of death by agreement, court order or decree, or otherwise, then such salary continuation shall be remitted to the estate of the deceased Executive Employee. 5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY. In the event the Executive Employee becomes disabled during the Term or any Renewal Term by virtue of ill health or other disability and is thereby unable to perform on a full time basis substantially and continuously the duties assigned to him by Glasstech, Glasstech agrees to continue the Executive Employee's Base Salary until such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage. At such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage (a "Disability"), Glasstech shall have no further obligation to compensate the Executive Employee (except that Glasstech shall continue to provide group life and health benefits to Executive Employee consistent with those provided to other executive employees for a period of two (2) years from the date on which Executive Employee's long term disability benefits commence) and further Glasstech shall have the right to terminate the employment of the Executive Employee hereunder upon written notice delivered pursuant to Section 13. In the event of such Disability, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee. Executive Employee shall participate in the Performance Share Program as set forth therein. -13- 14 6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. (a) Notwithstanding any other provision of this Employment Agreement, Glasstech may terminate the Executive Employee's employment at any time for Cause (as hereinafter defined) and the Executive Employee may voluntarily terminate the Executive Employee's employment with Glasstech. Upon such termination for Cause or upon Executive Employee's voluntary termination, Executive Employee shall not participate in the Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his termination occurred, and Executive Employee shall automatically forfeit those shares of Restricted Stock for which the restrictions would have lapsed (pursuant to Section 3.3) in the contract year in which his termination occurred and any subsequent year and shall participate in the Performance Share Program as set forth therein. Upon such termination for Cause or upon Executive Employee's voluntary termination, the Executive Employee shall be entitled to, except as restricted in the preceding sentence, receive any salary and other benefits earned or accrued, and reimbursement for expenses incurred, prior to the date of termination. (b) "Cause" shall mean (i) the Executive Employee's willful and continuing affirmative refusal to perform his or her duties hereunder (other than as a result of a Disability); (ii) dishonesty in the performance of his or her duties hereunder which results in criminal indictment of the Executive Employee; (iii) the Executive Employee's breach of any material term of this Employment Agreement (provided that Glasstech shall give the Executive Employee written notice of such breach and a thirty (30) day period -14- 15 after notice to cure such breach, except that no notice or cure period shall be given or extended with respect to breach of the provisions of Section 8 of this Employment Agreement); or (iv) the Executive Employee's conviction for a felony or for a crime which, in the reasonable judgment of Glasstech, renders the Executive Employee unable to perform his duties as described in this Employment Agreement. 7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated prior to the end of the Term or any Renewal Term other than pursuant to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a termination "Without Cause"), the Executive Employee shall be entitled to (in addition to such other rights as he may have, or damages to which he may be entitled at law or in equity) (i) all payments when due of any salary and other benefits (including, without limitation, participation in the Performance Bonus pursuant to Section 3.2) accrued through the date of termination, including the payment of all salary due for the remainder of the Term or Renewal Term as though the Executive Employee had remained employed through the full Term (or, if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee, and (iii) participation in the Performance Share Program as set forth therein. 8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges that (i) the principal business of Glasstech is design, manufacture, marketing, sale, distribution and servicing of glass bending, tempering and annealing equipment worldwide to -15- 16 both automotive glass fabricators and architectural glass producers and the principal business of Stir-Melter, Inc. is the vitrification of hazardous waste (collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited number of persons throughout the world which has developed such business; (iii) the Glasstech Business is, in large part, international in scope and Glasstech's customers, potential customers and competitors are located throughout the world; (iv) the Executive Employee's work for Glasstech has given and will continue to give him access to the confidential affairs and proprietary information of Glasstech; (v) this Employment Agreement has been entered into as part of a series of transactions pursuant to which Executive Employee and others have purchased an equity interest in Glasstech and sold their equity interest in Glasstech; and (vi) Glasstech would not have entered into this Employment Agreement but for the agreements and covenants of the Executive Employee contained in this Section 8. Accordingly, the Executive Employee covenants and agrees that: (a) he shall not, anywhere in the world directly or indirectly, (1) engage in Glasstech Business for his own account or that of any other person; (2) render any services related to the Glasstech Business to any person (other than Glasstech) engaged in such activities; or (3) become interested in any such person (other than Glasstech) as a partner, stockholder, member, principal, agent, trustee, consultant or in any other relationship or capacity for a period commencing on the date of this Employment Agreement and terminating on the day which is: (i) the later of (A) five (5) years following the date hereof, or (B) two (2) years following the termination of the Executive Employee's employment pursuant to a -16- 17 Renewal Termination Notice if given by Executive Employee, or (ii) if the Executive Employee's employment has been terminated for Cause, then two (2) years following termination of Executive Employee's employment; (collectively the "Restricted Period") provided, however, that there shall be no Restricted Period if Executive Employee's employment is terminated Without Cause or if Glasstech delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the above, the Executive Employee may own, directly or indirectly, solely as an investment, securities of any such person which are traded on any national securities exchange or NASDAQ if the Executive Employee is not a controlling person of, or a member of a group which controls such person and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such person. (b) at all times during and after this Employment Agreement is in force he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of Glasstech and its affiliates, all confidential matters relating to Glasstech Business and to Glasstech and its affiliates learned by the Executive Employee heretofore or hereafter directly or indirectly from Glasstech or its affiliates or any of their predecessors or successors (the "Confidential Company Information") and shall not disclose the Confidential Company Information to anyone outside of Glasstech and its affiliates except with Glasstech's express written consent. The requirements of this Section 8(b) shall not apply to Confidential Company Information which is: (1) at the time of receipt or thereafter publicly known -17- 18 through no wrongful act of the Executive Employee: (2) received from a third party not under any obligation to keep such information confidential; or (3) required to be disclosed by law. (c) during the Restricted Period, he shall not, without Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit employees of Glasstech or its affiliates to leave the employ of Glasstech or any of its affiliates or (ii) hire any employee who has left the employ of Glasstech or any of its affiliates within one year of the termination of such employee's employment with Glasstech or any of its affiliates. (d) at any time upon written request from Glasstech, he shall deliver to Glasstech all memoranda, notes, lists, records and other documents (and all copies thereof) made or compiled by the Executive Employee or made available to him concerning Glasstech Business or Glasstech or any of its affiliates all of which shall at all times be the property of Glasstech. 9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech shall have the following rights and remedies (upon compliance with any necessary prerequisites imposed by law upon the availability of such remedies), each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to Glasstech under law or in equity: (a) The right to have the Restrictive Covenants specifically enforced by any court having jurisdiction over the parties to this Employment Agreement; and -18- 19 (b) The right to entry of restraining orders and/or injunctions (preliminary, mandatory, temporary and permanent) against the Executive Employee against violations, threatened or actual, and whether or not then continuing, of such covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Glasstech and that money damages will not provide an adequate remedy to Glasstech; and (c) The right and remedy to require the Executive Employee to account for and pay over to Glasstech all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive Employee shall account for and pay over such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech under this Section 9 against any amounts owed to the Executive Employee. 10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which shall be subject to the provisions of Section 9, neither party shall institute an arbitration proceeding hereunder, before that party has sought to resolve the dispute through direct negotiation with the other party. If the dispute is not resolved within three weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through nonbinding mediation. If the parties do not promptly agree on a mediator, then either party may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator shall be paid one-half each by each -19- 20 party. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "Association"). The place of arbitration shall be Detroit, Michigan. Arbitration may be commenced at any time by any party hereto after giving written notice in the manner described in Section 13 of this Employment Agreement. The arbitrator shall be selected by the joint agreement of each party, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator shall render his decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the -20- 21 arbitrator shall be paid entirely by the nonprevailing party and in addition the nonprevailing party shall reimburse the other party for the fees and expenses of mediation incurred by such party, unless the arbitrator determines that the costs, expenses and attorneys' fees should be apportioned between the parties, then as the arbitrator may assess. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances. As set forth in the first phrase of the first sentence of this section 10, this arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Employment Agreement. 11. BLUE PENCILING. The Executive Employee acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Employment Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, whether because of the duration or geographical scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and. in its reduced form, such provision shall then be enforceable and shall be enforced. 12. SEVERABILITY. If any court determines that any covenant or provision of this Employment Agreement is unenforceable for any reason, the remaining covenants or provisions shall remain in full force and effect. 13. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be (a) -21- 22 delivered personally, (b) sent by facsimile transmission, (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by overnight delivery service, to the following addresses: (i) if to Glasstech, to: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: Mark Christman, President Fax: (419) 661-9366 and Kenneth H. Wetmore, Esquire Vice President, General Counsel and Secretary Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Fax: (419) 661-9616 and Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: David P. Given (ii) if to the Executive Employee, to: Mark D. Christman 30125 Morningside Drive Perrysburg, Ohio 43551 Any such notice shall be deemed given (a) when so delivered personally, (b) if sent by certified or registered mail, return receipt requested, on the date the return receipt is signed, or (c) if sent by overnight delivery service. on the next normal business day after the date of sender receipt. Any such person may, by giving notice in accordance with this section to the other parties hereto, designate another address or person for receipt by such person of notices hereunder. -22- 23 14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreement(s), written or oral with respect thereto. This Employment Agreement will be effective upon the consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger Agreement is not consummated within the time set forth therein, this Employment Agreement shall be null and void and of no further force and effect. The Employment Agreement dated December 6, 1994 between Glasstech and the Executive Employee is hereby terminated and is null and void and of no further force and effect. The Employment Agreement dated June 10, 1997 among Glasstech, Holding and the Executive Employee is hereby terminated and is null and void and of no further force and effect. 15. INDEMNIFICATION. During the Term or any Renewal Term hereof and subject to the continuing compliance by the Executive Employee with his obligations hereunder, Glasstech shall provide the Executive Employee with indemnification against liabilities or claims arising by reason of the fact that he is an employee. officer and/or director of Glasstech, and against expenses incurred in connection therewith, to the fullest extent of indemnification then available to any officer and/or director of Glasstech under and in accordance with the laws of the State of Delaware. Also, Glasstech shall purchase and/or maintain Directors' and Officers' insurance on or inuring to the Executive Employee's benefit with respect to such liabilities, claims, or -23- 24 expenses as described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding, dated June 5, 1997. 16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended, superseded, canceled, renewed, or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power, or privilege, nor shall any single or partial exercise of any such right, power, or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege. 17. GOVERNING LAW. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed within the State. 18. ASSIGNMENT. This Employment Agreement, and the Executive Employee's rights and obligations hereunder, may not be assigned by either party hereto without the consent of the other and any purported assignment by the Executive Employee or Glasstech in violation hereof shall be null and void; provided, however, that Glasstech may assign its rights and obligations hereunder without the Executive Employee's consent in connection with a sale of all or substantially all of Glasstech's assets. 19. BINDING EFFECT. This Employment Agreement shall be binding upon and inure to the benefit of the parties and their -24- 25 respective successors, permitted assigns, heirs, executors, and legal representatives. 20. COUNTERPARTS. This Employment Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two (2) copies hereof each signed by one of the parties hereto. 21. HEADING. The headings in this Employment Agreement are for reference only and shall not affect the interpretation of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have executed. or caused to be executed, this Employment Agreement as of the day and year first above written. GLASSTECH HOLDING CO. By: /s/ Kenneth H. Wetmore ---------------------------- Its: VP --------------------------- GLASSTECH, INC. By: /s/ Kenneth H. Wetmore ---------------------------- Its: VP --------------------------- EXECUTIVE EMPLOYEE /s/ Mark D. Christman ------------------------------- Mark D. Christman -25- EX-10.8 16 EXHIBIT 10.8 1 Exhibit 10.8 EMPLOYMENT AGREEMENT OF LARRY E. ELLIOTT WITH GLASSTECH, INC. This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING CO., a Delaware corporation with its principal place of business at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and LARRY E. ELLIOTT (SSN ###-##-####), an individual residing at 365 Osage Court, Perrysburg, Ohio 43551 (the "Executive Employee"). BACKGROUND ---------- This Employment Agreement covers the employment of the Executive Employee by Glasstech. Now therefore, Glasstech and the Executive Employee, in consideration of the mutual promises herein contained and intending to be legally bound hereby, agree as follows: 1. TERM. Glasstech hereby employs the Executive Employee as Vice President, Manufacturing & Engineering, and the Executive Employee hereby accepts such employment, from the date of this Employment Agreement to June 30, 2002 unless sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual anniversary thereafter, this Employment Agreement shall automatically renew for an additional one (1) year period (the "Renewal Term" or the "Renewal Terms") unless either party notifies -1- 2 the other party in writing of its or his intention not to renew the Employment Agreement (the "Renewal Termination Notice") not less than six (6) months prior to the expiration of the last year of the Term or of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this Employment Agreement. 2. DUTIES. The Executive Employee, in his capacity as Vice President, Manufacturing & Engineering of Glasstech (or such other and comparable titles and positions as shall be given the Executive Employee by Holding Board of Directors), shall perform for Glasstech the services currently performed by him for Glasstech (or comparable services or other reasonable duties as he and Glasstech may agree upon), subject to the reasonable direction of Holding's Board of Directors. The Executive Employee shall perform such services in Wood County, Ohio, or at such other location or locations where he may be assigned by Glasstech from time to time, provided, however, that the Executive Employee shall not be required, in connection with his performance of such services, to travel on behalf of Glasstech in a manner inconsistent with the scope of his duties and the past practices of Glasstech. The Executive Employee shall devote his business time and effort to the Employment Agreement performance of his duties as described herein as reasonably required. It is understood that the Executive Employee may attend to outside investments, serve as a director and/or officer of a non-competing company and serve as an officer, director, or participant in educational, welfare, social, religious, and civic organizations so long as such activities do -2- 3 not materially interfere with the Executive Employee's employment hereunder. 3. COMPENSATION. 3.1 BASE SALARY. Glasstech shall pay the Executive Employee during each calendar year of the Term and each Renewal Term hereunder, a minimum salary of One Hundred Fifty-Three Thousand Nine Hundred Fourteen Dollars ($153,914) per calendar year adjusted as provided in Section 3.5 (hereinafter referred to as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly installments, less such deductions as shall be required to be withheld by applicable law and regulations. 3.2 PERFORMANCE BONUS. Executive Employee shall participate in Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal year (commencing with the fiscal year ending June 30, 1998), Holding's Board of Directors will establish the Pool which, at a minimum, shall be calculated according to the following bonus chart (the "Bonus Chart"): Percentage of Total Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool - ---------------------------- ------------------ ---------- $14,000,000 to $14,999,999 5.0% $700,000 to $750,000 $15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000 $16,000,000 and Above 10.0 $1,600,000 and Above For purposes of this Section, EBITDA shall be subject to the following adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses paid to middle managers other than executive managers; and (Z) EBITDA shall be increased in the amount -3- 4 of any advisory fees paid to Key Equity Capital Corporation or its affiliates. Notwithstanding the foregoing, in the event Glasstech's EBITDA for any fiscal year after the year ending June 30, 1998 (the "Base Year") is less than $16,000,000 (the "Target"), the Board of Directors shall calculate the average EBITDA of Glasstech from the Base Year through and including the fiscal year in which the Target was not achieved. Using the Bonus Chart above, the Board of Directors shall pay the participants (including but not limited to the Executive Employee) the greater of (i) the amount of the Pool using the actual EBITDA for such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for such fiscal year. If the Pool is not ten (10%) percent of the EBITDA in any fiscal year during the Term of this Employment Agreement, such as in year 2001 in the example below, the Board of Directors shall, in each succeeding fiscal year during the Term of this Employment Agreement, calculate the average EBITDA of Glasstech from the Base Year through and including such succeeding fiscal year. If the average EBITDA is greater than the actual EBITDA for any prior fiscal year (or the average EBITDA used in a prior fiscal year), then the Board of Directors, using the Bonus Chart, shall pay the participants (including but not limited to the Executive Employee) an amount equal to (i) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA calculated in such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year less (ii) the amount of the Pool actually distributed to participants in such prior fiscal year. -4- 5 EXAMPLE: - -------- Fiscal Year Percentage of Total Bonus Year EBITDA Fiscal Year EBITDA Pool - ---- ------ ------------------ ---- 1998 $18,000,000 10% $1,800,000 1999 $20,000,000 10% $2,000,000 2000 $13,000,000(1) 10% $1,300,000 2001 $12,000,000(2) 7.5% $ 900,000 2002 $20,000,000 10% $2,000,000 $ 300,000(3) ---------- $2,300,000 Not later than 10 business days after delivery to Glasstech of its fiscal year audit at the end of each fiscal year commencing with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in consultation with the President and Chief Executive Officer, shall distribute the Pool to the participants therein (including but not limited to the Executive Employee) in such percentages as the Board of Directors determines appropriate; provided, that, in no event shall the Board of Directors distribute less than the entire Pool as calculated above in any fiscal year commencing with the fiscal year ending June 30, 1998. - -------- 1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 + $20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10% of EBITDA for that year. 2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 + $20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated based upon 7.5% of EBITDA for that year. 3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal year 2001 ($900,000). -5- 6 3.3 RESTRICTED STOCK PROGRAM. (a) Holding hereby awards to Executive Employee 133.36 shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"), which shall be subject to forfeiture in accordance with the provisions set forth herein. On each of the first four anniversary dates of this Employment Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long as his employment has not been terminated on or before such date pursuant to the provisions of Section 6 of this Employment Agreement. Subject to the forfeiture provisions set forth herein, Executive Employee shall be entitled to full and complete ownership of the Class C Shares and will be treated as the record and beneficial owner of such for all purposes including, but not limited to, payment of dividends and liquidation rights, provided that Executive Employee shall be bound by all of the provisions of the Stockholders' Agreement of even date herewith, among the Company, Executive Employee and the other stockholders of the Company (the "Stockholders' Agreement). (b) The certificates representing awarded Class C Shares shall not be delivered to Executive Employee until the restrictions as to such Class C Shares have lapsed. If Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a), Executive Employee shall forfeit to Holding all such Class C Shares for which the restrictions have not yet lapsed. In this regard, simultaneously with the issuance of certificates representing awarded Class C Shares, Executive Employee shall execute and deliver stock powers forfeiting to -6- 7 Holding Class C Shares awarded hereunder for which the restrictions have not yet lapsed in the event Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a). Executive Employee acknowledges that Class C Shares awarded hereunder shall be subject to the restrictions and risks of forfeiture contained herein and in the Stockholders' Agreement. (c) Subject to Section 3.3(h), Executive Employee hereby agrees that he shall pay to Holding, in cash, any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to him hereunder. If Executive Employee does not make such payment to Holding, then Holding shall have the right to deduct from any payment of any kind otherwise due to Executive Employee from Holding (or from any subsidiary of Holding), any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to Executive Employee hereunder. (d) Holding shall not issue Preferred Stock, Options or Warrants or any otherwise dilutive securities without the consent of the representative(s) of Key Equity Capital Corporation and the representative(s) of executive management on the Board of Directors and unless such securities are sold for fair market value, the proceeds of which are used for appropriate corporate purposes as determined by the Board of Directors. All shareholders of Class A, Class B or Class C Common Stock have the pre-emptive rights described in the Stockholders' Agreement. -7- 8 (e) "Change of Control" shall mean any one of the following events: (i) the transfer, sale or other disposition of the Common Stock of Holding which results in the current stockholders of Holding (determined as of the date hereof) owning in the aggregate less than a majority of the outstanding voting capital stock of Holding; (ii) any consolidation of Holding with, or merger of Holding into, any other entity, any merger of another entity into Holding, or any sale or transfer (in any one transaction or a series of transactions) of all or substantially all of the assets of Holding to another entity (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of Holding or (z) any consolidation with or merger of Holding into a wholly owned subsidiary of Holding, or any sale or transfer by Holding of all or substantially all of its assets to one or more of its wholly owned subsidiaries in any one transaction or a series of transactions). Notwithstanding the foregoing, a "Change in Control" shall not include any transaction permitted under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to the contrary in this Employment Agreement, so long as Executive Employee's employment has not been terminated pursuant to the provisions of Section 6 before the date of a Change of Control, the restrictions with respect to all of the Class C Shares shall immediately lapse upon a Change of Control. (f) Executive Employee understands that the Class C Shares have not been registered under the Securities Act of 1993, as amended (the "1933 Act") or any state securities laws. -8- 9 Executive Employee represents that the Class C Shares awarded hereunder are not being acquired by Executive Employee with a view toward resale or distribution and Executive Employee will not sell or otherwise transfer such Class C Shares except in compliance with the 1933 Act. The certificates representing the Class C Shares shall bear such legends and statements evidencing the restrictions contained in this Employment Agreement and as the Board of Directors of Holding shall deem advisable to assure compliance with federal and state securities laws and regulations. (g) The award of the Class C Shares to Executive Employee hereunder shall not confer any right to Executive Employee to continue in the employ of Glasstech or any of its subsidiaries and shall not restrict or interfere in any way with the right of Glasstech to terminate his employment with or without cause, at any time. (h) Executive Employee may file an "83(b) election" with the Internal Revenue Service with respect to the Class C Shares. If Executive Employee does file such an 83(b) election, Holding shall loan Executive Employee an amount equal to 80% of Executive Employee's tax liability resulting from such 83(b) election (the "Loan Amount") subject to the following terms: (i) Executive Employee shall execute and deliver to Holding a Promissory Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the principal amount of the Class C Note shall be equal to the Loan Amount and shall accrue interest at the annual applicable federal rate for mid-term obligations as of the month in which the Class C Note is issued; and (iii) the Executive Employee shall execute and deliver to -9- 10 Holding a Pledge Agreement in the form of Exhibit B attached hereto and made a part hereof with respect to all shares of Class A Voting Common Stock of Holding and all Class C Shares held by Executive Employee. 3.4 CLASS D SHARES. Executive Employee shall also be issued 1,000 shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share Program") and subject to the terms and conditions of Section 9 of the Stockholders' Agreement. 3.5 COST OF LIVING INCREASE. The Base Salary provided for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if any, in the cost of living by adding to the Base Salary an amount obtained by multiplying the Base Salary by the percentage by which the level of the Consumer Price Index North Central Region (for all items for urban wage earners and clerical workers as reported for December 31 of each calendar period by the Bureau of Labor Statistics of the United States Department of Labor) has increased over its level as of January I of the same calendar year. 3.6 BENEFITS. The Executive Employee shall be entitled during the Term and during any Renewal Terms to participate in such group life, hospitalization and/or disability insurance benefits, health programs, qualified or non-qualified deferred compensation plans or similar benefits which are comparable to those made available by Glasstech on the date of this Employment Agreement or thereafter to its executive employees generally, subject to the eligibility provisions of such plans. -10- 11 3.7 VACATIONS. The Executive Employee shall be entitled to vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which relating to vacation and personal leave are hereby incorporated into this Employment Agreement by reference; provided, however, that the Executive Employee shall be entitled to a minimum of three (3) weeks vacation per year. 3.8 INSURANCE. Glasstech agrees to pay life insurance and/or annuity premiums on a policy(ies) selected by and insuring the life of the Executive Employee with a beneficiary(ies) to be named by the Executive Employee. The parties hereto agree that Glasstech shall not be obligated to pay any premium greater than Five Thousand Dollars ($5,000) during the first year of the Term and such amount shall be increased by Five Hundred Dollars ($500) each year thereafter during the Term or during any of the Renewal Terms. The parties further agree that the Executive Employee shall be permitted from time to time, during the Term, or any Renewal Terms, to maintain such policy(ies), or to exchange such policy(ies), or to acquire any new life insurance and/or annuity products, provided however, that the portion of the premiums and costs to be paid by Glasstech in connection with such policy(ies) shall not exceed the amounts specified above. Glasstech expressly acknowledges that it shall have no right, title or interest in and to such policy(ies), the same being the exclusive property of the Executive Employee. 3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the Executive Employee for all reasonable expenses actually incurred or paid by the Executive Employee during the Term -11- 12 or any Renewal Term in performance of the Executive Employee's services under this Employment Agreement, subject to receipt by Glasstech of reasonable supporting documentation. 4. TERMINATION UPON DEATH. In the event the Executive Employee dies during the Term or any Renewal Term, for a period of six (6) months following such death Glasstech agrees to continue to pay to the surviving spouse of the Executive Employee the Base Salary rate of the deceased Executive Employee in effect at the time of death in equal bi-weekly installments less such deductions required to be withheld by applicable law and regulations. The salary continuation payable as provided herein shall be in addition to any right of the estate of the deceased Executive Employee to (a) participate in the Pool (in accordance with Section 3.2 above) in the fiscal year in which such death occurred and to receive a prorated amount for the portion of the fiscal year in which Executive Employee was alive, provided, however, that the level of such participation shall be subject to the discretion of Holding Board of Directors, and (b) to participate in the Performance Share Program as set forth therein. Upon the death of the Executive Employee, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the estate of the deceased Executive Employee. Glasstech shall also remit to the estate of the deceased Executive Employee any other benefits earned and accrued or payable up to the date of such death and shall reimburse to the estate of the deceased Executive Employee any outstanding unreimbursed expenses incurred by such Executive Employee on behalf of Glasstech and documented as provided herein. -12- 13 In the event the deceased Executive Employee is not survived by a spouse or in the further event the deceased Executive Employee and his spouse are separated at the time of death by agreement, court order or decree, or otherwise, then such salary continuation shall be remitted to the estate of the deceased Executive Employee. 5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY. In the event the Executive Employee becomes disabled during the Term or any Renewal Term by virtue of ill health or other disability and is thereby unable to perform on a full time basis substantially and continuously the duties assigned to him by Glasstech, Glasstech agrees to continue the Executive Employee's Base Salary until such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage. At such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage (a "Disability"), Glasstech shall have no further obligation to compensate the Executive Employee (except that Glasstech shall continue to provide group life and health benefits to Executive Employee consistent with those provided to other executive employees for a period of two (2) years from the date on which Executive Employee's long term disability benefits commence) and further Glasstech shall have the right to terminate the employment of the Executive Employee hereunder upon written notice delivered pursuant to Section 13. In the event of such Disability, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee. -13- 14 Executive Employee shall participate in the Performance Share Program as set forth therein. 6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. (a) Notwithstanding any other provision of this Employment Agreement, Glasstech may terminate the Executive Employee's employment at any time for Cause (as hereinafter defined) and the Executive Employee may voluntarily terminate the Executive Employee's employment with Glasstech. Upon such termination for Cause or upon Executive Employee's voluntary termination, Executive Employee shall not participate in the Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his termination occurred, and Executive Employee shall automatically forfeit those shares of Restricted Stock for which the restrictions would have lapsed (pursuant to Section 3.3) in the contract year in which his termination occurred and any subsequent year and shall participate in the Performance Share Program as set forth therein. Upon such termination for Cause or upon Executive Employee's voluntary termination, the Executive Employee shall be entitled to, except as restricted in the preceding sentence, receive any salary and other benefits earned or accrued, and reimbursement for expenses incurred, prior to the date of termination. (b) "Cause" shall mean (i) the Executive Employee's willful and continuing affirmative refusal to perform his or her duties hereunder (other than as a result of a Disability); (ii) dishonesty in the performance of his or her duties hereunder which results in criminal indictment of the Executive Employee; (iii) the -14- 15 Executive Employee's breach of any material term of this Employment Agreement (provided that Glasstech shall give the Executive Employee written notice of such breach and a thirty (30) day period after notice to cure such breach, except that no notice or cure period shall be given or extended with respect to breach of the provisions of Section 8 of this Employment Agreement); or (iv) the Executive Employee's conviction for a felony or for a crime which, in the reasonable judgment of Glasstech, renders the Executive Employee unable to perform his duties as described in this Employment Agreement. 7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated prior to the end of the Term or any Renewal Term other than pursuant to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a termination "Without Cause"), the Executive Employee shall be entitled to (in addition to such other rights as he may have, or damages to which he may be entitled at law or in equity) (i) all payments when due of any salary and other benefits (including, without limitation, participation in the Performance Bonus pursuant to Section 3.2) accrued through the date of termination, including the payment of all salary due for the remainder of the Term or Renewal Term as though the Executive Employee had remained employed through the full Term (or, if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee, and (iii) participation in the Performance Share Program as set forth therein. -15- 16 8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges that (i) the principal business of Glasstech is design, manufacture, marketing, sale, distribution and servicing of glass bending, tempering and annealing equipment worldwide to both automotive glass fabricators and architectural glass producers and the principal business of Stir-Melter, Inc. is the vitrification of hazardous waste (collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited number of persons throughout the world which has developed such business; (iii) the Glasstech Business is, in large part, international in scope and Glasstech's customers, potential customers and competitors are located throughout the world; (iv) the Executive Employee's work for Glasstech has given and will continue to give him access to the confidential affairs and proprietary information of Glasstech; (v) this Employment Agreement has been entered into as part of a series of transactions pursuant to which Executive Employee and others have purchased an equity interest in Glasstech and sold their equity interest in Glasstech; and (vi) Glasstech would not have entered into this Employment Agreement but for the agreements and covenants of the Executive Employee contained in this Section 8. Accordingly, the Executive Employee covenants and agrees that: (a) he shall not, anywhere in the world directly or indirectly, (1) engage in Glasstech Business for his own account or that of any other person; (2) render any services related to the Glasstech Business to any person (other than Glasstech) engaged in such activities; or (3) become interested in any such person (other than Glasstech) as a partner, stockholder, member, principal, agent, trustee, consultant or in any other relationship or capacity -16- 17 for a period commencing on the date of this Employment Agreement and terminating on the day which is: (i) the later of (A) five (5) years following the date hereof, or (B) two (2) years following the termination of the Executive Employee's employment pursuant to a Renewal Termination Notice if given by Executive Employee, or (ii) if the Executive Employee's employment has been terminated for Cause, then two (2) years following termination of Executive Employee's employment; (collectively the "Restricted Period") provided, however, that there shall be no Restricted Period if Executive Employee's employment is terminated Without Cause or if Glasstech delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the above, the Executive Employee may own, directly or indirectly, solely as an investment, securities of any such person which are traded on any national securities exchange or NASDAQ if the Executive Employee is not a controlling person of, or a member of a group which controls such person and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such person. (b) at all times during and after this Employment Agreement is in force he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of Glasstech and its affiliates, all confidential matters relating to Glasstech Business and to Glasstech and its affiliates learned by the Executive Employee heretofore or hereafter directly or indirectly from Glasstech or its affiliates or any of their predecessors or successors (the "Confidential Company Information") and shall not disclose the Confidential Company Information to -17- 18 anyone outside of Glasstech and its affiliates except with Glasstech's express written consent. The requirements of this Section 8(b) shall not apply to Confidential Company Information which is: (1) at the time of receipt or thereafter publicly known through no wrongful act of the Executive Employee: (2) received from a third party not under any obligation to keep such information confidential; or (3) required to be disclosed by law. (c) during the Restricted Period, he shall not, without Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit employees of Glasstech or its affiliates to leave the employ of Glasstech or any of its affiliates or (ii) hire any employee who has left the employ of Glasstech or any of its affiliates within one year of the termination of such employee's employment with Glasstech or any of its affiliates. (d) at any time upon written request from Glasstech, he shall deliver to Glasstech all memoranda, notes, lists, records and other documents (and all copies thereof) made or compiled by the Executive Employee or made available to him concerning Glasstech Business or Glasstech or any of its affiliates all of which shall at all times be the property of Glasstech. 9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech shall have the following rights and remedies (upon compliance with any necessary prerequisites imposed by law upon the availability of such remedies), each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall -18- 19 be in addition to, and not in lieu of, any other rights and remedies available to Glasstech under law or in equity: (a) The right to have the Restrictive Covenants specifically enforced by any court having jurisdiction over the parties to this Employment Agreement; and (b) The right to entry of restraining orders and/or injunctions (preliminary, mandatory, temporary and permanent) against the Executive Employee against violations, threatened or actual, and whether or not then continuing, of such covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Glasstech and that money damages will not provide an adequate remedy to Glasstech; and (c) The right and remedy to require the Executive Employee to account for and pay over to Glasstech all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive Employee shall account for and pay over such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech under this Section 9 against any amounts owed to the Executive Employee. 10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which shall be subject to the provisions of Section 9, neither party shall institute an arbitration proceeding hereunder, before that party has sought to resolve the dispute through direct negotiation with the other party. If the dispute is not resolved within three weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through nonbinding -19- 20 mediation. If the parties do not promptly agree on a mediator, then either party may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator shall be paid one-half each by each party. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "Association"). The place of arbitration shall be Detroit, Michigan. Arbitration may be commenced at any time by any party hereto after giving written notice in the manner described in Section 13 of this Employment Agreement. The arbitrator shall be selected by the joint agreement of each party, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator shall render his decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the -20- 21 award rendered by the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the arbitrator shall be paid entirely by the nonprevailing party and in addition the nonprevailing party shall reimburse the other party for the fees and expenses of mediation incurred by such party, unless the arbitrator determines that the costs, expenses and attorneys' fees should be apportioned between the parties, then as the arbitrator may assess. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances. As set forth in the first phrase of the first sentence of this section 10, this arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Employment Agreement. 11. BLUE PENCILING. The Executive Employee acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Employment Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, whether because of the duration or geographical scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and. in its reduced form, such provision shall then be enforceable and shall be enforced. -21- 22 12. SEVERABILITY. If any court determines that any covenant or provision of this Employment Agreement is unenforceable for any reason, the remaining covenants or provisions shall remain in full force and effect. 13. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be (a) delivered personally, (b) sent by facsimile transmission, (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by overnight delivery service, to the following addresses: (i) if to Glasstech, to: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: Mark Christman, President Fax: (419) 661-9366 and Kenneth H. Wetmore, Esquire Vice President, General Counsel and Secretary Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Fax: (419) 661-9616 and Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: David P. Given (ii) if to the Executive Employee, to: Larry E. Elliott 365 Osage Court Perrysburg, Ohio 43551 Any such notice shall be deemed given (a) when so delivered personally, (b) if sent by certified or registered mail, -22- 23 return receipt requested, on the date the return receipt is signed, or (c) if sent by overnight delivery service. on the next normal business day after the date of sender receipt. Any such person may, by giving notice in accordance with this section to the other parties hereto, designate another address or person for receipt by such person of notices hereunder. 14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreement(s), written or oral with respect thereto. This Employment Agreement will be effective upon the consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger Agreement is not consummated within the time set forth therein, this Employment Agreement shall be null and void and of no further force and effect. The Employment Agreement dated December 19, 1996 between Glasstech and the Executive Employee is hereby terminated and is null and void and of no further force and effect. 15. INDEMNIFICATION. During the Term or any Renewal Term hereof and subject to the continuing compliance by the Executive Employee with his obligations hereunder, Glasstech shall provide the Executive Employee with indemnification against liabilities or claims arising by reason of the fact that he is an employee. officer and/or director of Glasstech, and against expenses incurred in connection therewith, to the fullest extent of indemnification then available to any officer and/or director of Glasstech under and in accordance with the laws of the State of Delaware. Also, Glasstech shall purchase and/or maintain -23- 24 Directors' and Officers' insurance on or inuring to the Executive Employee's benefit with respect to such liabilities, claims, or expenses as described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding, dated June 5, 1997. 16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended, superseded, canceled, renewed, or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power, or privilege, nor shall any single or partial exercise of any such right, power, or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege. 17. GOVERNING LAW. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed within the State. 18. ASSIGNMENT. This Employment Agreement, and the Executive Employee's rights and obligations hereunder, may not be assigned by either party hereto without the consent of the other and any purported assignment by the Executive Employee or Glasstech in violation hereof shall be null and void; provided, however, that Glasstech may assign its rights and obligations hereunder without the Executive Employee's consent in connection with a sale of all or substantially all of Glasstech's assets. -24- 25 19. BINDING EFFECT. This Employment Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors, and legal representatives. 20. COUNTERPARTS. This Employment Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two (2) copies hereof each signed by one of the parties hereto. 21. HEADING. The headings in this Employment Agreement are for reference only and shall not affect the interpretation of this Employment Agreement. -25- 26 IN WITNESS WHEREOF, the parties hereto have executed. or caused to be executed, this Employment Agreement as of the day and year first above written. GLASSTECH HOLDING CO. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- GLASSTECH, INC. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- EXECUTIVE EMPLOYEE /s/ Larry E. Elliott ------------------------------- Larry E. Elliott -26- EX-10.9 17 EXHIBIT 10.9 1 Exhibit 10.9 EMPLOYMENT AGREEMENT OF RONALD A. MCMASTER WITH GLASSTECH, INC. This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING CO., a Delaware corporation with its principal place of business at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and RONALD A. MCMASTER (SSN ###-##-####), an individual residing at 29794 Foxhill Road, Perrysburg, Ohio 43551 (the "Executive Employee"). BACKGROUND ---------- This Employment Agreement covers the employment of the Executive Employee by Glasstech. Now therefore, Glasstech and the Executive Employee, in consideration of the mutual promises herein contained and intending to be legally bound hereby, agree as follows: 1. TERM. Glasstech hereby employs the Executive Employee as Vice President, Corporate Development, and the Executive Employee hereby accepts such employment, from the date of this Employment Agreement to June 30, 2002 unless sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual anniversary thereafter, this Employment Agreement shall automatically renew for an additional one (1) year period (the "Renewal Term" or the "Renewal Terms") unless either party notifies -1- 2 the other party in writing of its or his intention not to renew the Employment Agreement (the "Renewal Termination Notice") not less than six (6) months prior to the expiration of the last year of the Term or of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this Employment Agreement. 2. DUTIES. The Executive Employee, in his capacity as Vice President, Corporate Development of Glasstech (or such other and comparable titles and positions as shall be given the Executive Employee by Holding Board of Directors), shall perform for Glasstech the services currently performed by him for Glasstech (or comparable services or other reasonable duties as he and Glasstech may agree upon), subject to the reasonable direction of Holding's Board of Directors. The Executive Employee shall perform such services in Wood County, Ohio, or at such other location or locations where he may be assigned by Glasstech from time to time, provided, however, that the Executive Employee shall not be required, in connection with his performance of such services, to travel on behalf of Glasstech in a manner inconsistent with the scope of his duties and the past practices of Glasstech. The Executive Employee shall devote his business time and effort to the Employment Agreement performance of his duties as described herein as reasonably required. It is understood that the Executive Employee may attend to outside investments, serve as a director and/or officer of a non-competing company and serve as an officer, director, or participant in educational, welfare, social, religious, and civic organizations so long as such activities do -2- 3 not materially interfere with the Executive Employee's employment hereunder. 3. COMPENSATION. ------------- 3.1 BASE SALARY. Glasstech shall pay the Executive Employee during each calendar year of the Term and each Renewal Term hereunder, a minimum salary of One Hundred Seventy-Five Thousand Eight Hundred Forty-Four Dollars ($175,844) per calendar year adjusted as provided in Section 3.5 (hereinafter referred to as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly installments, less such deductions as shall be required to be withheld by applicable law and regulations. 3.2 PERFORMANCE BONUS. ------------------ Executive Employee shall participate in Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal year (commencing with the fiscal year ending June 30, 1998), Holding's Board of Directors will establish the Pool which, at a minimum, shall be calculated according to the following bonus chart (the "Bonus Chart"):
Percentage of Total Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool - ---------------------------- ------------------ ---------- $14,000,000 to $14,999,999 5.0% $700,000 to $750,000 $15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000 $16,000,000 and Above 10.0 $1,600,000 and Above
For purposes of this Section, EBITDA shall be subject to the following adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses paid to middle managers other than executive managers; and (Z) EBITDA shall be increased in the amount -3- 4 of any advisory fees paid to Key Equity Capital Corporation or its affiliates. Notwithstanding the foregoing, in the event Glasstech's EBITDA for any fiscal year after the year ending June 30, 1998 (the "Base Year") is less than $16,000,000 (the "Target"), the Board of Directors shall calculate the average EBITDA of Glasstech from the Base Year through and including the fiscal year in which the Target was not achieved. Using the Bonus Chart above, the Board of Directors shall pay the participants (including but not limited to the Executive Employee) the greater of (i) the amount of the Pool using the actual EBITDA for such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for such fiscal year. If the Pool is not ten (10%) percent of the EBITDA in any fiscal year during the Term of this Employment Agreement, such as in year 2001 in the example below, the Board of Directors shall, in each succeeding fiscal year during the Term of this Employment Agreement, calculate the average EBITDA of Glasstech from the Base Year through and including such succeeding fiscal year. If the average EBITDA is greater than the actual EBITDA for any prior fiscal year (or the average EBITDA used in a prior fiscal year), then the Board of Directors, using the Bonus Chart, shall pay the participants (including but not limited to the Executive Employee) an amount equal to (i) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA calculated in such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year less (ii) the amount of the Pool actually distributed to participants in such prior fiscal year. -4- 5 EXAMPLE: - --------
Fiscal Year Percentage of Total Bonus Year EBITDA Fiscal Year EBITDA Pool - ---- ------ ------------------ ---- 1998 $18,000,000 10% $1,800,000 1999 $20,000,000 10% $2,000,000 2000 $13,000,000(1) 10% $1,300,000 2001 $12,000,000(2) 7.5% $ 900,000 2002 $20,000,000 10% $2,000,000 $ 300,000(3) ---------- $2,300,000
Not later than 10 business days after delivery to Glasstech of its fiscal year audit at the end of each fiscal year commencing with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in consultation with the President and Chief Executive Officer, shall distribute the Pool to the participants therein (including but not limited to the Executive Employee) in such percentages as the Board of Directors determines appropriate; provided, that, in no event shall the Board of Directors distribute less than the entire Pool as calculated above in any fiscal year commencing with the fiscal year ending June 30, 1998. - ---------------- 1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 + $20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10% of EBITDA for that year. 2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 + $20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated based upon 7.5% of EBITDA for that year. 3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal year 2001 ($900,000). -5- 6 3.3 RESTRICTED STOCK PROGRAM. ------------------------- (a) Holding hereby awards to Executive Employee 66.68 shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"), which shall be subject to forfeiture in accordance with the provisions set forth herein. On each of the first four anniversary dates of this Employment Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long as his employment has not been terminated on or before such date pursuant to the provisions of Section 6 of this Employment Agreement. Subject to the forfeiture provisions set forth herein, Executive Employee shall be entitled to full and complete ownership of the Class C Shares and will be treated as the record and beneficial owner of such for all purposes including, but not limited to, payment of dividends and liquidation rights, provided that Executive Employee shall be bound by all of the provisions of the Stockholders' Agreement of even date herewith, among the Company, Executive Employee and the other stockholders of the Company (the "Stockholders' Agreement"). (b) The certificates representing awarded Class C Shares shall not be delivered to Executive Employee until the restrictions as to such Class C Shares have lapsed. If Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a), Executive Employee shall forfeit to Holding all such Class C Shares for which the restrictions have not yet lapsed. In this regard, simultaneously with the issuance of certificates representing awarded Class C Shares, Executive Employee shall execute and deliver stock powers forfeiting to -6- 7 Holding Class C Shares awarded hereunder for which the restrictions have not yet lapsed in the event Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a). Executive Employee acknowledges that Class C Shares awarded hereunder shall be subject to the restrictions and risks of forfeiture contained herein and in the Stockholders' Agreement. (c) Subject to Section 3.3(h), Executive Employee hereby agrees that he shall pay to Holding, in cash, any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to him hereunder. If Executive Employee does not make such payment to Holding, then Holding shall have the right to deduct from any payment of any kind otherwise due to Executive Employee from Holding (or from any subsidiary of Holding), any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to Executive Employee hereunder. (d) Holding shall not issue Preferred Stock, Options or Warrants or any otherwise dilutive securities without the consent of the representative(s) of Key Equity Capital Corporation and the representative(s) of executive management on the Board of Directors and unless such securities are sold for fair market value, the proceeds of which are used for appropriate corporate purposes as determined by the Board of Directors. All shareholders of Class A, Class B or Class C Common Stock have the pre-emptive rights described in the Stockholders' Agreement. -7- 8 (e) "Change of Control" shall mean any one of the following events: (i) the transfer, sale or other disposition of the Common Stock of Holding which results in the current stockholders of Holding (determined as of the date hereof) owning in the aggregate less than a majority of the outstanding voting capital stock of Holding; (ii) any consolidation of Holding with, or merger of Holding into, any other entity, any merger of another entity into Holding, or any sale or transfer (in any one transaction or a series of transactions) of all or substantially all of the assets of Holding to another entity (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of Holding or (z) any consolidation with or merger of Holding into a wholly owned subsidiary of Holding, or any sale or transfer by Holding of all or substantially all of its assets to one or more of its wholly owned subsidiaries in any one transaction or a series of transactions). Notwithstanding the foregoing, a "Change in Control" shall not include any transaction permitted under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to the contrary in this Employment Agreement, so long as Executive Employee's employment has not been terminated pursuant to the provisions of Section 6 before the date of a Change of Control, the restrictions with respect to all of the Class C Shares shall immediately lapse upon a Change of Control. (f) Executive Employee understands that the Class C Shares have not been registered under the Securities Act of 1993, as amended (the "1933 Act") or any state securities laws. -8- 9 Executive Employee represents that the Class C Shares awarded hereunder are not being acquired by Executive Employee with a view toward resale or distribution and Executive Employee will not sell or otherwise transfer such Class C Shares except in compliance with the 1933 Act. The certificates representing the Class C Shares shall bear such legends and statements evidencing the restrictions contained in this Employment Agreement and as the Board of Directors of Holding shall deem advisable to assure compliance with federal and state securities laws and regulations. (g) The award of the Class C Shares to Executive Employee hereunder shall not confer any right to Executive Employee to continue in the employ of Glasstech or any of its subsidiaries and shall not restrict or interfere in any way with the right of Glasstech to terminate his employment with or without cause, at any time. (h) Executive Employee may file an "83(b) election" with the Internal Revenue Service with respect to the Class C Shares. If Executive Employee does file such an 83(b) election, Holding shall loan Executive Employee an amount equal to 80% of Executive Employee's tax liability resulting from such 83(b) election (the "Loan Amount") subject to the following terms: (i) Executive Employee shall execute and deliver to Holding a Promissory Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the principal amount of the Class C Note shall be equal to the Loan Amount and shall accrue interest at the annual applicable federal rate for mid-term obligations as of the month in which the Class C Note is issued; and (iii) the Executive Employee shall execute and deliver to -9- 10 Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a part hereof with respect to all shares of Class A Voting Common Stock of Holding and all Class C Shares held by Executive Employee. 3.4 CLASS D SHARES. Executive Employee shall also be issued 500 shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share Program") and subject to the terms and conditions of Section 9 of the Stockholders' Agreement. 3.5 COST OF LIVING INCREASE. The Base Salary provided for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if any, in the cost of living by adding to the Base Salary an amount obtained by multiplying the Base Salary by the percentage by which the level of the Consumer Price Index North Central Region (for all items for urban wage earners and clerical workers as reported for December 31 of each calendar period by the Bureau of Labor Statistics of the United States Department of Labor) has increased over its level as of January I of the same calendar year. 3.6 BENEFITS. The Executive Employee shall be entitled during the Term and during any Renewal Terms to participate in such group life, hospitalization and/or disability insurance benefits, health programs, qualified or non-qualified deferred compensation plans or similar benefits which are comparable to those made available by Glasstech on the date of this Employment Agreement or thereafter to its executive employees generally, subject to the eligibility provisions of such plans. -10- 11 3.7 VACATIONS. The Executive Employee shall be entitled to vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which relating to vacation and personal leave are hereby incorporated into this Employment Agreement by reference. 3.8 INSURANCE. Glasstech agrees to pay life insurance and/or annuity premiums on a policy(ies) selected by and insuring the life of the Executive Employee with a beneficiary(ies) to be named by the Executive Employee. The parties hereto agree that Glasstech shall not be obligated to pay any premium greater than Five Thousand Dollars ($5,000) during the first year of the Term and such amount shall be increased by Five Hundred Dollars ($500) each year thereafter during the Term or during any of the Renewal Terms. The parties further agree that the Executive Employee shall be permitted from time to time, during the Term, or any Renewal Terms, to maintain such policy(ies), or to exchange such policy(ies), or to acquire any new life insurance and/or annuity products, provided however, that the portion of the premiums and costs to be paid by Glasstech in connection with such policy(ies) shall not exceed the amounts specified above. Glasstech expressly acknowledges that it shall have no right, title or interest in and to such policy(ies), the same being the exclusive property of the Executive Employee. 3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the Executive Employee for all reasonable expenses actually incurred or paid by the Executive Employee during the Term or any Renewal Term in performance of the Executive Employee's -11- 12 services under this Employment Agreement, subject to receipt by Glasstech of reasonable supporting documentation. 4. TERMINATION UPON DEATH. In the event the Executive Employee dies during the Term or any Renewal Term, for a period of six (6) months following such death Glasstech agrees to continue to pay to the surviving spouse of the Executive Employee the Base Salary rate of the deceased Executive Employee in effect at the time of death in equal bi-weekly installments less such deductions required to be withheld by applicable law and regulations. The salary continuation payable as provided herein shall be in addition to any right of the estate of the deceased Executive Employee to (a) participate in the Pool (in accordance with Section 3.2 above) in the fiscal year in which such death occurred and to receive a prorated amount for the portion of the fiscal year in which Executive Employee was alive, provided, however, that the level of such participation shall be subject to the discretion of Holding Board of Directors, and (b) to participate in the Performance Share Program as set forth therein. Upon the death of the Executive Employee, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the estate of the deceased Executive Employee. Glasstech shall also remit to the estate of the deceased Executive Employee any other benefits earned and accrued or payable up to the date of such death and shall reimburse to the estate of the deceased Executive Employee any outstanding unreimbursed expenses incurred by such Executive Employee on behalf of Glasstech and documented as provided herein. In the event the deceased Executive Employee is not survived by a spouse or in the further event the deceased Executive -12- 13 Employee and his spouse are separated at the time of death by agreement, court order or decree, or otherwise, then such salary continuation shall be remitted to the estate of the deceased Executive Employee. 5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY. In the event the Executive Employee becomes disabled during the Term or any Renewal Term by virtue of ill health or other disability and is thereby unable to perform on a full time basis substantially and continuously the duties assigned to him by Glasstech, Glasstech agrees to continue the Executive Employee's Base Salary until such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage. At such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage (a "Disability"), Glasstech shall have no further obligation to compensate the Executive Employee (except that Glasstech shall continue to provide group life and health benefits to Executive Employee consistent with those provided to other executive employees for a period of two (2) years from the date on which Executive Employee's long term disability benefits commence) and further Glasstech shall have the right to terminate the employment of the Executive Employee hereunder upon written notice delivered pursuant to Section 13. In the event of such Disability, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee. Executive Employee shall participate in the Performance Share Program as set forth therein. -13- 14 6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. ------------------------------------------------ (a) Notwithstanding any other provision of this Employment Agreement, Glasstech may terminate the Executive Employee's employment at any time for Cause (as hereinafter defined) and the Executive Employee may voluntarily terminate the Executive Employee's employment with Glasstech. Upon such termination for Cause or upon Executive Employee's voluntary termination, Executive Employee shall not participate in the Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his termination occurred, and Executive Employee shall automatically forfeit those shares of Restricted Stock for which the restrictions would have lapsed (pursuant to Section 3.3) in the contract year in which his termination occurred and any subsequent year and shall participate in the Performance Share Program as set forth therein. Upon such termination for Cause or upon Executive Employee's voluntary termination, the Executive Employee shall be entitled to, except as restricted in the preceding sentence, receive any salary and other benefits earned or accrued, and reimbursement for expenses incurred, prior to the date of termination. (b) "Cause" shall mean (i) the Executive Employee's willful and continuing affirmative refusal to perform his or her duties hereunder (other than as a result of a Disability); (ii) dishonesty in the performance of his or her duties hereunder which results in criminal indictment of the Executive Employee; (iii) the Executive Employee's breach of any material term of this Employment Agreement (provided that Glasstech shall give the Executive Employee written notice of such breach and a thirty (30) day period -14- 15 after notice to cure such breach, except that no notice or cure period shall be given or extended with respect to breach of the provisions of Section 8 of this Employment Agreement); or (iv) the Executive Employee's conviction for a felony or for a crime which, in the reasonable judgment of Glasstech, renders the Executive Employee unable to perform his duties as described in this Employment Agreement. 7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated prior to the end of the Term or any Renewal Term other than pursuant to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a termination "Without Cause"), the Executive Employee shall be entitled to (in addition to such other rights as he may have, or damages to which he may be entitled at law or in equity) (i) all payments when due of any salary and other benefits (including, without limitation, participation in the Performance Bonus pursuant to Section 3.2) accrued through the date of termination, including the payment of all salary due for the remainder of the Term or Renewal Term as though the Executive Employee had remained employed through the full Term (or, if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee, and (iii) participation in the Performance Share Program as set forth therein. 8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges that (i) the principal business of Glasstech is design, manufacture, marketing, sale, distribution and servicing of glass bending, tempering and annealing equipment worldwide to -15- 16 both automotive glass fabricators and architectural glass producers and the principal business of Stir-Melter, Inc. is the vitrification of hazardous waste (collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited number of persons throughout the world which has developed such business; (iii) the Glasstech Business is, in large part, international in scope and Glasstech's customers, potential customers and competitors are located throughout the world; (iv) the Executive Employee's work for Glasstech has given and will continue to give him access to the confidential affairs and proprietary information of Glasstech; (v) this Employment Agreement has been entered into as part of a series of transactions pursuant to which Executive Employee and others have purchased an equity interest in Glasstech and sold their equity interest in Glasstech; and (vi) Glasstech would not have entered into this Employment Agreement but for the agreements and covenants of the Executive Employee contained in this Section 8. Accordingly, the Executive Employee covenants and agrees that: (a) he shall not, anywhere in the world directly or indirectly, (1) engage in Glasstech Business for his own account or that of any other person; (2) render any services related to the Glasstech Business to any person (other than Glasstech) engaged in such activities; or (3) become interested in any such person (other than Glasstech) as a partner, stockholder, member, principal, agent, trustee, consultant or in any other relationship or capacity for a period commencing on the date of this Employment Agreement and terminating on the day which is: (i) the later of (A) five (5) years following the date hereof, or (B) two (2) years following the termination of the Executive Employee's employment pursuant to a -16- 17 Renewal Termination Notice if given by Executive Employee, or (ii) if the Executive Employee's employment has been terminated for Cause, then two (2) years following termination of Executive Employee's employment; (collectively the "Restricted Period") provided, however, that there shall be no Restricted Period if Executive Employee's employment is terminated Without Cause or if Glasstech delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the above, the Executive Employee may own, directly or indirectly, solely as an investment, securities of any such person which are traded on any national securities exchange or NASDAQ if the Executive Employee is not a controlling person of, or a member of a group which controls such person and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such person. (b) at all times during and after this Employment Agreement is in force he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of Glasstech and its affiliates, all confidential matters relating to Glasstech Business and to Glasstech and its affiliates learned by the Executive Employee heretofore or hereafter directly or indirectly from Glasstech or its affiliates or any of their predecessors or successors (the "Confidential Company Information") and shall not disclose the Confidential Company Information to anyone outside of Glasstech and its affiliates except with Glasstech's express written consent. The requirements of this Section 8(b) shall not apply to Confidential Company Information which is: (1) at the time of receipt or thereafter publicly known -17- 18 through no wrongful act of the Executive Employee: (2) received from a third party not under any obligation to keep such information confidential; or (3) required to be disclosed by law. (c) during the Restricted Period, he shall not, without Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit employees of Glasstech or its affiliates to leave the employ of Glasstech or any of its affiliates or (ii) hire any employee who has left the employ of Glasstech or any of its affiliates within one year of the termination of such employee's employment with Glasstech or any of its affiliates. (d) at any time upon written request from Glasstech, he shall deliver to Glasstech all memoranda, notes, lists, records and other documents (and all copies thereof) made or compiled by the Executive Employee or made available to him concerning Glasstech Business or Glasstech or any of its affiliates all of which shall at all times be the property of Glasstech. 9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech shall have the following rights and remedies (upon compliance with any necessary prerequisites imposed by law upon the availability of such remedies), each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to Glasstech under law or in equity: (a) The right to have the Restrictive Covenants specifically enforced by any court having jurisdiction over the parties to this Employment Agreement; and -18- 19 (b) The right to entry of restraining orders and/or injunctions (preliminary, mandatory, temporary and permanent) against the Executive Employee against violations, threatened or actual, and whether or not then continuing, of such covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Glasstech and that money damages will not provide an adequate remedy to Glasstech; and (c) The right and remedy to require the Executive Employee to account for and pay over to Glasstech all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive Employee shall account for and pay over such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech under this Section 9 against any amounts owed to the Executive Employee. 10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which shall be subject to the provisions of Section 9, neither party shall institute an arbitration proceeding hereunder, before that party has sought to resolve the dispute through direct negotiation with the other party. If the dispute is not resolved within three weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through nonbinding mediation. If the parties do not promptly agree on a mediator, then either party may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator shall be paid one-half each by each -19- 20 party. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "Association"). The place of arbitration shall be Detroit, Michigan. Arbitration may be commenced at any time by any party hereto after giving written notice in the manner described in Section 13 of this Employment Agreement. The arbitrator shall be selected by the joint agreement of each party, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator shall render his decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the -20- 21 arbitrator shall be paid entirely by the nonprevailing party and in addition the nonprevailing party shall reimburse the other party for the fees and expenses of mediation incurred by such party, unless the arbitrator determines that the costs, expenses and attorneys' fees should be apportioned between the parties, then as the arbitrator may assess. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances. As set forth in the first phrase of the first sentence of this section 10, this arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Employment Agreement. 11. BLUE PENCILING. The Executive Employee acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Employment Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, whether because of the duration or geographical scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced. 12. SEVERABILITY. If any court determines that any covenant or provision of this Employment Agreement is unenforceable for any reason, the remaining covenants or provisions shall remain in full force and effect. 13. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be (a) -21- 22 delivered personally, (b) sent by facsimile transmission, (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by overnight delivery service, to the following addresses: (i) if to Glasstech, to: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: Mark Christman, President Fax: (419) 661-9366 and Kenneth H. Wetmore, Esquire Vice President, General Counsel and Secretary Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Fax: (419) 661-9616 and Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: David P. Given (ii) if to the Executive Employee, to: Ronald A. McMaster 29794 Foxhill Road Perrysburg, Ohio 43551 Any such notice shall be deemed given (a) when so delivered personally, (b) if sent by certified or registered mail, return receipt requested, on the date the return receipt is signed, or (c) if sent by overnight delivery service. on the next normal business day after the date of sender receipt. Any such person may, by giving notice in accordance with this section to the other parties hereto, designate another address or person for receipt by such person of notices hereunder. -22- 23 14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreement(s), written or oral with respect thereto. This Employment Agreement will be effective upon the consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger Agreement is not consummated within the time set forth therein, this Employment Agreement shall be null and void and of no further force and effect. The Employment Agreement dated December 6, 1994 between Glasstech and the Executive Employee is hereby terminated and is null and void and of no further force and effect. 15. INDEMNIFICATION. During the Term or any Renewal Term hereof and subject to the continuing compliance by the Executive Employee with his obligations hereunder, Glasstech shall provide the Executive Employee with indemnification against liabilities or claims arising by reason of the fact that he is an employee. officer and/or director of Glasstech, and against expenses incurred in connection therewith, to the fullest extent of indemnification then available to any officer and/or director of Glasstech under and in accordance with the laws of the State of Delaware. Also, Glasstech shall purchase and/or maintain Directors' and Officers' insurance on or inuring to the Executive Employee's benefit with respect to such liabilities, claims, or expenses as described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding, dated June 5, 1997. 16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended, superseded, canceled, renewed, or extended, and the -23- 24 terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power, or privilege, nor shall any single or partial exercise of any such right, power, or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege. 17. GOVERNING LAW. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed within the State. 18. ASSIGNMENT. This Employment Agreement, and the Executive Employee's rights and obligations hereunder, may not be assigned by either party hereto without the consent of the other and any purported assignment by the Executive Employee or Glasstech in violation hereof shall be null and void; provided, however, that Glasstech may assign its rights and obligations hereunder without the Executive Employee's consent in connection with a sale of all or substantially all of Glasstech's assets. 19. BINDING EFFECT. This Employment Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors, and legal representatives. 20. COUNTERPARTS. This Employment Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all -24- 25 such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two (2) copies hereof each signed by one of the parties hereto. 21. HEADING. The headings in this Employment Agreement are for reference only and shall not affect the interpretation of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have executed. or caused to be executed, this Employment Agreement as of the day and year first above written. GLASSTECH HOLDING CO. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- GLASSTECH, INC. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- EXECUTIVE EMPLOYEE /s/ Ronald A. McMaster ------------------------------- Ronald A. McMaster -25- EX-10.10 18 EXHIBIT 10.10 1 Exhibit 10.10 EMPLOYMENT AGREEMENT OF JAMES P. SCHNABEL, JR. WITH GLASSTECH, INC. This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING CO., a Delaware corporation with its principal place of business at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and JAMES P. SCHNABEL, JR. (SSN ###-##-####), an individual residing at 1915 Wexford Hill Lane, Holland, Ohio 43528 (the "Executive Employee"). BACKGROUND ---------- This Employment Agreement covers the employment of the Executive Employee by Glasstech. Now therefore, Glasstech and the Executive Employee, in consideration of the mutual promises herein contained and intending to be legally bound hereby, agree as follows: 1. TERM. Glasstech hereby employs the Executive Employee as Vice President, Product Development, and the Executive Employee hereby accepts such employment, from the date of this Employment Agreement to June 30, 2002 unless sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual anniversary thereafter, this Employment Agreement shall automatically renew for an additional one (1) year period (the "Renewal Term" or the "Renewal Terms") unless either party notifies the other party in -1- 2 writing of its or his intention not to renew the Employment Agreement (the "Renewal Termination Notice") not less than six (6) months prior to the expiration of the last year of the Term or of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this Employment Agreement. 2. DUTIES. The Executive Employee, in his capacity as Vice President, Product Development of Glasstech (or such other and comparable titles and positions as shall be given the Executive Employee by Holding Board of Directors), shall perform for Glasstech the services currently performed by him for Glasstech (or comparable services or other reasonable duties as he and Glasstech may agree upon), subject to the reasonable direction of Holding's Board of Directors. The Executive Employee shall perform such services in Wood County, Ohio, or at such other location or locations where he may be assigned by Glasstech from time to time, provided, however, that the Executive Employee shall not be required, in connection with his performance of such services, to travel on behalf of Glasstech in a manner inconsistent with the scope of his duties and the past practices of Glasstech. The Executive Employee shall devote his business time and effort to the Employment Agreement performance of his duties as described herein as reasonably required. It is understood that the Executive Employee may attend to outside investments, serve as a director and/or officer of a non-competing company and serve as an officer, director, or participant in educational, welfare, social, religious, and civic organizations so long as such activities do not materially interfere with the Executive Employee's employment hereunder. -2- 3 3. COMPENSATION. ------------- 3.1 BASE SALARY. Glasstech shall pay the Executive Employee during each calendar year of the Term and each Renewal Term hereunder, a minimum salary of One Hundred Thirty-Two Thousand Eight Hundred Forty-Three Dollars ($132,843) per calendar year adjusted as provided in Section 3.5 (hereinafter referred to as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly installments, less such deductions as shall be required to be withheld by applicable law and regulations. 3.2 PERFORMANCE BONUS. ------------------ Executive Employee shall participate in Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal year (commencing with the fiscal year ending June 30, 1998), Holding's Board of Directors will establish the Pool which, at a minimum, shall be calculated according to the following bonus chart (the "Bonus Chart"):
Percentage of Total Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool - ---------------------------- ------------------ ---------- $14,000,000 to $14,999,999 5.0% $700,000 to $750,000 $15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000 $16,000,000 and Above 10.0 $1,600,000 and Above
For purposes of this Section, EBITDA shall be subject to the following adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses paid to middle managers other than executive managers; and (Z) EBITDA shall be increased in the amount of any advisory fees paid to Key Equity Capital Corporation or its affiliates. -3- 4 Notwithstanding the foregoing, in the event Glasstech's EBITDA for any fiscal year after the year ending June 30, 1998 (the "Base Year") is less than $16,000,000 (the "Target"), the Board of Directors shall calculate the average EBITDA of Glasstech from the Base Year through and including the fiscal year in which the Target was not achieved. Using the Bonus Chart above, the Board of Directors shall pay the participants (including but not limited to the Executive Employee) the greater of (i) the amount of the Pool using the actual EBITDA for such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for such fiscal year. If the Pool is not ten (10%) percent of the EBITDA in any fiscal year during the Term of this Employment Agreement, such as in year 2001 in the example below, the Board of Directors shall, in each succeeding fiscal year during the Term of this Employment Agreement, calculate the average EBITDA of Glasstech from the Base Year through and including such succeeding fiscal year. If the average EBITDA is greater than the actual EBITDA for any prior fiscal year (or the average EBITDA used in a prior fiscal year), then the Board of Directors, using the Bonus Chart, shall pay the participants (including but not limited to the Executive Employee) an amount equal to (i) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA calculated in such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year less (ii) the amount of the Pool actually distributed to participants in such prior fiscal year. -4- 5
EXAMPLE: - -------- Fiscal Year Percentage of Total Bonus Year EBITDA Fiscal Year EBITDA Pool - ---- ------ ------------------ ---- 1998 $18,000,000 10% $1,800,000 1999 $20,000,000 10% $2,000,000 2000 $13,000,000(1) 10% $1,300,000 2001 $12,000,000(2) 7.5% $ 900,000 2002 $20,000,000 10% $2,000,000 $ 300,000(3) ---------- $2,300,000
Not later than 10 business days after delivery to Glasstech of its fiscal year audit at the end of each fiscal year commencing with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in consultation with the President and Chief Executive Officer, shall distribute the Pool to the participants therein (including but not limited to the Executive Employee) in such percentages as the Board of Directors determines appropriate; provided, that, in no event shall the Board of Directors distribute less than the entire Pool as calculated above in any fiscal year commencing with the fiscal year ending June 30, 1998. - -------------------- 1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 + $20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10% of EBITDA for that year. 2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 + $20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated based upon 7.5% of EBITDA for that year. 3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000 + 20,000,000 + 13,000,000 + 12,000,000 + 20,000,000 / 5). Therefore, the Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal year 2001 ($900,000). -5- 6 3.3 RESTRICTED STOCK PROGRAM. ------------------------- (a) Holding hereby awards to Executive Employee 133.36 shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"), which shall be subject to forfeiture in accordance with the provisions set forth herein. On each of the first four anniversary dates of this Employment Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long as his employment has not been terminated on or before such date pursuant to the provisions of Section 6 of this Employment Agreement. Subject to the forfeiture provisions set forth herein, Executive Employee shall be entitled to full and complete ownership of the Class C Shares and will be treated as the record and beneficial owner of such for all purposes including, but not limited to, payment of dividends and liquidation rights, provided that Executive Employee shall be bound by all of the provisions of the Stockholders' Agreement of even date herewith, among the Company, Executive Employee and the other stockholders of the Company (the "Stockholders' Agreement). (b) The certificates representing awarded Class C Shares shall not be delivered to Executive Employee until the restrictions as to such Class C Shares have lapsed. If Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a), Executive Employee shall forfeit to Holding all such Class C Shares for which the restrictions have not yet lapsed. In this regard, simultaneously with the issuance of certificates representing awarded Class C Shares, Executive Employee shall execute and deliver stock powers forfeiting to -6- 7 Holding Class C Shares awarded hereunder for which the restrictions have not yet lapsed in the event Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a). Executive Employee acknowledges that Class C Shares awarded hereunder shall be subject to the restrictions and risks of forfeiture contained herein and in the Stockholders' Agreement. (c) Subject to Section 3.3(h), Executive Employee hereby agrees that he shall pay to Holding, in cash, any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to him hereunder. If Executive Employee does not make such payment to Holding, then Holding shall have the right to deduct from any payment of any kind otherwise due to Executive Employee from Holding (or from any subsidiary of Holding), any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to Executive Employee hereunder. (d) Holding shall not issue Preferred Stock, Options or Warrants or any otherwise dilutive securities without the consent of the representative(s) of Key Equity Capital Corporation and the representative(s) of executive management on the Board of Directors and unless such securities are sold for fair market value, the proceeds of which are used for appropriate corporate purposes as determined by the Board of Directors. All shareholders of Class A, Class B or Class C Common Stock have the pre-emptive rights described in the Stockholders' Agreement. -7- 8 (e) "Change of Control" shall mean any one of the following events: (i) the transfer, sale or other disposition of the Common Stock of Holding which results in the current stockholders of Holding (determined as of the date hereof) owning in the aggregate less than a majority of the outstanding voting capital stock of Holding; (ii) any consolidation of Holding with, or merger of Holding into, any other entity, any merger of another entity into Holding, or any sale or transfer (in any one transaction or a series of transactions) of all or substantially all of the assets of Holding to another entity (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of Holding or (z) any consolidation with or merger of Holding into a wholly owned subsidiary of Holding, or any sale or transfer by Holding of all or substantially all of its assets to one or more of its wholly owned subsidiaries in any one transaction or a series of transactions). Notwithstanding the foregoing, a "Change in Control" shall not include any transaction permitted under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to the contrary in this Employment Agreement, so long as Executive Employee's employment has not been terminated pursuant to the provisions of Section 6 before the date of a Change of Control, the restrictions with respect to all of the Class C Shares shall immediately lapse upon a Change of Control. (f) Executive Employee understands that the Class C Shares have not been registered under the Securities Act of 1993, as amended (the "1933 Act") or any state securities laws. -8- 9 Executive Employee represents that the Class C Shares awarded hereunder are not being acquired by Executive Employee with a view toward resale or distribution and Executive Employee will not sell or otherwise transfer such Class C Shares except in compliance with the 1933 Act. The certificates representing the Class C Shares shall bear such legends and statements evidencing the restrictions contained in this Employment Agreement and as the Board of Directors of Holding shall deem advisable to assure compliance with federal and state securities laws and regulations. (g) The award of the Class C Shares to Executive Employee hereunder shall not confer any right to Executive Employee to continue in the employ of Glasstech or any of its subsidiaries and shall not restrict or interfere in any way with the right of Glasstech to terminate his employment with or without cause, at any time. (h) Executive Employee may file an "83(b) election" with the Internal Revenue Service with respect to the Class C Shares. If Executive Employee does file such an 83(b) election, Holding shall loan Executive Employee an amount equal to 80% of Executive Employee's tax liability resulting from such 83(b) election (the "Loan Amount") subject to the following terms: (i) Executive Employee shall execute and deliver to Holding a Promissory Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the principal amount of the Class C Note shall be equal to the Loan Amount and shall accrue interest at the annual applicable federal rate for mid-term obligations as of the month in which the Class C Note is issued; and (iii) the Executive Employee shall execute and deliver to -9- 10 Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a part hereof with respect to all shares of Class A Voting Common Stock of Holding and all Class C Shares held by Executive Employee. 3.4 CLASS D SHARES. Executive Employee shall also be issued 1,000 shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share Program") and subject to the terms and conditions of Section 9 of the Stockholders' Agreement. 3.5 COST OF LIVING INCREASE. The Base Salary provided for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if any, in the cost of living by adding to the Base Salary an amount obtained by multiplying the Base Salary by the percentage by which the level of the Consumer Price Index North Central Region (for all items for urban wage earners and clerical workers as reported for December 31 of each calendar period by the Bureau of Labor Statistics of the United States Department of Labor) has increased over its level as of January I of the same calendar year. 3.6 BENEFITS. The Executive Employee shall be entitled during the Term and during any Renewal Terms to participate in such group life, hospitalization and/or disability insurance benefits, health programs, qualified or non-qualified deferred compensation plans or similar benefits which are comparable to those made available by Glasstech on the date of this Employment Agreement or thereafter to its executive employees generally, subject to the eligibility provisions of such plans. -10- 11 3.7 VACATIONS. The Executive Employee shall be entitled to vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which relating to vacation and personal leave are hereby incorporated into this Employment Agreement by reference. 3.8 INSURANCE. Glasstech agrees to pay life insurance and/or annuity premiums on a policy(ies) selected by and insuring the life of the Executive Employee with a beneficiary(ies) to be named by the Executive Employee. The parties hereto agree that Glasstech shall not be obligated to pay any premium greater than Five Thousand Dollars ($5,000) during the first year of the Term and such amount shall be increased by Five Hundred Dollars ($500) each year thereafter during the Term or during any of the Renewal Terms. The parties further agree that the Executive Employee shall be permitted from time to time, during the Term, or any Renewal Terms, to maintain such policy(ies), or to exchange such policy(ies), or to acquire any new life insurance and/or annuity products, provided however, that the portion of the premiums and costs to be paid by Glasstech in connection with such policy(ies) shall not exceed the amounts specified above. Glasstech expressly acknowledges that it shall have no right, title or interest in and to such policy(ies), the same being the exclusive property of the Executive Employee. 3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the Executive Employee for all reasonable expenses actually incurred or paid by the Executive Employee during the Term or any Renewal Term in performance of the Executive Employee's -11- 12 services under this Employment Agreement, subject to receipt by Glasstech of reasonable supporting documentation. 4. TERMINATION UPON DEATH. In the event the Executive Employee dies during the Term or any Renewal Term, for a period of six (6) months following such death Glasstech agrees to continue to pay to the surviving spouse of the Executive Employee the Base Salary rate of the deceased Executive Employee in effect at the time of death in equal bi-weekly installments less such deductions required to be withheld by applicable law and regulations. The salary continuation payable as provided herein shall be in addition to any right of the estate of the deceased Executive Employee to (a) participate in the Pool (in accordance with Section 3.2 above) in the fiscal year in which such death occurred and to receive a prorated amount for the portion of the fiscal year in which Executive Employee was alive, provided, however, that the level of such participation shall be subject to the discretion of Holding Board of Directors, and (b) to participate in the Performance Share Program as set forth therein. Upon the death of the Executive Employee, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the estate of the deceased Executive Employee. Glasstech shall also remit to the estate of the deceased Executive Employee any other benefits earned and accrued or payable up to the date of such death and shall reimburse to the estate of the deceased Executive Employee any outstanding unreimbursed expenses incurred by such Executive Employee on behalf of Glasstech and documented as provided herein. In the event the deceased Executive Employee is not survived by a spouse or in the further event the deceased Executive -12- 13 Employee and his spouse are separated at the time of death by agreement, court order or decree, or otherwise, then such salary continuation shall be remitted to the estate of the deceased Executive Employee. 5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY. In the event the Executive Employee becomes disabled during the Term or any Renewal Term by virtue of ill health or other disability and is thereby unable to perform on a full time basis substantially and continuously the duties assigned to him by Glasstech, Glasstech agrees to continue the Executive Employee's Base Salary until such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage. At such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage (a "Disability"), Glasstech shall have no further obligation to compensate the Executive Employee (except that Glasstech shall continue to provide group life and health benefits to Executive Employee consistent with those provided to other executive employees for a period of two (2) years from the date on which Executive Employee's long term disability benefits commence) and further Glasstech shall have the right to terminate the employment of the Executive Employee hereunder upon written notice delivered pursuant to Section 13. In the event of such Disability, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee. Executive Employee shall participate in the Performance Share Program as set forth therein. -13- 14 6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. ------------------------------------------------ (a) Notwithstanding any other provision of this Employment Agreement, Glasstech may terminate the Executive Employee's employment at any time for Cause (as hereinafter defined) and the Executive Employee may voluntarily terminate the Executive Employee's employment with Glasstech. Upon such termination for Cause or upon Executive Employee's voluntary termination, Executive Employee shall not participate in the Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his termination occurred, and Executive Employee shall automatically forfeit those shares of Restricted Stock for which the restrictions would have lapsed (pursuant to Section 3.3) in the contract year in which his termination occurred and any subsequent year and shall participate in the Performance Share Program as set forth therein. Upon such termination for Cause or upon Executive Employee's voluntary termination, the Executive Employee shall be entitled to, except as restricted in the preceding sentence, receive any salary and other benefits earned or accrued, and reimbursement for expenses incurred, prior to the date of termination. (b) "Cause" shall mean (i) the Executive Employee's willful and continuing affirmative refusal to perform his or her duties hereunder (other than as a result of a Disability); (ii) dishonesty in the performance of his or her duties hereunder which results in criminal indictment of the Executive Employee; (iii) the Executive Employee's breach of any material term of this Employment Agreement (provided that Glasstech shall give the Executive Employee written notice of such breach and a thirty (30) day period -14- 15 after notice to cure such breach, except that no notice or cure period shall be given or extended with respect to breach of the provisions of Section 8 of this Employment Agreement); or (iv) the Executive Employee's conviction for a felony or for a crime which, in the reasonable judgment of Glasstech, renders the Executive Employee unable to perform his duties as described in this Employment Agreement. 7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated prior to the end of the Term or any Renewal Term other than pursuant to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a termination "Without Cause"), the Executive Employee shall be entitled to (in addition to such other rights as he may have, or damages to which he may be entitled at law or in equity) (i) all payments when due of any salary and other benefits (including, without limitation, participation in the Performance Bonus pursuant to Section 3.2) accrued through the date of termination, including the payment of all salary due for the remainder of the Term or Renewal Term as though the Executive Employee had remained employed through the full Term (or, if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee, and (iii) participation in the Performance Share Program as set forth therein. 8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges that (i) the principal business of Glasstech is design, manufacture, marketing, sale, distribution and servicing of glass bending, tempering and annealing equipment worldwide to -15- 16 both automotive glass fabricators and architectural glass producers and the principal business of Stir-Melter, Inc. is the vitrification of hazardous waste (collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited number of persons throughout the world which has developed such business; (iii) the Glasstech Business is, in large part, international in scope and Glasstech's customers, potential customers and competitors are located throughout the world; (iv) the Executive Employee's work for Glasstech has given and will continue to give him access to the confidential affairs and proprietary information of Glasstech; (v) this Employment Agreement has been entered into as part of a series of transactions pursuant to which Executive Employee and others have purchased an equity interest in Glasstech and sold their equity interest in Glasstech; and (vi) Glasstech would not have entered into this Employment Agreement but for the agreements and covenants of the Executive Employee contained in this Section 8. Accordingly, the Executive Employee covenants and agrees that: (a) he shall not, anywhere in the world directly or indirectly, (1) engage in Glasstech Business for his own account or that of any other person; (2) render any services related to the Glasstech Business to any person (other than Glasstech) engaged in such activities; or (3) become interested in any such person (other than Glasstech) as a partner, stockholder, member, principal, agent, trustee, consultant or in any other relationship or capacity for a period commencing on the date of this Employment Agreement and terminating on the day which is: (i) the later of (A) five (5) years following the date hereof, or (B) two (2) years following the termination of the Executive Employee's employment pursuant to a -16- 17 Renewal Termination Notice if given by Executive Employee, or (ii) if the Executive Employee's employment has been terminated for Cause, then two (2) years following termination of Executive Employee's employment; (collectively the "Restricted Period") provided, however, that there shall be no Restricted Period if Executive Employee's employment is terminated Without Cause or if Glasstech delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the above, the Executive Employee may own, directly or indirectly, solely as an investment, securities of any such person which are traded on any national securities exchange or NASDAQ if the Executive Employee is not a controlling person of, or a member of a group which controls such person and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such person. (b) at all times during and after this Employment Agreement is in force he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of Glasstech and its affiliates, all confidential matters relating to Glasstech Business and to Glasstech and its affiliates learned by the Executive Employee heretofore or hereafter directly or indirectly from Glasstech or its affiliates or any of their predecessors or successors (the "Confidential Company Information") and shall not disclose the Confidential Company Information to anyone outside of Glasstech and its affiliates except with Glasstech's express written consent. The requirements of this Section 8(b) shall not apply to Confidential Company Information which is: (1) at the time of receipt or thereafter publicly known -17- 18 through no wrongful act of the Executive Employee: (2) received from a third party not under any obligation to keep such information confidential; or (3) required to be disclosed by law. (c) during the Restricted Period, he shall not, without Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit employees of Glasstech or its affiliates to leave the employ of Glasstech or any of its affiliates or (ii) hire any employee who has left the employ of Glasstech or any of its affiliates within one year of the termination of such employee's employment with Glasstech or any of its affiliates. (d) at any time upon written request from Glasstech, he shall deliver to Glasstech all memoranda, notes, lists, records and other documents (and all copies thereof) made or compiled by the Executive Employee or made available to him concerning Glasstech Business or Glasstech or any of its affiliates all of which shall at all times be the property of Glasstech. 9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech shall have the following rights and remedies (upon compliance with any necessary prerequisites imposed by law upon the availability of such remedies), each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to Glasstech under law or in equity: (a) The right to have the Restrictive Covenants specifically enforced by any court having jurisdiction over the parties to this Employment Agreement; and -18- 19 (b) The right to entry of restraining orders and/or injunctions (preliminary, mandatory, temporary and permanent) against the Executive Employee against violations, threatened or actual, and whether or not then continuing, of such covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Glasstech and that money damages will not provide an adequate remedy to Glasstech; and (c) The right and remedy to require the Executive Employee to account for and pay over to Glasstech all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive Employee shall account for and pay over such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech under this Section 9 against any amounts owed to the Executive Employee. 10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which shall be subject to the provisions of Section 9, neither party shall institute an arbitration proceeding hereunder, before that party has sought to resolve the dispute through direct negotiation with the other party. If the dispute is not resolved within three weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through nonbinding mediation. If the parties do not promptly agree on a mediator, then either party may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator shall be paid one-half each by each -19- 20 party. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "Association"). The place of arbitration shall be Detroit, Michigan. Arbitration may be commenced at any time by any party hereto after giving written notice in the manner described in Section 13 of this Employment Agreement. The arbitrator shall be selected by the joint agreement of each party, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator shall render his decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the -20- 21 arbitrator shall be paid entirely by the nonprevailing party and in addition the nonprevailing party shall reimburse the other party for the fees and expenses of mediation incurred by such party, unless the arbitrator determines that the costs, expenses and attorneys' fees should be apportioned between the parties, then as the arbitrator may assess. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances. As set forth in the first phrase of the first sentence of this section 10, this arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Employment Agreement. 11. BLUE PENCILING. The Executive Employee acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Employment Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, whether because of the duration or geographical scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and. in its reduced form, such provision shall then be enforceable and shall be enforced. 12. SEVERABILITY. If any court determines that any covenant or provision of this Employment Agreement is unenforceable for any reason, the remaining covenants or provisions shall remain in full force and effect. 13. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be (a) -21- 22 delivered personally, (b) sent by facsimile transmission, (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by overnight delivery service, to the following addresses: (i) if to Glasstech, to: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: Mark Christman, President Fax: (419) 661-9366 and Kenneth H. Wetmore, Esquire Vice President, General Counsel and Secretary Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Fax: (419) 661-9616 and Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: David P. Given (ii) if to the Executive Employee, to: James P. Schnabel, Jr. 1915 Wexford Hill Lane Holland, Ohio 43528 Any such notice shall be deemed given (a) when so delivered personally, (b) if sent by certified or registered mail, return receipt requested, on the date the return receipt is signed, or (c) if sent by overnight delivery service. on the next normal business day after the date of sender receipt. Any such person may, by giving notice in accordance with this section to the other parties hereto, designate another address or person for receipt by such person of notices hereunder. -22- 23 14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreement(s), written or oral with respect thereto. This Employment Agreement will be effective upon the consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger Agreement is not consummated within the time set forth therein, this Employment Agreement shall be null and void and of no further force and effect. The Employment Agreement dated December 6, 1994 between Glasstech and the Executive Employee is hereby terminated and is null and void and of no further force and effect. 15. INDEMNIFICATION. During the Term or any Renewal Term hereof and subject to the continuing compliance by the Executive Employee with his obligations hereunder, Glasstech shall provide the Executive Employee with indemnification against liabilities or claims arising by reason of the fact that he is an employee. officer and/or director of Glasstech, and against expenses incurred in connection therewith, to the fullest extent of indemnification then available to any officer and/or director of Glasstech under and in accordance with the laws of the State of Delaware. Also, Glasstech shall purchase and/or maintain Directors' and Officers' insurance on or inuring to the Executive Employee's benefit with respect to such liabilities, claims, or expenses as described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding, dated June 5, 1997. 16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended, superseded, canceled, renewed, or extended, and the -23- 24 terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power, or privilege, nor shall any single or partial exercise of any such right, power, or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege. 17. GOVERNING LAW. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed within the State. 18. ASSIGNMENT. This Employment Agreement, and the Executive Employee's rights and obligations hereunder, may not be assigned by either party hereto without the consent of the other and any purported assignment by the Executive Employee or Glasstech in violation hereof shall be null and void; provided, however, that Glasstech may assign its rights and obligations hereunder without the Executive Employee's consent in connection with a sale of all or substantially all of Glasstech's assets. 19. BINDING EFFECT. This Employment Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors, and legal representatives. 20. COUNTERPARTS. This Employment Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all -24- 25 such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two (2) copies hereof each signed by one of the parties hereto. 21. HEADING. The headings in this Employment Agreement are for reference only and shall not affect the interpretation of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have executed. or caused to be executed, this Employment Agreement as of the day and year first above written. GLASSTECH HOLDING CO. By: /s/ Mark D. Christman --------------------------- Its: President -------------------------- GLASSTECH, INC. By: /s/ Mark D. Christman --------------------------- Its: President -------------------------- EXECUTIVE EMPLOYEE /s/ James P. Schnabel, Jr. ------------------------------- James P. Schnabel, Jr. -25- EX-10.11 19 EXHIBIT 10.11 1 Exhibit 10.11 EMPLOYMENT AGREEMENT OF DIANE S. TYMIAK WITH GLASSTECH, INC. This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING CO., a Delaware corporation with its principal place of business at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and DIANE S. TYMIAK (SSN ###-##-####), an individual residing at 7850 Finzel Road, Whitehouse, Ohio 43571 (the "Executive Employee"). BACKGROUND ---------- This Employment Agreement covers the employment of the Executive Employee by Glasstech. Now therefore, Glasstech and the Executive Employee, in consideration of the mutual promises herein contained and intending to be legally bound hereby, agree as follows: 1. TERM. Glasstech hereby employs the Executive Employee as Vice President & Chief Financial Officer, and the Executive Employee hereby accepts such employment, from the date of this Employment Agreement to June 30, 2002 unless sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual anniversary thereafter, this Employment Agreement shall automatically renew for an additional one (1) year period (the "Renewal Term" or the "Renewal Terms") unless either party notifies -1- 2 the other party in writing of its or her intention not to renew the Employment Agreement (the "Renewal Termination Notice") not less than six (6) months prior to the expiration of the last year of the Term or of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this Employment Agreement. 2. DUTIES. The Executive Employee, in her capacity as Vice President & Chief Financial Officer of Glasstech (or such other and comparable titles and positions as shall be given the Executive Employee by Holding Board of Directors), shall perform for Glasstech the services currently performed by her for Glasstech (or comparable services or other reasonable duties as she and Glasstech may agree upon), subject to the reasonable direction of Holding's Board of Directors. The Executive Employee shall perform such services in Wood County, Ohio, or at such other location or locations where she may be assigned by Glasstech from time to time, provided, however, that the Executive Employee shall not be required, in connection with her performance of such services, to travel on behalf of Glasstech in a manner inconsistent with the scope of her duties and the past practices of Glasstech. The Executive Employee shall devote her business time and effort to the Employment Agreement performance of her duties as described herein as reasonably required. It is understood that the Executive Employee may attend to outside investments, serve as a director and/or officer of a non-competing company and serve as an officer, director, or participant in educational, welfare, social, religious, and civic organizations so long as such activities do -2- 3 not materially interfere with the Executive Employee's employment hereunder. 3. COMPENSATION. ------------ 3.1 BASE SALARY. Glasstech shall pay the Executive Employee during each calendar year of the Term and each Renewal Term hereunder, a minimum salary of One Hundred Thirty-Eight Thousand Four Hundred Fifty-Two Dollars ($138,452) per calendar year adjusted as provided in Section 3.5 (hereinafter referred to as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly installments, less such deductions as shall be required to be withheld by applicable law and regulations. 3.2 PERFORMANCE BONUS. ----------------- Executive Employee shall participate in Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal year (commencing with the fiscal year ending June 30, 1998), Holding's Board of Directors will establish the Pool which, at a minimum, shall be calculated according to the following bonus chart (the "Bonus Chart"):
Percentage of Total Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool - ---------------------------- ------------------ ---------- $14,000,000 to $14,999,999 5.0% $700,000 to $750,000 $15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000 $16,000,000 and Above 10.0 $1,600,000 and Above
For purposes of this Section, EBITDA shall be subject to the following adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses paid to middle managers other than executive managers; and (Z) EBITDA shall be increased in the amount -3- 4 of any advisory fees paid to Key Equity Capital Corporation or its affiliates. Notwithstanding the foregoing, in the event Glasstech's EBITDA for any fiscal year after the year ending June 30, 1998 (the "Base Year") is less than $16,000,000 (the "Target"), the Board of Directors shall calculate the average EBITDA of Glasstech from the Base Year through and including the fiscal year in which the Target was not achieved. Using the Bonus Chart above, the Board of Directors shall pay the participants (including but not limited to the Executive Employee) the greater of (i) the amount of the Pool using the actual EBITDA for such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for such fiscal year. If the Pool is not ten (10%) percent of the EBITDA in any fiscal year during the Term of this Employment Agreement, such as in year 2001 in the example below, the Board of Directors shall, in each succeeding fiscal year during the Term of this Employment Agreement, calculate the average EBITDA of Glasstech from the Base Year through and including such succeeding fiscal year. If the average EBITDA is greater than the actual EBITDA for any prior fiscal year (or the average EBITDA used in a prior fiscal year), then the Board of Directors, using the Bonus Chart, shall pay the participants (including but not limited to the Executive Employee) an amount equal to (i) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA calculated in such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year less (ii) the amount of the Pool actually distributed to participants in such prior fiscal year. -4- 5 EXAMPLE: - --------
Fiscal Year Percentage of Total Bonus Year EBITDA Fiscal Year EBITDA Pool - ---- ------ ------------------ ---- 1998 $18,000,000 10% $1,800,000 1999 $20,000,000 10% $2,000,000 2000 $13,000,0001 10% $1,300,000 2001 $12,000,0002 7.5% $ 900,000 2002 $20,000,000 10% $2,000,000 $ 300,0003 ----------- $2,300,000
Not later than 10 business days after delivery to Glasstech of its fiscal year audit at the end of each fiscal year commencing with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in consultation with the President and Chief Executive Officer, shall distribute the Pool to the participants therein (including but not limited to the Executive Employee) in such percentages as the Board of Directors determines appropriate; provided, that, in no event shall the Board of Directors distribute less than the entire Pool as calculated above in any fiscal year commencing with the fiscal year ending June 30, 1998. - -------------------- 1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 + $20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10% of EBITDA for that year. 2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 + $20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated based upon 7.5% of EBITDA for that year. 3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000 + 20,000,000 + 13,000,000 + 12,000,000 + 20,000,000 / 5). Therefore, the Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal year 2001 ($900,000). -5- 6 3.3 RESTRICTED STOCK PROGRAM. ------------------------- (a) Holding hereby awards to Executive Employee 100.02 shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"), which shall be subject to forfeiture in accordance with the provisions set forth herein. On each of the first four anniversary dates of this Employment Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long as her employment has not been terminated on or before such date pursuant to the provisions of Section 6 of this Employment Agreement. Subject to the forfeiture provisions set forth herein, Executive Employee shall be entitled to full and complete ownership of the Class C Shares and will be treated as the record and beneficial owner of such for all purposes including, but not limited to, payment of dividends and liquidation rights, provided that Executive Employee shall be bound by all of the provisions of the Stockholders' Agreement of even date herewith, among the Company, Executive Employee and the other stockholders of the Company (the "Stockholders' Agreement). (b) The certificates representing awarded Class C Shares shall not be delivered to Executive Employee until the restrictions as to such Class C Shares have lapsed. If Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a), Executive Employee shall forfeit to Holding all such Class C Shares for which the restrictions have not yet lapsed. In this regard, simultaneously with the issuance of certificates representing awarded Class C Shares, Executive Employee shall execute and deliver stock powers forfeiting to -6- 7 Holding Class C Shares awarded hereunder for which the restrictions have not yet lapsed in the event Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a). Executive Employee acknowledges that Class C Shares awarded hereunder shall be subject to the restrictions and risks of forfeiture contained herein and in the Stockholders' Agreement. (c) Subject to Section 3.3(h), Executive Employee hereby agrees that she shall pay to Holding, in cash, any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to her hereunder. If Executive Employee does not make such payment to Holding, then Holding shall have the right to deduct from any payment of any kind otherwise due to Executive Employee from Holding (or from any subsidiary of Holding), any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to Executive Employee hereunder. (d) Holding shall not issue Preferred Stock, Options or Warrants or any otherwise dilutive securities without the consent of the representative(s) of Key Equity Capital Corporation and the representative(s) of executive management on the Board of Directors and unless such securities are sold for fair market value, the proceeds of which are used for appropriate corporate purposes as determined by the Board of Directors. All shareholders of Class A, Class B or Class C Common Stock have the pre-emptive rights described in the Stockholders' Agreement. -7- 8 (e) "Change of Control" shall mean any one of the following events: (i) the transfer, sale or other disposition of the Common Stock of Holding which results in the current stockholders of Holding (determined as of the date hereof) owning in the aggregate less than a majority of the outstanding voting capital stock of Holding; (ii) any consolidation of Holding with, or merger of Holding into, any other entity, any merger of another entity into Holding, or any sale or transfer (in any one transaction or a series of transactions) of all or substantially all of the assets of Holding to another entity (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of Holding or (z) any consolidation with or merger of Holding into a wholly owned subsidiary of Holding, or any sale or transfer by Holding of all or substantially all of its assets to one or more of its wholly owned subsidiaries in any one transaction or a series of transactions). Notwithstanding the foregoing, a "Change in Control" shall not include any transaction permitted under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to the contrary in this Employment Agreement, so long as Executive Employee's employment has not been terminated pursuant to the provisions of Section 6 before the date of a Change of Control, the restrictions with respect to all of the Class C Shares shall immediately lapse upon a Change of Control. (f) Executive Employee understands that the Class C Shares have not been registered under the Securities Act of 1993, as amended (the "1933 Act") or any state securities laws. -8- 9 Executive Employee represents that the Class C Shares awarded hereunder are not being acquired by Executive Employee with a view toward resale or distribution and Executive Employee will not sell or otherwise transfer such Class C Shares except in compliance with the 1933 Act. The certificates representing the Class C Shares shall bear such legends and statements evidencing the restrictions contained in this Employment Agreement and as the Board of Directors of Holding shall deem advisable to assure compliance with federal and state securities laws and regulations. (g) The award of the Class C Shares to Executive Employee hereunder shall not confer any right to Executive Employee to continue in the employ of Glasstech or any of its subsidiaries and shall not restrict or interfere in any way with the right of Glasstech to terminate her employment with or without cause, at any time. (h) Executive Employee may file an "83(b) election" with the Internal Revenue Service with respect to the Class C Shares. If Executive Employee does file such an 83(b) election, Holding shall loan Executive Employee an amount equal to 80% of Executive Employee's tax liability resulting from such 83(b) election (the "Loan Amount") subject to the following terms: (i) Executive Employee shall execute and deliver to Holding a Promissory Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the principal amount of the Class C Note shall be equal to the Loan Amount and shall accrue interest at the annual applicable federal rate for mid-term obligations as of the month in which the Class C Note is issued; and (iii) the Executive Employee shall execute and deliver to -9- 10 Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a part hereof with respect to all shares of Class A Voting Common Stock of Holding and all Class C Shares held by Executive Employee. 3.4 CLASS D SHARES. Executive Employee shall also be issued 700 shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share Program") and subject to the terms and conditions of Section 9 of the Stockholders' Agreement. 3.5 COST OF LIVING INCREASE. The Base Salary provided for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if any, in the cost of living by adding to the Base Salary an amount obtained by multiplying the Base Salary by the percentage by which the level of the Consumer Price Index North Central Region (for all items for urban wage earners and clerical workers as reported for December 31 of each calendar period by the Bureau of Labor Statistics of the United States Department of Labor) has increased over its level as of January I of the same calendar year. 3.6 BENEFITS. The Executive Employee shall be entitled during the Term and during any Renewal Terms to participate in such group life, hospitalization and/or disability insurance benefits, health programs, qualified or non-qualified deferred compensation plans or similar benefits which are comparable to those made available by Glasstech on the date of this Employment Agreement or thereafter to its executive employees generally, subject to the eligibility provisions of such plans. -10- 11 3.7 VACATIONS. The Executive Employee shall be entitled to vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which relating to vacation and personal leave are hereby incorporated into this Employment Agreement by reference. 3.8 INSURANCE. Glasstech agrees to pay life insurance and/or annuity premiums on a policy(ies) selected by and insuring the life of the Executive Employee with a beneficiary(ies) to be named by the Executive Employee. The parties hereto agree that Glasstech shall not be obligated to pay any premium greater than Five Thousand Dollars ($5,000) during the first year of the Term and such amount shall be increased by Five Hundred Dollars ($500) each year thereafter during the Term or during any of the Renewal Terms. The parties further agree that the Executive Employee shall be permitted from time to time, during the Term, or any Renewal Terms, to maintain such policy(ies), or to exchange such policy(ies), or to acquire any new life insurance and/or annuity products, provided however, that the portion of the premiums and costs to be paid by Glasstech in connection with such policy(ies) shall not exceed the amounts specified above. Glasstech expressly acknowledges that it shall have no right, title or interest in and to such policy(ies), the same being the exclusive property of the Executive Employee. 3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the Executive Employee for all reasonable expenses actually incurred or paid by the Executive Employee during the Term or any Renewal Term in performance of the Executive Employee's -11- 12 services under this Employment Agreement, subject to receipt by Glasstech of reasonable supporting documentation. 4. TERMINATION UPON DEATH. In the event the Executive Employee dies during the Term or any Renewal Term, for a period of six (6) months following such death Glasstech agrees to continue to pay to the surviving spouse of the Executive Employee the Base Salary rate of the deceased Executive Employee in effect at the time of death in equal bi-weekly installments less such deductions required to be withheld by applicable law and regulations. The salary continuation payable as provided herein shall be in addition to any right of the estate of the deceased Executive Employee to (a) participate in the Pool (in accordance with Section 3.2 above) in the fiscal year in which such death occurred and to receive a prorated amount for the portion of the fiscal year in which Executive Employee was alive, provided, however, that the level of such participation shall be subject to the discretion of Holding Board of Directors, and (b) to participate in the Performance Share Program as set forth therein. Upon the death of the Executive Employee, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the estate of the deceased Executive Employee. Glasstech shall also remit to the estate of the deceased Executive Employee any other benefits earned and accrued or payable up to the date of such death and shall reimburse to the estate of the deceased Executive Employee any outstanding unreimbursed expenses incurred by such Executive Employee on behalf of Glasstech and documented as provided herein. In the event the deceased Executive Employee is not survived by a spouse or in the further event the deceased Executive -12- 13 Employee and her spouse are separated at the time of death by agreement, court order or decree, or otherwise, then such salary continuation shall be remitted to the estate of the deceased Executive Employee. 5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY. In the event the Executive Employee becomes disabled during the Term or any Renewal Term by virtue of ill health or other disability and is thereby unable to perform on a full time basis substantially and continuously the duties assigned to her by Glasstech, Glasstech agrees to continue the Executive Employee's Base Salary until such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage. At such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage (a "Disability"), Glasstech shall have no further obligation to compensate the Executive Employee (except that Glasstech shall continue to provide group life and health benefits to Executive Employee consistent with those provided to other executive employees for a period of two (2) years from the date on which Executive Employee's long term disability benefits commence) and further Glasstech shall have the right to terminate the employment of the Executive Employee hereunder upon written notice delivered pursuant to Section 13. In the event of such Disability, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee. Executive Employee shall participate in the Performance Share Program as set forth therein. -13- 14 6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. (a) Notwithstanding any other provision of this Employment Agreement, Glasstech may terminate the Executive Employee's employment at any time for Cause (as hereinafter defined) and the Executive Employee may voluntarily terminate the Executive Employee's employment with Glasstech. Upon such termination for Cause or upon Executive Employee's voluntary termination, Executive Employee shall not participate in the Performance Bonus (pursuant to Section 3.2) for the fiscal year in which her termination occurred, and Executive Employee shall automatically forfeit those shares of Restricted Stock for which the restrictions would have lapsed (pursuant to Section 3.3) in the contract year in which her termination occurred and any subsequent year and shall participate in the Performance Share Program as set forth therein. Upon such termination for Cause or upon Executive Employee's voluntary termination, the Executive Employee shall be entitled to, except as restricted in the preceding sentence, receive any salary and other benefits earned or accrued, and reimbursement for expenses incurred, prior to the date of termination. (b) "Cause" shall mean (i) the Executive Employee's willful and continuing affirmative refusal to perform his or her duties hereunder (other than as a result of a Disability); (ii) dishonesty in the performance of his or her duties hereunder which results in criminal indictment of the Executive Employee; (iii) the Executive Employee's breach of any material term of this Employment Agreement (provided that Glasstech shall give the Executive Employee written notice of such breach and a thirty (30) day period -14- 15 after notice to cure such breach, except that no notice or cure period shall be given or extended with respect to breach of the provisions of Section 8 of this Employment Agreement); or (iv) the Executive Employee's conviction for a felony or for a crime which, in the reasonable judgment of Glasstech, renders the Executive Employee unable to perform her duties as described in this Employment Agreement. 7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated prior to the end of the Term or any Renewal Term other than pursuant to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a termination "Without Cause"), the Executive Employee shall be entitled to (in addition to such other rights as she may have, or damages to which she may be entitled at law or in equity) (i) all payments when due of any salary and other benefits (including, without limitation, participation in the Performance Bonus pursuant to Section 3.2) accrued through the date of termination, including the payment of all salary due for the remainder of the Term or Renewal Term as though the Executive Employee had remained employed through the full Term (or, if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee, and (iii) participation in the Performance Share Program as set forth therein. 8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges that (i) the principal business of Glasstech is design, manufacture, marketing, sale, distribution and servicing of glass bending, tempering and annealing equipment worldwide to -15- 16 both automotive glass fabricators and architectural glass producers and the principal business of Stir-Melter, Inc. is the vitrification of hazardous waste (collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited number of persons throughout the world which has developed such business; (iii) the Glasstech Business is, in large part, international in scope and Glasstech's customers, potential customers and competitors are located throughout the world; (iv) the Executive Employee's work for Glasstech has given and will continue to give her access to the confidential affairs and proprietary information of Glasstech; (v) this Employment Agreement has been entered into as part of a series of transactions pursuant to which Executive Employee and others have purchased an equity interest in Glasstech and sold their equity interest in Glasstech; and (vi) Glasstech would not have entered into this Employment Agreement but for the agreements and covenants of the Executive Employee contained in this Section 8. Accordingly, the Executive Employee covenants and agrees that: (a) he shall not, anywhere in the world directly or indirectly, (1) engage in Glasstech Business for her own account or that of any other person; (2) render any services related to the Glasstech Business to any person (other than Glasstech) engaged in such activities; or (3) become interested in any such person (other than Glasstech) as a partner, stockholder, member, principal, agent, trustee, consultant or in any other relationship or capacity for a period commencing on the date of this Employment Agreement and terminating on the day which is: (i) the later of (A) five (5) years following the date hereof, or (B) two (2) years following the termination of the Executive Employee's employment pursuant to a -16- 17 Renewal Termination Notice if given by Executive Employee, or (ii) if the Executive Employee's employment has been terminated for Cause, then two (2) years following termination of Executive Employee's employment; (collectively the "Restricted Period") provided, however, that there shall be no Restricted Period if Executive Employee's employment is terminated Without Cause or if Glasstech delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the above, the Executive Employee may own, directly or indirectly, solely as an investment, securities of any such person which are traded on any national securities exchange or NASDAQ if the Executive Employee is not a controlling person of, or a member of a group which controls such person and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such person. (b) at all times during and after this Employment Agreement is in force she shall keep secret and retain in strictest confidence, and shall not use for her benefit or the benefit of others, except in connection with the business and affairs of Glasstech and its affiliates, all confidential matters relating to Glasstech Business and to Glasstech and its affiliates learned by the Executive Employee heretofore or hereafter directly or indirectly from Glasstech or its affiliates or any of their predecessors or successors (the "Confidential Company Information") and shall not disclose the Confidential Company Information to anyone outside of Glasstech and its affiliates except with Glasstech's express written consent. The requirements of this Section 8(b) shall not apply to Confidential Company Information which is: (1) at the time of receipt or thereafter publicly known -17- 18 through no wrongful act of the Executive Employee: (2) received from a third party not under any obligation to keep such information confidential; or (3) required to be disclosed by law. (c) during the Restricted Period, she shall not, without Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit employees of Glasstech or its affiliates to leave the employ of Glasstech or any of its affiliates or (ii) hire any employee who has left the employ of Glasstech or any of its affiliates within one year of the termination of such employee's employment with Glasstech or any of its affiliates. (d) at any time upon written request from Glasstech, she shall deliver to Glasstech all memoranda, notes, lists, records and other documents (and all copies thereof) made or compiled by the Executive Employee or made available to her concerning Glasstech Business or Glasstech or any of its affiliates all of which shall at all times be the property of Glasstech. 9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech shall have the following rights and remedies (upon compliance with any necessary prerequisites imposed by law upon the availability of such remedies), each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to Glasstech under law or in equity: (a) The right to have the Restrictive Covenants specifically enforced by any court having jurisdiction over the parties to this Employment Agreement; and -18- 19 (b) The right to entry of restraining orders and/or injunctions (preliminary, mandatory, temporary and permanent) against the Executive Employee against violations, threatened or actual, and whether or not then continuing, of such covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Glasstech and that money damages will not provide an adequate remedy to Glasstech; and (c) The right and remedy to require the Executive Employee to account for and pay over to Glasstech all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by her as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive Employee shall account for and pay over such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech under this Section 9 against any amounts owed to the Executive Employee. 10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which shall be subject to the provisions of Section 9, neither party shall institute an arbitration proceeding hereunder, before that party has sought to resolve the dispute through direct negotiation with the other party. If the dispute is not resolved within three weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through nonbinding mediation. If the parties do not promptly agree on a mediator, then either party may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator shall be paid one-half each by each -19- 20 party. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "Association"). The place of arbitration shall be Detroit, Michigan. Arbitration may be commenced at any time by any party hereto after giving written notice in the manner described in Section 13 of this Employment Agreement. The arbitrator shall be selected by the joint agreement of each party, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator shall render her decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the -20- 21 arbitrator shall be paid entirely by the nonprevailing party and in addition the nonprevailing party shall reimburse the other party for the fees and expenses of mediation incurred by such party, unless the arbitrator determines that the costs, expenses and attorneys' fees should be apportioned between the parties, then as the arbitrator may assess. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances. As set forth in the first phrase of the first sentence of this section 10, this arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Employment Agreement. 11. BLUE PENCILING. The Executive Employee acknowledges and agrees that (i) she has had an opportunity to seek advice of counsel in connection with this Employment Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, whether because of the duration or geographical scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and. in its reduced form, such provision shall then be enforceable and shall be enforced. 12. SEVERABILITY. If any court determines that any covenant or provision of this Employment Agreement is unenforceable for any reason, the remaining covenants or provisions shall remain in full force and effect. 13. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be (a) -21- 22 delivered personally, (b) sent by facsimile transmission, (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by overnight delivery service, to the following addresses: (i) if to Glasstech, to: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: Mark Christman, President Fax: (419) 661-9366 and Kenneth H. Wetmore, Esquire Vice President, General Counsel and Secretary Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Fax: (419) 661-9616 and Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: David P. Given (ii) if to the Executive Employee, to: Diane S. Tymiak 7850 Finzel Road Whitehouse, Ohio 43571 Any such notice shall be deemed given (a) when so delivered personally, (b) if sent by certified or registered mail, return receipt requested, on the date the return receipt is signed, or (c) if sent by overnight delivery service. on the next normal business day after the date of sender receipt. Any such person may, by giving notice in accordance with this section to the other parties hereto, designate another address or person for receipt by such person of notices hereunder. -22- 23 14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreement(s), written or oral with respect thereto. This Employment Agreement will be effective upon the consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger Agreement is not consummated within the time set forth therein, this Employment Agreement shall be null and void and of no further force and effect. The Employment Agreement dated December 6, 1994 between Glasstech and the Executive Employee is hereby terminated and is null and void and of no further force and effect. 15. INDEMNIFICATION. During the Term or any Renewal Term hereof and subject to the continuing compliance by the Executive Employee with her obligations hereunder, Glasstech shall provide the Executive Employee with indemnification against liabilities or claims arising by reason of the fact that she is an employee. officer and/or director of Glasstech, and against expenses incurred in connection therewith, to the fullest extent of indemnification then available to any officer and/or director of Glasstech under and in accordance with the laws of the State of Delaware. Also, Glasstech shall purchase and/or maintain Directors' and Officers' insurance on or inuring to the Executive Employee's benefit with respect to such liabilities, claims, or expenses as described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding, dated June 5, 1997. 16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended, superseded, canceled, renewed, or extended, and the -23- 24 terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power, or privilege, nor shall any single or partial exercise of any such right, power, or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege. 17. GOVERNING LAW. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed within the State. 18. ASSIGNMENT. This Employment Agreement, and the Executive Employee's rights and obligations hereunder, may not be assigned by either party hereto without the consent of the other and any purported assignment by the Executive Employee or Glasstech in violation hereof shall be null and void; provided, however, that Glasstech may assign its rights and obligations hereunder without the Executive Employee's consent in connection with a sale of all or substantially all of Glasstech's assets. 19. BINDING EFFECT. This Employment Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors, and legal representatives. 20. COUNTERPARTS. This Employment Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all -24- 25 such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two (2) copies hereof each signed by one of the parties hereto. 21. HEADING. The headings in this Employment Agreement are for reference only and shall not affect the interpretation of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have executed. or caused to be executed, this Employment Agreement as of the day and year first above written. GLASSTECH HOLDING CO. By: /s/ Mark D. Christman --------------------------- Its: President -------------------------- GLASSTECH, INC. By: /s/ Mark D. Christman --------------------------- Its: President -------------------------- EXECUTIVE EMPLOYEE Diane S. Tymiak ------------------------------- Diane S. Tymiak -25- EX-10.12 20 EXHIBIT 10.12 1 Exhibit 10.12 EMPLOYMENT AGREEMENT OF KENNETH H. WETMORE WITH GLASSTECH, INC. This EMPLOYMENT AGREEMENT, dated as of July 2, 1997 is made by and among GLASSTECH, INC., a Delaware corporation ("Glasstech"), GLASSTECH HOLDING CO., a Delaware corporation with its principal place of business at Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551 ("Holding") and KENNETH H. WETMORE (SSN ###-##-####), an individual residing at 647 Oak Knoll Drive, Perrysburg, Ohio 43551 (the "Executive Employee"). BACKGROUND ---------- This Employment Agreement covers the employment of the Executive Employee by Glasstech. Now therefore, Glasstech and the Executive Employee, in consideration of the mutual promises herein contained and intending to be legally bound hereby, agree as follows: 1. TERM. Glasstech hereby employs the Executive Employee as Vice President, General Counsel & Secretary, and the Executive Employee hereby accepts such employment, from the date of this Employment Agreement to June 30, 2002 unless sooner terminated in accordance with the provisions of Sections 4, 5, 6 or 7 hereof (the "Term"). At the expiration of the Term and each annual anniversary thereafter, this Employment Agreement shall automatically renew for an additional one (1) year period (the "Renewal Term" or the "Renewal Terms") unless either party notifies -1- 2 the other party in writing of its or his intention not to renew the Employment Agreement (the "Renewal Termination Notice") not less than six (6) months prior to the expiration of the last year of the Term or of any Renewal Term. The provisions of Sections 8, 9, 10, 11 and 12 hereof shall survive any termination of this Employment Agreement. 2. DUTIES. The Executive Employee, in his capacity as Vice President, General Counsel & Secretary of Glasstech (or such other and comparable titles and positions as shall be given the Executive Employee by Holding Board of Directors), shall perform for Glasstech the services currently performed by him for Glasstech (or comparable services or other reasonable duties as he and Glasstech may agree upon), subject to the reasonable direction of Holding's Board of Directors. The Executive Employee shall perform such services in Wood County, Ohio, or at such other location or locations where he may be assigned by Glasstech from time to time, provided, however, that the Executive Employee shall not be required, in connection with his performance of such services, to travel on behalf of Glasstech in a manner inconsistent with the scope of his duties and the past practices of Glasstech. The Executive Employee shall devote his business time and effort to the Employment Agreement performance of his duties as described herein as reasonably required. It is understood that the Executive Employee may attend to outside investments, serve as a director and/or officer of a non-competing company and serve as an officer, director, or participant in educational, welfare, social, religious, and civic organizations so long as such activities do -2- 3 not materially interfere with the Executive Employee's employment hereunder. 3. COMPENSATION. ------------- 3.1 BASE SALARY. Glasstech shall pay the Executive Employee during each calendar year of the Term and each Renewal Term hereunder, a minimum salary of One Hundred Eighty-Two Thousand Two Hundred Ten Dollars ($182,210) per calendar year adjusted as provided in Section 3.5 (hereinafter referred to as the "Base Salary"). The Base Salary shall be payable in equal bi-weekly installments, less such deductions as shall be required to be withheld by applicable law and regulations. 3.2 PERFORMANCE BONUS. ------------------ Executive Employee shall participate in Glasstech's cash performance bonus pool (the "Pool"). At the end of each fiscal year (commencing with the fiscal year ending June 30, 1998), Holding's Board of Directors will establish the Pool which, at a minimum, shall be calculated according to the following bonus chart (the "Bonus Chart"):
Percentage of Total Glasstech Fiscal Year EBITDA Fiscal Year EBITDA Bonus Pool - ---------------------------- ------------------ ---------- $14,000,000 to $14,999,999 5.0% $700,000 to $750,000 $15,000,000 to $15,999,999 7.5 $1,125,000 to $1,200,000 $16,000,000 and Above 10.0 $1,600,000 and Above
For purposes of this Section, EBITDA shall be subject to the following adjustments: (Y) EBITDA shall be decreased by the aggregate amount of bonuses paid to middle managers other than executive managers; and (Z) EBITDA shall be increased in the amount -3- 4 of any advisory fees paid to Key Equity Capital Corporation or its affiliates. Notwithstanding the foregoing, in the event Glasstech's EBITDA for any fiscal year after the year ending June 30, 1998 (the "Base Year") is less than $16,000,000 (the "Target"), the Board of Directors shall calculate the average EBITDA of Glasstech from the Base Year through and including the fiscal year in which the Target was not achieved. Using the Bonus Chart above, the Board of Directors shall pay the participants (including but not limited to the Executive Employee) the greater of (i) the amount of the Pool using the actual EBITDA for such fiscal year or (ii) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA multiplied by the actual EBITDA for such fiscal year. If the Pool is not ten (10%) percent of the EBITDA in any fiscal year during the Term of this Employment Agreement, such as in year 2001 in the example below, the Board of Directors shall, in each succeeding fiscal year during the Term of this Employment Agreement, calculate the average EBITDA of Glasstech from the Base Year through and including such succeeding fiscal year. If the average EBITDA is greater than the actual EBITDA for any prior fiscal year (or the average EBITDA used in a prior fiscal year), then the Board of Directors, using the Bonus Chart, shall pay the participants (including but not limited to the Executive Employee) an amount equal to (i) an amount equal to the percentage in the Bonus Chart based upon the average EBITDA calculated in such succeeding fiscal year, multiplied by the actual EBITDA for such fiscal year less (ii) the amount of the Pool actually distributed to participants in such prior fiscal year. -4- 5 EXAMPLE: - --------
Fiscal Year Percentage of Total Bonus Year EBITDA Fiscal Year EBITDA Pool - ---- ------ ------------------ ---- 1998 $18,000,000 10% $1,800,000 1999 $20,000,000 10% $2,000,000 2000 $13,000,0001 10% $1,300,000 2001 $12,000,0002 7.5% $ 900,000 2002 $20,000,000 10% $2,000,000 $ 300,000(3) ---------- $2,300,000
Not later than 10 business days after delivery to Glasstech of its fiscal year audit at the end of each fiscal year commencing with the fiscal year ending June 30, 1998, the Board of Directors of Holding, in consultation with the President and Chief Executive Officer, shall distribute the Pool to the participants therein (including but not limited to the Executive Employee) in such percentages as the Board of Directors determines appropriate; provided, that, in no event shall the Board of Directors distribute less than the entire Pool as calculated above in any fiscal year commencing with the fiscal year ending June 30, 1998. - ------------- 1 The average EBITDA in fiscal year 2000 is $17,000,000 ($18,000,000 + $20,000,000 + $13,000,000 / 3). Therefore the Pool is calculated based upon 10% of EBITDA for that year. 2 The average EBITDA in fiscal year 2001 is $15,750,000 ($18,000,000 + $20,000,000 + $13,000,000 + $12,000,000 / 4). Therefore the Pool is calculated based upon 7.5% of EBITDA for that year. 3 The average EBITDA in fiscal year 2002 is $16,500,000 ($18,000,000+20,000,000+13,000,000+12,000,000+20,000,000/5). Therefore, the Pool for fiscal year 2001 is recomputed using 10 (10%) percent of EBITDA for fiscal year 2001 ($1,200,000) less amount of the Pool actually distributed for fiscal year 2001 ($900,000). -5- 6 3.3 RESTRICTED STOCK PROGRAM. ------------------------- (a) Holding hereby awards to Executive Employee 133.36 shares of restricted Class C Non-Voting Common Stock of Holding (the "Class C Shares"), which shall be subject to forfeiture in accordance with the provisions set forth herein. On each of the first four anniversary dates of this Employment Agreement, the restrictions shall lapse as to 25% of the Class C Shares so long as his employment has not been terminated on or before such date pursuant to the provisions of Section 6 of this Employment Agreement. Subject to the forfeiture provisions set forth herein, Executive Employee shall be entitled to full and complete ownership of the Class C Shares and will be treated as the record and beneficial owner of such for all purposes including, but not limited to, payment of dividends and liquidation rights, provided that Executive Employee shall be bound by all of the provisions of the Stockholders' Agreement of even date herewith, among the Company, Executive Employee and the other stockholders of the Company (the "Stockholders' Agreement). (b) The certificates representing awarded Class C Shares shall not be delivered to Executive Employee until the restrictions as to such Class C Shares have lapsed. If Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a), Executive Employee shall forfeit to Holding all such Class C Shares for which the restrictions have not yet lapsed. In this regard, simultaneously with the issuance of certificates representing awarded Class C Shares, Executive Employee shall execute and deliver stock powers forfeiting to -6- 7 Holding Class C Shares awarded hereunder for which the restrictions have not yet lapsed in the event Executive Employee's employment is terminated pursuant to Section 6 of this Employment Agreement on or before any applicable anniversary date as described in Section 3.3(a). Executive Employee acknowledges that Class C Shares awarded hereunder shall be subject to the restrictions and risks of forfeiture contained herein and in the Stockholders' Agreement. (c) Subject to Section 3.3(h), Executive Employee hereby agrees that he shall pay to Holding, in cash, any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to him hereunder. If Executive Employee does not make such payment to Holding, then Holding shall have the right to deduct from any payment of any kind otherwise due to Executive Employee from Holding (or from any subsidiary of Holding), any foreign, United States federal, state or local taxes of any kind required by law to be withheld with respect to the Class C Shares awarded to Executive Employee hereunder. (d) Holding shall not issue Preferred Stock, Options or Warrants or any otherwise dilutive securities without the consent of the representative(s) of Key Equity Capital Corporation and the representative(s) of executive management on the Board of Directors and unless such securities are sold for fair market value, the proceeds of which are used for appropriate corporate purposes as determined by the Board of Directors. All shareholders of Class A, Class B or Class C Common Stock have the pre-emptive rights described in the Stockholders' Agreement. -7- 8 (e) "Change of Control" shall mean any one of the following events: (i) the transfer, sale or other disposition of the Common Stock of Holding which results in the current stockholders of Holding (determined as of the date hereof) owning in the aggregate less than a majority of the outstanding voting capital stock of Holding; (ii) any consolidation of Holding with, or merger of Holding into, any other entity, any merger of another entity into Holding, or any sale or transfer (in any one transaction or a series of transactions) of all or substantially all of the assets of Holding to another entity (other than (x) a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock, (y) a merger which is effected solely to change the jurisdiction of incorporation of Holding or (z) any consolidation with or merger of Holding into a wholly owned subsidiary of Holding, or any sale or transfer by Holding of all or substantially all of its assets to one or more of its wholly owned subsidiaries in any one transaction or a series of transactions). Notwithstanding the foregoing, a "Change in Control" shall not include any transaction permitted under Section 2.2(b) of the Stockholders' Agreement. Notwithstanding anything to the contrary in this Employment Agreement, so long as Executive Employee's employment has not been terminated pursuant to the provisions of Section 6 before the date of a Change of Control, the restrictions with respect to all of the Class C Shares shall immediately lapse upon a Change of Control. (f) Executive Employee understands that the Class C Shares have not been registered under the Securities Act of 1993, as amended (the "1933 Act") or any state securities laws. -8- 9 Executive Employee represents that the Class C Shares awarded hereunder are not being acquired by Executive Employee with a view toward resale or distribution and Executive Employee will not sell or otherwise transfer such Class C Shares except in compliance with the 1933 Act. The certificates representing the Class C Shares shall bear such legends and statements evidencing the restrictions contained in this Employment Agreement and as the Board of Directors of Holding shall deem advisable to assure compliance with federal and state securities laws and regulations. (g) The award of the Class C Shares to Executive Employee hereunder shall not confer any right to Executive Employee to continue in the employ of Glasstech or any of its subsidiaries and shall not restrict or interfere in any way with the right of Glasstech to terminate his employment with or without cause, at any time. (h) Executive Employee may file an "83(b) election" with the Internal Revenue Service with respect to the Class C Shares. If Executive Employee does file such an 83(b) election, Holding shall loan Executive Employee an amount equal to 80% of Executive Employee's tax liability resulting from such 83(b) election (the "Loan Amount") subject to the following terms: (i) Executive Employee shall execute and deliver to Holding a Promissory Note in the form of EXHIBIT A attached hereto and made a part hereof (the "Class C Note"); (ii) the principal amount of the Class C Note shall be equal to the Loan Amount and shall accrue interest at the annual applicable federal rate for mid-term obligations as of the month in which the Class C Note is issued; and (iii) the Executive Employee shall execute and deliver to -9- 10 Holding a Pledge Agreement in the form of EXHIBIT B attached hereto and made a part hereof with respect to all shares of Class A Voting Common Stock of Holding and all Class C Shares held by Executive Employee. 3.4 CLASS D SHARES. Executive Employee shall also be issued 1,000 shares of Class D Non-voting Common Stock of Holding issued pursuant to Schedule II of the Stockholders' Agreement (the "Performance Share Program") and subject to the terms and conditions of Section 9 of the Stockholders' Agreement. 3.5 COST OF LIVING INCREASE. The Base Salary provided for in Section 3.1 hereof shall be adjusted annually to reflect the increase, if any, in the cost of living by adding to the Base Salary an amount obtained by multiplying the Base Salary by the percentage by which the level of the Consumer Price Index North Central Region (for all items for urban wage earners and clerical workers as reported for December 31 of each calendar period by the Bureau of Labor Statistics of the United States Department of Labor) has increased over its level as of January I of the same calendar year. 3.6 BENEFITS. The Executive Employee shall be entitled during the Term and during any Renewal Terms to participate in such group life, hospitalization and/or disability insurance benefits, health programs, qualified or non-qualified deferred compensation plans or similar benefits which are comparable to those made available by Glasstech on the date of this Employment Agreement or thereafter to its executive employees generally, subject to the eligibility provisions of such plans. -10- 11 3.7 VACATIONS. The Executive Employee shall be entitled to vacations and personal leave days more fully set forth in the GLASSTECH EMPLOYEE HANDBOOK FOR SALARIED EXEMPT EMPLOYEES, the specific provisions of which relating to vacation and personal leave are hereby incorporated into this Employment Agreement by reference. 3.8 INSURANCE. Glasstech agrees to pay life insurance and/or annuity premiums on a policy(ies) selected by and insuring the life of the Executive Employee with a beneficiary(ies) to be named by the Executive Employee. The parties hereto agree that Glasstech shall not be obligated to pay any premium greater than Five Thousand Dollars ($5,000) during the first year of the Term and such amount shall be increased by Five Hundred Dollars ($500) each year thereafter during the Term or during any of the Renewal Terms. The parties further agree that the Executive Employee shall be permitted from time to time, during the Term, or any Renewal Terms, to maintain such policy(ies), or to exchange such policy(ies), or to acquire any new life insurance and/or annuity products, provided however, that the portion of the premiums and costs to be paid by Glasstech in connection with such policy(ies) shall not exceed the amounts specified above. Glasstech expressly acknowledges that it shall have no right, title or interest in and to such policy(ies), the same being the exclusive property of the Executive Employee. 3.9 EXPENSE REIMBURSEMENT. Glasstech shall pay or reimburse the Executive Employee for all reasonable expenses actually incurred or paid by the Executive Employee during the Term or any Renewal Term in performance of the Executive Employee's -11- 12 services under this Employment Agreement, subject to receipt by Glasstech of reasonable supporting documentation. 4. TERMINATION UPON DEATH. In the event the Executive Employee dies during the Term or any Renewal Term, for a period of six (6) months following such death Glasstech agrees to continue to pay to the surviving spouse of the Executive Employee the Base Salary rate of the deceased Executive Employee in effect at the time of death in equal bi-weekly installments less such deductions required to be withheld by applicable law and regulations. The salary continuation payable as provided herein shall be in addition to any right of the estate of the deceased Executive Employee to (a) participate in the Pool (in accordance with Section 3.2 above) in the fiscal year in which such death occurred and to receive a prorated amount for the portion of the fiscal year in which Executive Employee was alive, provided, however, that the level of such participation shall be subject to the discretion of Holding Board of Directors, and (b) to participate in the Performance Share Program as set forth therein. Upon the death of the Executive Employee, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the estate of the deceased Executive Employee. Glasstech shall also remit to the estate of the deceased Executive Employee any other benefits earned and accrued or payable up to the date of such death and shall reimburse to the estate of the deceased Executive Employee any outstanding unreimbursed expenses incurred by such Executive Employee on behalf of Glasstech and documented as provided herein. In the event the deceased Executive Employee is not survived by a spouse or in the further event the deceased Executive -12- 13 Employee and his spouse are separated at the time of death by agreement, court order or decree, or otherwise, then such salary continuation shall be remitted to the estate of the deceased Executive Employee. 5. SALARY CONTINUATION ON DISABILITY AND TERMINATION UPON DISABILITY. In the event the Executive Employee becomes disabled during the Term or any Renewal Term by virtue of ill health or other disability and is thereby unable to perform on a full time basis substantially and continuously the duties assigned to him by Glasstech, Glasstech agrees to continue the Executive Employee's Base Salary until such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage. At such time as Executive Employee is eligible to collect benefits under Glasstech's long term disability insurance coverage (a "Disability"), Glasstech shall have no further obligation to compensate the Executive Employee (except that Glasstech shall continue to provide group life and health benefits to Executive Employee consistent with those provided to other executive employees for a period of two (2) years from the date on which Executive Employee's long term disability benefits commence) and further Glasstech shall have the right to terminate the employment of the Executive Employee hereunder upon written notice delivered pursuant to Section 13. In the event of such Disability, the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee. Executive Employee shall participate in the Performance Share Program as set forth therein. -13- 14 6. TERMINATION FOR CAUSE AND VOLUNTARY TERMINATION. ------------------------------------------------ (a) Notwithstanding any other provision of this Employment Agreement, Glasstech may terminate the Executive Employee's employment at any time for Cause (as hereinafter defined) and the Executive Employee may voluntarily terminate the Executive Employee's employment with Glasstech. Upon such termination for Cause or upon Executive Employee's voluntary termination, Executive Employee shall not participate in the Performance Bonus (pursuant to Section 3.2) for the fiscal year in which his termination occurred, and Executive Employee shall automatically forfeit those shares of Restricted Stock for which the restrictions would have lapsed (pursuant to Section 3.3) in the contract year in which his termination occurred and any subsequent year and shall participate in the Performance Share Program as set forth therein. Upon such termination for Cause or upon Executive Employee's voluntary termination, the Executive Employee shall be entitled to, except as restricted in the preceding sentence, receive any salary and other benefits earned or accrued, and reimbursement for expenses incurred, prior to the date of termination. (b) "Cause" shall mean (i) the Executive Employee's willful and continuing affirmative refusal to perform his or her duties hereunder (other than as a result of a Disability); (ii) dishonesty in the performance of his or her duties hereunder which results in criminal indictment of the Executive Employee; (iii) the Executive Employee's breach of any material term of this Employment Agreement (provided that Glasstech shall give the Executive Employee written notice of such breach and a thirty (30) day period -14- 15 after notice to cure such breach, except that no notice or cure period shall be given or extended with respect to breach of the provisions of Section 8 of this Employment Agreement); or (iv) the Executive Employee's conviction for a felony or for a crime which, in the reasonable judgment of Glasstech, renders the Executive Employee unable to perform his duties as described in this Employment Agreement. 7. TERMINATION WITHOUT CAUSE. If the Executive Employee is terminated prior to the end of the Term or any Renewal Term other than pursuant to Section 4, Section 5, or Section 6 hereof (hereinafter referred to as a termination "Without Cause"), the Executive Employee shall be entitled to (in addition to such other rights as he may have, or damages to which he may be entitled at law or in equity) (i) all payments when due of any salary and other benefits (including, without limitation, participation in the Performance Bonus pursuant to Section 3.2) accrued through the date of termination, including the payment of all salary due for the remainder of the Term or Renewal Term as though the Executive Employee had remained employed through the full Term (or, if renewed, the Renewal Term) of the Employment Agreement, (ii) the restrictions on all Class C Shares shall lapse and such Class C Shares shall be released to the Executive Employee, and (iii) participation in the Performance Share Program as set forth therein. 8. COVENANT AGAINST COMPETITION. The Executive Employee acknowledges that (i) the principal business of Glasstech is design, manufacture, marketing, sale, distribution and servicing of glass bending, tempering and annealing equipment worldwide to -15- 16 both automotive glass fabricators and architectural glass producers and the principal business of Stir-Melter, Inc. is the vitrification of hazardous waste (collectively, the "Glasstech Business"); (ii) Glasstech is one of a limited number of persons throughout the world which has developed such business; (iii) the Glasstech Business is, in large part, international in scope and Glasstech's customers, potential customers and competitors are located throughout the world; (iv) the Executive Employee's work for Glasstech has given and will continue to give him access to the confidential affairs and proprietary information of Glasstech; (v) this Employment Agreement has been entered into as part of a series of transactions pursuant to which Executive Employee and others have purchased an equity interest in Glasstech and sold their equity interest in Glasstech; and (vi) Glasstech would not have entered into this Employment Agreement but for the agreements and covenants of the Executive Employee contained in this Section 8. Accordingly, the Executive Employee covenants and agrees that: (a) he shall not, anywhere in the world directly or indirectly, (1) engage in Glasstech Business for his own account or that of any other person; (2) render any services related to the Glasstech Business to any person (other than Glasstech) engaged in such activities; or (3) become interested in any such person (other than Glasstech) as a partner, stockholder, member, principal, agent, trustee, consultant or in any other relationship or capacity for a period commencing on the date of this Employment Agreement and terminating on the day which is: (i) the later of (A) five (5) years following the date hereof, or (B) two (2) years following the termination of the Executive Employee's employment pursuant to a -16- 17 Renewal Termination Notice if given by Executive Employee, or (ii) if the Executive Employee's employment has been terminated for Cause, then two (2) years following termination of Executive Employee's employment; (collectively the "Restricted Period") provided, however, that there shall be no Restricted Period if Executive Employee's employment is terminated Without Cause or if Glasstech delivers a Renewal Termination Notice to Executive Employee. Notwithstanding the above, the Executive Employee may own, directly or indirectly, solely as an investment, securities of any such person which are traded on any national securities exchange or NASDAQ if the Executive Employee is not a controlling person of, or a member of a group which controls such person and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such person. (b) at all times during and after this Employment Agreement is in force he shall keep secret and retain in strictest confidence, and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of Glasstech and its affiliates, all confidential matters relating to Glasstech Business and to Glasstech and its affiliates learned by the Executive Employee heretofore or hereafter directly or indirectly from Glasstech or its affiliates or any of their predecessors or successors (the "Confidential Company Information") and shall not disclose the Confidential Company Information to anyone outside of Glasstech and its affiliates except with Glasstech's express written consent. The requirements of this Section 8(b) shall not apply to Confidential Company Information which is: (1) at the time of receipt or thereafter publicly known -17- 18 through no wrongful act of the Executive Employee: (2) received from a third party not under any obligation to keep such information confidential; or (3) required to be disclosed by law. (c) during the Restricted Period, he shall not, without Glasstech's prior written consent, directly or indirectly, (i) knowingly solicit employees of Glasstech or its affiliates to leave the employ of Glasstech or any of its affiliates or (ii) hire any employee who has left the employ of Glasstech or any of its affiliates within one year of the termination of such employee's employment with Glasstech or any of its affiliates. (d) at any time upon written request from Glasstech, he shall deliver to Glasstech all memoranda, notes, lists, records and other documents (and all copies thereof) made or compiled by the Executive Employee or made available to him concerning Glasstech Business or Glasstech or any of its affiliates all of which shall at all times be the property of Glasstech. 9. RIGHTS AND REMEDIES UPON BREACH. If the Executive Employee breaches any of the provisions of Section 8 (the "Restrictive Covenants"), Glasstech shall have the following rights and remedies (upon compliance with any necessary prerequisites imposed by law upon the availability of such remedies), each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to Glasstech under law or in equity: (a) The right to have the Restrictive Covenants specifically enforced by any court having jurisdiction over the parties to this Employment Agreement; and -18- 19 (b) The right to entry of restraining orders and/or injunctions (preliminary, mandatory, temporary and permanent) against the Executive Employee against violations, threatened or actual, and whether or not then continuing, of such covenants, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Glasstech and that money damages will not provide an adequate remedy to Glasstech; and (c) The right and remedy to require the Executive Employee to account for and pay over to Glasstech all compensation, profits, monies, accruals, increments or other benefits (collectively, "Benefits") derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive Employee shall account for and pay over such Benefits to Glasstech. Glasstech may set off any amounts due to Glasstech under this Section 9 against any amounts owed to the Executive Employee. 10. MEDIATION, ARBITRATION. Except for a dispute under Section 8 which shall be subject to the provisions of Section 9, neither party shall institute an arbitration proceeding hereunder, before that party has sought to resolve the dispute through direct negotiation with the other party. If the dispute is not resolved within three weeks after a demand for direct negotiation, the parties shall attempt to resolve the dispute through nonbinding mediation. If the parties do not promptly agree on a mediator, then either party may notify the CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, New York, to initiate selection of a mediator from the CPR Panel of Neutrals. The fees and expenses of the mediator shall be paid one-half each by each -19- 20 party. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "Association"). The place of arbitration shall be Detroit, Michigan. Arbitration may be commenced at any time by any party hereto after giving written notice in the manner described in Section 13 of this Employment Agreement. The arbitrator shall be selected by the joint agreement of each party, but if they do not so agree within twenty (20) days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panels of the arbitrators maintained by such Association. The arbitrator shall render his decision within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The costs and expenses of arbitration, including attorneys' fees and expenses of the -20- 21 arbitrator shall be paid entirely by the nonprevailing party and in addition the nonprevailing party shall reimburse the other party for the fees and expenses of mediation incurred by such party, unless the arbitrator determines that the costs, expenses and attorneys' fees should be apportioned between the parties, then as the arbitrator may assess. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances. As set forth in the first phrase of the first sentence of this section 10, this arbitration provision shall constitute the sole and exclusive remedy for any dispute under this Employment Agreement. 11. BLUE PENCILING. The Executive Employee acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Employment Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, whether because of the duration or geographical scope of such provision, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and. in its reduced form, such provision shall then be enforceable and shall be enforced. 12. SEVERABILITY. If any court determines that any covenant or provision of this Employment Agreement is unenforceable for any reason, the remaining covenants or provisions shall remain in full force and effect. 13. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be (a) -21- 22 delivered personally, (b) sent by facsimile transmission, (c) sent by certified or registered mail, postage prepaid, return receipt requested, or (d) sent by overnight delivery service, to the following addresses: (i) if to Glasstech, to: Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Attention: Mark Christman, President Fax: (419) 661-9366 and Kenneth H. Wetmore, Esquire Vice President, General Counsel and Secretary Glasstech, Inc. Ampoint Industrial Park 995 Fourth Street Perrysburg, Ohio 43551 Fax: (419) 661-9616 and Key Equity Capital Corporation 127 Public Square, 6th Floor Cleveland, Ohio 44114 Attention: David P. Given (ii) if to the Executive Employee, to: Kenneth H. Wetmore 647 Oak Knoll Drive Perrysburg, Ohio 43551 Any such notice shall be deemed given (a) when so delivered personally, (b) if sent by certified or registered mail, return receipt requested, on the date the return receipt is signed, or (c) if sent by overnight delivery service. on the next normal business day after the date of sender receipt. Any such person may, by giving notice in accordance with this section to the other parties hereto, designate another address or person for receipt by such person of notices hereunder. -22- 23 14. ENTIRE EMPLOYMENT AGREEMENT, EFFECTIVE TIME. This Employment Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreement(s), written or oral with respect thereto. This Employment Agreement will be effective upon the consummation of the Agreement and Plan of Merger (the "Merger Agreement") dated June 5, 1997 by and among Glasstech, Holding and Glasstech Sub Co. If the Merger Agreement is not consummated within the time set forth therein, this Employment Agreement shall be null and void and of no further force and effect. The Employment Agreement dated December 6, 1994 between Glasstech and the Executive Employee is hereby terminated and is null and void and of no further force and effect. 15. INDEMNIFICATION. During the Term or any Renewal Term hereof and subject to the continuing compliance by the Executive Employee with his obligations hereunder, Glasstech shall provide the Executive Employee with indemnification against liabilities or claims arising by reason of the fact that he is an employee. officer and/or director of Glasstech, and against expenses incurred in connection therewith, to the fullest extent of indemnification then available to any officer and/or director of Glasstech under and in accordance with the laws of the State of Delaware. Also, Glasstech shall purchase and/or maintain Directors' and Officers' insurance on or inuring to the Executive Employee's benefit with respect to such liabilities, claims, or expenses as described in the Agreement and Plan of Merger among Glasstech, Glasstech Sub Co. and Holding, dated June 5, 1997. 16. WAIVERS AND AMENDMENTS. This Employment Agreement may be amended, superseded, canceled, renewed, or extended, and the -23- 24 terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power, or privilege, nor shall any single or partial exercise of any such right, power, or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege. 17. GOVERNING LAW. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made and to be performed within the State. 18. ASSIGNMENT. This Employment Agreement, and the Executive Employee's rights and obligations hereunder, may not be assigned by either party hereto without the consent of the other and any purported assignment by the Executive Employee or Glasstech in violation hereof shall be null and void; provided, however, that Glasstech may assign its rights and obligations hereunder without the Executive Employee's consent in connection with a sale of all or substantially all of Glasstech's assets. 19. BINDING EFFECT. This Employment Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns, heirs, executors, and legal representatives. 20. COUNTERPARTS. This Employment Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original but all -24- 25 such counterparts together shall constitute one and the same instrument. Each counterpart may consist of two (2) copies hereof each signed by one of the parties hereto. 21. HEADING. The headings in this Employment Agreement are for reference only and shall not affect the interpretation of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have executed. or caused to be executed, this Employment Agreement as of the day and year first above written. GLASSTECH HOLDING CO. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- GLASSTECH, INC. By: /s/ Mark D. Christman ---------------------------- Its: President --------------------------- EXECUTIVE EMPLOYEE /s/ Kenneth H. Wetmore ------------------------------- Kenneth H. Wetmore -25- EX-10.13 21 EXHIBIT 10.13 1 EXHIBIT 10.13 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT by and among GLASSTECH HOLDING CO GLASSTECH SUB CO. and CIBC WOOD GUNDY SECURITIES CORP., as Initial Purchaser --------------------------------- Dated as of June 27, 1997 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS Section 1.1. Definitions ................................................. 1 Section 1.2. Accounting Terms; Financial Statements....................... 7 ARTICLE II ISSUE OF SECURITIES; PURCHASE AND SALE OF SECURITIES; RIGHTS OF HOLDERS OF SECURITIES; OFFERING BY INITIAL PURCHASER Section 2.1. Issue of Securities ......................................... 7 Section 2.2. Purchase, Sale and Delivery of Securities.................... 8 Section 2.3. Registration Rights of Holders of Securities................. 9 Section 2.4. Offering by the Initial Purchaser............................ 9 ARTICLE III REPRESENTATIONS AND WARRANTIES; RESALE OF SECURITIES Section 3.1. Representations and Warranties of the Issuer................ 10 Section 3.2. Representations and Warranties of Holding................... 23 Section 3.3. Resale of Securities ....................................... 24 ARTICLE IV CONDITIONS PRECEDENT TO CLOSING Section 4.1. Conditions Precedent to Obligations of the Initial Purchaser..................................... 25 -i- 3 Page ---- ARTICLE V COVENANTS Section 5.1. Covenants of Holding and the Issuer......................... 29 ARTICLE VI FEES Section 6.1. Costs, Expenses and Taxes .................................. 32 ARTICLE VII INDEMNITY Section 7.1. Indemnity .................................................. 33 Section 7.2. Contribution ............................................... 37 Section 7.3. Registration Rights Agreements ............................. 38 ARTICLE VIII MISCELLANEOUS Section 8.1. Survival of Provisions ..................................... 38 Section 8.2. Termination ................................................ 38 Section 8.3. No Waiver; Modifications in Writing......................... 39 Section 8.4. Information Supplied by the Initial Purchaser............... 40 Section 8.5. Communications ............................................. 40 Section 8.6. Execution in Counterparts .................................. 41 Section 8.7. Successors ................................................. 41 Section 8.8. Governing Law .............................................. 42 Section 8.9. Severability of Provisions ................................. 42 Section 8.10. Headings ................................................... 42 SIGNATURE PAGE EXHIBITS Exhibit 1 Form of Opinion of Baker and Hostetler Exhibit 2 Form of Opinion of Cahill Gordon & Reindel Exhibit 3 Form of Report of Brooks & Kushman -ii- 4 SECURITIES PURCHASE AGREEMENT, dated as of June 27, 1997 (the "AGREEMENT"), by and among GLASSTECH HOLDING CO., a Delaware corporation ("HOLDING"), GLASSTECH SUB CO., a Delaware corporation (the "ISSUER") and a wholly owned subsidiary of Holding, and CIBC WOOD GUNDY SECURITIES CORP. (the "INITIAL PURCHASER"). In consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- Section 1.1. DEFINITIONS. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "ACCREDITED INVESTOR" has the meaning provided therefor in Section 3.2 of this Agreement. "ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder. "AFFILIATE" means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Person in question. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER, that beneficial ownership of at least 10% of the voting securities of a Person shall be deemed to be control. "AGREEMENT" means this Agreement, as the same may be amended, supplemented or modified in accordance with the terms hereof. "BASIC DOCUMENTS" means, collectively, the Indenture, the Supplemental Indenture, the Notes, the Registration Rights 5 -2- Agreement, the Warrant Agreement, the Warrants, the Common Stock Registration Rights Agreement and this Agreement. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the City of New York are authorized or obligated by law to close. "CLASS A COMMON STOCK" means the Class A Common Stock, par value $0.01 per share, of Holding. "CLOSING" has the meaning provided therefor in Section 2.2(b) of this Agreement. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMISSION" means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Act. "COMMON STOCK REGISTRATION RIGHTS AGREEMENT" means the common stock registration rights agreement between Holding, the Initial Purchaser and certain stockholders named therein. "COMMONLY CONTROLLED ENTITY" has the meaning provided therefor in Section 3.1(t). "CREDIT AGREEMENT" has the meaning provided therefor in Section 2.1 of this Agreement. "DEFAULT" means any event, act or condition which, with notice or lapse of time or both, would constitute an Event of Default. "EFFECTIVE TIME" has the meaning provided therefor in Section 2.1 of this Agreement. "ENVIRONMENTAL LAW" has the meaning provided therefor in Section 3.1(aa). "EQUITY CONTRIBUTION" has the meaning provided therefor in Section 2.1 of this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 6 -3- "ERNST & YOUNG" has the meaning set forth in Section 1.3(b) hereof. "EVENT OF DEFAULT" means any event defined as an Event of Default in the Indenture. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. "EXCHANGE NOTES" shall have the meaning provided therefor in the Note Registration Rights Agreement. "EXISTING NOTES" means Glasstech's 10% Senior Notes due 2001. "FINAL MEMORANDUM" has the meaning provided therefor in Section 2.1 of this Agreement. "FOREIGN PLANS" has the meaning provided therefor in Section 3.1(t). "GLASSTECH" has the meaning provided therefor in Section 2.1 of this Agreement. "GLASSTECH ENTITIES" has the meaning provided therefor in Section 2.1 of this Agreement. "HOLDING" has the meaning provided therefor in the introductory paragraph of this Agreement. "INDEMNIFIED PARTY" has the meaning provided therefor in Section 7.1(c) of this Agreement. "INDEMNIFYING PARTY" has the meaning provided therefor in Section 7.1(c) of this Agreement. "INDENTURE" means the indenture dated as of July 2, 1997 by and between the Issuer and the Trustee under which the Notes will be issued. "INITIAL PURCHASER" has the meaning provided therefor in the introductory paragraph of this Agreement. "INTELLECTUAL PROPERTY RIGHTS" has the meaning provided therefor in Section 3.1(x). 7 -4- "ISSUER" has the meaning provided therefor in the introductory paragraph of this Agreement. "LIEN" means, with respect to any property or assets of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement, encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including without limitation, any Capitalized Lease Obligation (as defined in the Indenture), conditional sales, or other title retention agreement having substantially the same economic effect as any of the foregoing). "MATERIAL ADVERSE EFFECT" means, with respect to the Glasstech Entities and Glasstech's Subsidiaries and, at and immediately after the Effective Time, the Surviving Company and its Subsidiaries, a material adverse effect on the business, condition (financial or otherwise), results of operations or prospects of the Glasstech Entities and Glasstech's Subsidiaries and, at and immediately after the Effective Time, the Surviving Company and its Subsidiaries, taken as a whole; PROVIDED that, with respect to the Glasstech Entities and, at and immediately after the Effective Time, the Surviving Company, "Material Adverse Effect" shall also mean a material adverse effect on the ability of any of the Glasstech Entities and, at and immediately after the Effective Time, the Surviving Company to perform its respective obligations under this Agreement or the Other Transaction Documents. "MEMORANDUM" has the meaning provided therefor in Section 2.1 of this Agreement. "MERGER" has the meaning provided therefor in Section 2.1 of this Agreement. "MERGER AGREEMENT" has the meaning provided therefor in Section 2.1 of this Agreement. "NOTES" means the 12:% Senior Notes due 2004 of the Issuer. "OFFERING" has the meaning provided therefor in Section 2.1 of this Agreement. "OFFERING MATERIALS" has the meaning provided therefor in Section 7.1 of this Agreement. 8 -5- "OTHER TRANSACTION DOCUMENTS" means the Merger Agreement and the Revolving Credit Facility. "PERSON" means any individual, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint-stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "PORTAL" means the Private Offerings, Resales and Trading through Automated Linkages Market. "PRELIMINARY MEMORANDUM" has the meaning provided therefor in Section 2.1 of this Agreement. "PRIVATE EXCHANGE NOTES" shall have the meaning provided therefor in the Registration Rights Agreement. "PROCEEDING" has the meaning provided therefor in Section 7.1(c) of this Agreement. "QIB" has the meaning provided therefor in Section 3.2 of this Agreement. "REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement by and between the Issuer and the Initial Purchaser relating to the Notes. "REVOLVING CREDIT FACILITY" has the meaning provided therefor in the Final Memorandum. "SECURITIES" has the meaning provided therefor in Section 2.1 of this Agreement. "STATE" means each of the states of the United States, the District of Columbia and the Commonwealth of Puerto Rico. "STATE COMMISSION" means any agency of any State having jurisdiction to enforce such State's securities laws. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, (i) in the case of a corporation, of which more than 50% of the total voting power of the capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, officers or trustees thereof is held by such first-named Person or any of its Subsidiaries; or 9 -6- (ii) in the case of a partnership, joint venture, association or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise or if in accordance with generally accepted accounting principles such entity is consolidated with the first-named Person for financial statement purposes. "SUPPLEMENTAL INDENTURE" has the meaning provided therefor in Section 2.1 of this Agreement. "SURVIVING COMPANY" has the meaning provided therefor in Section 2.1 of this Agreement. "TAXES" has the meaning provided therefor in Section 3.1(w) of this Agreement. "TIME OF PURCHASE" has the meaning provided therefor in Section 2.2(b) of this Agreement. "TRANSACTION DOCUMENTS" means the Basic Documents and the Other Transaction Documents. "TRANSACTIONS" means the Merger, the Offering, the Equity Contribution and the Revolving Credit Facility. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder. "TRUSTEE" means United States Trust Company of New York, as trustee under the Indenture. "UNITS" has the meaning provided therefor in Section 2.1 of this Agreement. "WARRANT AGENT" means United States Trust Company of New York, as warrant agent under the Warrant Agreement. "WARRANT AGREEMENT" means the warrant agreement dated as of July 2, 1997 by and between Holding and the Warrant Agent under which the Warrants will be issued. "WARRANT SHARES" means the shares of Class A Common Stock issued or issuable upon the exercise of Warrants. 10 -7- "WARRANTS" means the warrants of Holding, each Warrant initially entitling the holder thereof to purchase 0.01253157 shares of Class A Common Stock of Holding. Section 1.2. ACCOUNTING TERMS; FINANCIAL STATEMENTS. All accounting terms used herein not expressly defined in this Agreement shall have the respective meanings given to them in accordance with generally accepted accounting principles in the United States as the same may be in effect from time to time. ARTICLE II ISSUE OF SECURITIES; PURCHASE AND SALE OF SECURITIES; RIGHTS OF HOLDERS OF SECURITIES; OFFERING BY INITIAL PURCHASER Section 2.1. ISSUE OF SECURITIES. Holding and the Issuer have authorized the issuance of 70,000 units (the "UNITS") consisting of $1,000 principal amount of the Notes and one Warrant (the "OFFERING"). The Notes are to be issued pursuant to the Indenture and the Warrants are to be issued pursuant to the Warrant Agreement. The Units, Notes and Warrants are referred to herein as the "SECURITIES". Each Note will be substantially in the form of the Note set forth as Exhibit A to the Indenture. Each Warrant will be substantially in the form of the Warrant set forth as Exhibit A to the Warrant Agreement. The Securities will be offered and sold to the Initial Purchaser without being registered under the Act, in reliance on exemptions therefrom. The Securities are being offered in connection with a Merger Agreement dated June 5, 1997 (as amended through the date hereof and together with all ancillary agreements entered into therewith, the "MERGER AGREEMENT"). Pursuant to the Merger Agreement, (i) the net proceeds of the Offering, together with the proceeds from an equity contribution of up to $15,000,000 (the "EQUITY CONTRIBUTION") from Holding, will be used by the Issuer to acquire all of the outstanding capital stock of Glasstech, Inc. ("GLASSTECH") from its existing stockholders and (ii) the Issuer will be merged with and into Glasstech (the "MERGER"), with Glasstech surviving the Merger (the "SURVIVING COMPANY"). In addition, concurrently with the consummation of the Merger, the Surviving Company will execute and deliver a credit agreement (the "CREDIT AGREEMENT") con- 11 -8- sisting of a $10.0 million revolving credit facility (the "REVOLVING CREDIT FACILITY"). The time of consummation of the Merger is referred to herein as the "EFFECTIVE TIME." At the Effective Time, the Surviving Company and the Trustee will enter into a first supplemental indenture to the Indenture (the "SUPPLEMENTAL INDENTURE") providing for the express assumption by the Surviving Company of the covenants, agreements and undertakings of the Issuer in the Indenture and under the Notes. In connection with the sale of the Securities, Holding, the Issuer and Glasstech (collectively, the "GLASSTECH ENTITIES") have prepared a preliminary offering memorandum dated June 10, 1997 (the "PRELIMINARY MEMORANDUM") and prepared a final offering memorandum dated June 27, 1997 (the "FINAL MEMORANDUM" and, together with the Preliminary Memorandum, the "MEMORANDUM") setting forth or including a description of the terms of the Notes, the terms of the Offering, a description of the Glasstech Entities and Glasstech's Subsidiaries and any material developments relating to the Glasstech Entities and Glasstech's Subsidiaries occurring after the date of the most recent financial statements included therein. Section 2.2. PURCHASE, SALE AND DELIVERY OF SECURITIES. (a) On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, Holding and the Issuer agree that they will sell to the Initial Purchaser, and the Initial Purchaser agrees that it will purchase at the Time of Purchase, 70,000 Units consisting of $70,000,000 aggregate principal amount of the Notes of the Issuer and 877.21 Warrants to purchase Class A Common Stock of Holding at a price equal to 97.00% of the principal amount of the Notes. The Notes will be issued by the Issuer and the warrants will be issued by Holding. Each Unit will consist of $1,000 principal amount of the Notes and one Warrant to purchase 0.01253157 shares of Class A Common Stock of Holding. The Notes and the Warrants will be separately transferable immediately after the Issue Date. (b) The purchase, sale and delivery of the Securities will take place at a closing (the "CLOSING") at the offices of Baker & Hostetler LLP, 3200 National City Center, Cleveland, Ohio, at 10:00 A.M., New York time, on July 2, 1997, or such later date and time, if any, as the Initial Pur- 12 -9- chaser, Holding and the Issuer shall agree. The time at which such Closing is concluded is herein called the "TIME OF PURCHASE." (c) One or more certificates in definitive form for each of the Notes and the Warrants that the Initial Purchaser has agreed to purchase hereunder, and in such denomination or denominations and registered in such name or names as the Initial Purchaser requests upon notice to the Issuer at least 48 hours prior to the Closing, shall be delivered by or on behalf of Holding, in the case of the Warrants, and the Issuer, in the case of the Notes, to the Initial Purchaser, against payment by or on behalf of the Initial Purchaser of the purchase price therefor by wire transfer of immediately available funds wired in accordance with the written instructions of Holding and the Issuer. Holding shall make such certificate or certificates for the Warrants available and the Issuer will make such certificate or certificates for the Notes available for checking and packaging by the Initial Purchaser at the offices of the Initial Purchaser, or such other place as the Initial Purchaser may designate, at least 24 hours prior to the Closing. Section 2.3. REGISTRATION RIGHTS OF HOLDERS OF SECURITIES. The Initial Purchaser and its direct and indirect transferees of the Notes shall have such rights with respect to the registration thereof under the Act and qualification of the Indenture under the Trust Indenture Act as are set forth in the Registration Rights Agreement. The Initial Purchaser and its direct and indirect transferees of the Warrants shall have such rights with respect to the registration thereof under the Act as are set forth in the Common Stock Registration Rights Agreement. Section 2.4. OFFERING BY THE INITIAL PURCHASER. The Initial Purchaser proposes to make an offering of the Securities at the price and upon the terms set forth in the Final Memorandum, as soon as practicable after this Agreement is entered into and as in the judgment of the Initial Purchaser is advisable. 13 -10- ARTICLE III REPRESENTATIONS AND WARRANTIES; RESALE OF SECURITIES ------------------------------- Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer represents and warrants to and agrees with the Initial Purchaser as follows: (a) The Final Memorandum, as of its date and at the Time of Purchase, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 3.1(a) do not apply to statements or omissions made in reliance upon and in conformity with information relating to the Initial Purchaser furnished to the Issuer in writing by the Initial Purchaser expressly for use in the Final Memorandum or any amendment or supplement thereto or relating to the manner of sale of the Notes by the Initial Purchaser. (b) The audited consolidated financial statements of Glasstech and its Subsidiaries included in the Final Memorandum present fairly the financial position, results of operations and cash flows of Glasstech and its Subsidiaries at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein. The summary and selected financial data in the Final Memorandum present fairly in all material respects the financial information shown therein and have been prepared and compiled on a basis consistent with the audited financial statements included therein, except as otherwise stated therein. Ernst & Young LLP ("ERNST & YOUNG") is an independent public accounting firm within the meaning of the Act and the rules and regulations promulgated thereunder. The pro forma financial statements (including the notes thereto) and the other pro forma financial information included in the Final Memorandum have been prepared using assumptions which Glasstech believes to be reasonable and in accordance with the applicable requirements of the Act and include all adjustments necessary to present fairly the pro forma financial information included within the Final Memorandum at the respective dates and for the respective periods indicated. 14 -11- (c) Each of the Glasstech Entities is and, immediately after the Effective Time, the Surviving Company will be, a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has or, in the case of the Surviving Company, will have filed all reports with the Secretary of State of Delaware required to obtain a certificate with respect to continued subsistence in good standing from that office. Each Subsidiary of Glasstech is a corporation duly incorporated or organized, validly existing and in good standing under the laws of the state or other jurisdiction of its incorporation or organization. Each of Glasstech and its Subsidiaries is and, immediately after the Effective Time, each of the Surviving Company and its Subsidiaries will be, duly qualified and in good standing as a foreign corporation, and authorized to do business, in each jurisdiction in which the ownership or leasing of any property or the character of its operations makes such qualification necessary and in which the failure so to qualify is reasonably likely to have a Material Adverse Effect. (d) At and as of the Effective Time, the Surviving Company will have the authorized, issued and outstanding capitalization of 1,000 shares of common stock, par value $0.01 per share. All of the issued and outstanding shares of capital stock of the Glasstech Entities and Glasstech's Subsidiaries are and, at and as of the Effective Time, of the Surviving Company and its Subsidiaries will be validly issued, fully paid and nonassessable and none of such shares were issued in violation of any preemptive or similar rights. Except as set forth in the Final Memorandum and the Merger Agreement in the case of the Glasstech Entities and the Glasstech Subsidiaries, and except as set forth in the Final Memorandum in the case of the Surviving Company and its Subsidiaries, (i) there are no outstanding subscriptions, options, warrants, rights, convertible securities or other binding agreements or commitments of any character obligating any of the Glasstech Entities or Glasstech's Subsidiaries or, at and as of the Effective Time, the Surviving Company or any of its Subsidiaries, to issue any securities and (ii) there is no agreement, understanding or arrangement among any of the Glasstech Entities or any of Glasstech's Subsidiaries and, at and as of the Effective Time, there will be no agreement, understanding or arrangement among the Surviving Company or its Subsidiaries and their respective stockholders or any other Person relating to the ownership or disposition of any capital stock in any of the Glasstech Entities or any of Glasstech's Subsidiaries or the Surviving Company or any of its Subsidiaries, the election of directors of any of the Glasstech Entities or any 15 -12- of Glasstech's Subsidiaries or the Surviving Company or any of its Subsidiaries or the governance of any of the Glasstech Entities' or any of Glasstech's Subsidiaries' or the Surviving Company's or any of its Subsidiaries' affairs, and such agreements, arrangements or understandings will not be breached or violated as a result of the execution and delivery of, or the consummation of the transactions contemplated by, this Agreement and the Other Transaction Documents. (e) This Agreement has been duly authorized, executed and delivered by the Issuer and (assuming the due authorization, execution and delivery by the Initial Purchaser) is a valid and legally binding agreement of the Issuer and, at and as of the Effective Time, will be a valid and legally binding agreement of the Surviving Company, enforceable against the Issuer and, at and as of the Effective Time, against the Surviving Company in accordance with its terms except (i) that the enforcement hereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity or contribution hereunder may be limited by federal and state securities laws and public policy considerations. (f) The Indenture has been duly authorized by the Issuer and, when executed and delivered by the Issuer (assuming the due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding agreement of the Issuer, enforceable against it in accordance with its terms except (i) that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. 16 -13- (g) The Supplemental Indenture has been duly and validly authorized by the Issuer and Glasstech. The Supplemental Indenture, when executed and delivered by the Surviving Company (assuming the due authorization, execution and delivery thereof by the Trustee), will be duly executed and delivered and will constitute the valid and legally binding obligation of the Surviving Company, enforceable against the Surviving Company in accordance with its terms, except (i) that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (h) The Registration Rights Agreement has been duly authorized by the Issuer and (assuming the due authorization, execution and delivery by the Initial Purchaser) is a valid and legally binding agreement of the Issuer and, at and as of the Effective Time, will be a valid and legally binding agreement of the Surviving Company, enforceable against it in accordance with its terms except (i) that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (i) The Notes have each been duly authorized by the Issuer and, when executed by the Issuer and authenticated by the Trustee in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, will be entitled to the benefits of the Indenture and will constitute valid and legally binding obligations of the Issuer and, following the execution of the Supplemental Indenture, the Surviving Company, enforceable in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to credi- 17 -14- tors' rights generally, and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (j) The Exchange Notes and the Private Exchange Notes have each been duly authorized by the Issuer and Glasstech and, when executed by the Surviving Company and authenticated by the Trustee in accordance with the provisions of the Registration Rights Agreement and the Indenture, as amended by the Supplemental Indenture, will be entitled to the benefits of the Indenture, as amended by the Supplemental Indenture, and will constitute valid and legally binding obligations of the Surviving Company, enforceable in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (k) Immediately after the consummation of the Transactions (including the use of proceeds from the sale of Notes at the Time of Purchase), to the best of the Issuer's knowledge: (i) on a pro forma basis, the fair value and present fair saleable value of the Surviving Company's assets would exceed the Surviving Company's stated liabilities and identified contingent liabilities; (ii) the Surviving Company should be able to pay its debts as they become absolute and mature; and (iii) the capital remaining in the Surviving Company after the Transactions would not be unreasonably small for the business in which the Surviving Company is engaged, as management has indicated it is now conducted and is proposed to be conducted following the consummation of the Transactions. (l) Each of the Glasstech Entities has and, immediately after the Effective Time, the Surviving Company will have all requisite corporate power and authority to (i) execute, deliver and perform its obligations under each of the Basic Documents (to the extent each is a party thereto), (ii) execute, deliver and perform its obligations under each of the Other Transaction Documents (to the extent each is a party thereto), (iii) execute, deliver and perform its obligations under all other agreements and instruments (to the extent each is a party thereto) to be executed and delivered by each of them pursuant to or in connection with each of the Basic Documents 18 -15- and the Other Transaction Documents, (iv) in the case of the Issuer, issue the Notes and, in the case of Holding, issue the Warrants in the manner and for the purpose contemplated by this Agreement and (v) consummate each of the Transactions. (m) Subsequent to the date as of which information is given in the Final Memorandum to the date hereof, except as contemplated in the Final Memorandum, there has not been (i) any event or condition that has had or that could reasonably be expected to have a Material Adverse Effect, (ii) any transaction entered into by any of the Glasstech Entities or any of Glasstech's Subsidiaries, other than in the ordinary course of business, that is material to the Glasstech Entities and Glasstech's Subsidiaries, taken as a whole, or (iii) any dividend or distribution of any kind declared, paid or made by any of the Glasstech Entities on its capital stock. (n) Except as set forth in the Final Memorandum, there is no action, suit, investigation or proceeding, governmental or otherwise, pending or, to the best knowledge of the Issuer, threatened to which the Glasstech Entities or any of Glasstech's Subsidiaries is or would be a party or of which the properties or assets of the Glasstech Entities or any of Glasstech's Subsidiaries are or may be the subject that (i) seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance and sale of the Notes by the Issuer or any of the other transactions contemplated hereby, (ii) questions the legality or validity of any such transactions or seeks to recover damages or obtain other relief in connection with any such transactions or (iii) could reasonably be expected to have a Material Adverse Effect. (o) The execution, delivery and performance by each of the Glasstech Entities and, at and immediately after the Effective Time, the Surviving Company of the Transaction Documents (to the extent each is a party thereto), the issuance and sale by the Issuer and Holding of the Securities, and the execution, delivery and performance by each of the Glasstech Entities and, at and immediately 19 -16- after the Effective Time, the Surviving Company of all other agreements and instruments (to the extent each is a party thereto) to be executed and delivered by it pursuant hereto or thereto or in connection herewith or therewith or in connection with any of the Transactions, and compliance by each of the Glasstech Entities and, immediately after the Effective Time, the Surviving Company with the terms and provisions hereof and thereof, do not and will not (i) (assuming compliance with all applicable state securities or "Blue Sky" laws) violate any provision of any law, rule or regulation (including, without limitation, Regulation G, T, U or X of the Board of Governors of the Federal Reserve System), order, writ, judgment, decree, determination or award presently in effect or in effect at the Effective Time having applicability to any such party, (ii) conflict with or result in a breach of or constitute a default under the certificate of incorporation or by-laws (or similar organizational document) of any of the Glasstech Entities or any of Glasstech's Subsidiaries or, at and immediately after the Effective Time, the Surviving Company, or, as of the Effective Time, any indenture or loan or credit agreement, or any other material agreement or instrument, to which any Glasstech Entity or the Surviving Company or any of its Subsidiaries is a party or by which any Glasstech Entity or the Surviving Company or any of its Subsidiaries or any of their respective properties or assets may be bound or affected, or (iii) except as contemplated by the Basic Documents or the Revolving Credit Facility, result in, or require the creation or imposition of, any Lien upon or with respect to any of the properties or assets now owned or hereafter acquired by the Issuer or any of its Subsidiaries, except, in each case, where such violation, conflict, default or creation or imposition of any Lien would not (individually or in the aggregate) be reasonably likely to have a Material Adverse Effect. (p) Each of the Other Transaction Documents and each agreement or instrument (other than the Basic Documents) executed and delivered by each of the Glasstech Entities and, at and immediately after the Effective Time, the Surviving Company in connection with the Basic Documents and the Transactions (to the extent each is a party thereto) has been duly and validly authorized, and, when executed and delivered by it, will constitute a valid and legally binding obligation enforceable against it in accordance with its terms, except (i) that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity and 20 -17- contribution hereunder and thereunder may be limited by applicable law. (q) None of the Glasstech Entities or any of Glasstech's Subsidiaries is currently or, immediately after the Effective Time, will be, and neither the Surviving Company nor any of its Subsidiaries, immediately after the Effective Time, will be, (i) in violation of its respective certificate of incorporation or by-laws (or similar organizational document (including any partnership agreement or certificate of limited partnership)), (ii) in default (nor will an event occur which with notice or passage of time or both would constitute such a default) under or in violation of any indenture or loan or credit agreement or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound or affected (except as set forth in the Final Memorandum), (iii) in violation of any order of any court, arbitrator or governmental body, or (iv) (assuming compliance with all applicable state securities or "Blue Sky" laws) in violation of or will have violated any statute, rule or regulation of any governmental authority, except in each case, which default or violation (individually or in the aggregate) could reasonably be expected to (y) affect the legality, validity or enforceability of any of the Basic Documents in any material respect or (z) have a Material Adverse Effect. (r) Except as set forth in the Final Memorandum, and assuming the accuracy of the Initial Purchaser's representations and warranties set forth in Section 3.2 hereof, and the due performance by the Initial Purchaser of the covenants and agreements set forth in Section 3.2 hereof, no authorization, consent, approval, license, qualification or formal exemption from, nor any filing, declaration or registration with, any court, governmental agency or regulatory authority or any securities exchange is required in connection with the execution, delivery or performance by any Glasstech Entity or, at and immediately after the Effective Time, the Surviving Company or any of its Subsidiaries (to the extent they are a party thereto) of any of the Basic Documents or any of the Other Transaction Documents, except (i) as may be required under state securities or "blue sky" laws or the laws of any foreign jurisdiction in connection with the offer and sale of the Notes or (ii) as would not (individually or in the aggregate) be reasonably likely to have a Material Adverse Effect. All such authorizations, consents, approvals, li- 21 -18- censes, qualifications, exemptions, filings, declarations and registrations set forth in the Final Memorandum (other than as disclosed therein) which are required to have been obtained by the date hereof have been obtained or made, as the case may be, and are in full force and effect and not the subject of any pending or, to the knowledge of the Issuer, threatened attack by appeal or direct proceeding or otherwise. (s) The Issuer is not, and immediately after the execution of the Supplemental Indenture, the Surviving Company will not be, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (t) (i) No Reportable Event (as defined in Section 4043 of ERISA) has occurred during the five-year period prior to the date on which this representation is made with respect to any Employee Benefit Plan (as defined in Section 3(3) of ERISA), (ii) Glasstech and its Subsidiaries have complied in all material respects with the applicable provisions of ERISA and the code in connection with each Employee Benefit Plan, (iii) neither Glasstech nor any person or entity treated with Glasstech as a single employer under Section 414 of ERISA (a "COMMONLY CONTROLLED ENTITY") has had a complete or partial withdrawal from any Multiemployer Plan (as defined in ERISA), (iv) neither Glasstech nor any Commonly Controlled Entity would become subject to any liability under ERISA if Glasstech or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made, and (v) no such Multiemployer Plan is in reorganization or insolvent, which, in any such case under clause (i), (ii), (iii), (iv) or (v), individually or in the aggregate, will result in a Material Adverse Effect. (u) At and as of the Effective Time, the Surviving Company will have good and marketable title to all real property and good title to all personal property described in the Final Memorandum as being owned by it and good and marketable title to a leasehold estate in the real and personal property described in the Final Memorandum as being leased by it free and clear of all liens, charges, encumbrances or restrictions, except as described in the Final Memorandum or to the extent the failure to have such title or the existence of such liens, charges, encum- 22 -19- brances or restrictions would not, individually or in the aggregate, have a Material Adverse Effect. All leases, contracts and agreements to which any Glasstech Entity is or, at and as of the Effective Time, the Surviving Company will be, a party or by which any of them is bound are valid and enforceable against such party, and are valid and enforceable against the other party or parties thereto and are in full force and effect with only such exceptions as would not, individually or in the aggregate, have a Material Adverse Effect. (v) No form of general solicitation or general advertising was used by any Glasstech Entity or any of Glasstech's Subsidiaries or any of their respective representatives in connection with the offer and sale of the Notes. None of the Glasstech Entities or any of Glasstech's Subsidiaries nor any Person authorized to act for any of them has, either directly or indirectly, sold or offered for sale any of the Notes or any other similar security of the Issuer to, or solicited any offers to buy any thereof from, or has otherwise approached or negotiated in respect thereof with, any Person or Persons other than with or through the Initial Purchaser; and the Issuer agrees that none of the Glasstech Entities or any of Glasstech's Subsidiaries and, at and as of the Effective Time, the Surviving Company, or any Person acting on its or their behalf will sell or offer for sale any Securities to, or solicit any offers to buy any Securities from, or otherwise approach or negotiate in respect thereof with, any Person or Persons so as thereby to bring the issuance or sale of any of the Securities within the provisions of Section 5 of the Act. (w) All tax returns required to be filed by the Glasstech Entities or any of Glasstech's Subsidiaries in any jurisdiction (including foreign jurisdictions) have been duly filed and all taxes, assessments, fees and other charges including, without limitation, withholding taxes, penalties and interest ("TAXES") due or claimed to be due have been paid, other than those Taxes being contested in good faith and for which adequate reserves or accruals have been established in accordance with generally accepted accounting principles, except where the failure to file such returns or to pay such Taxes is not reasonably likely to have, singly or in the aggregate, a Material Adverse Effect. The Issuer knows of no actual or proposed additional tax assessments for any fiscal period against the Glasstech Entities or any of Glasstech's Subsidiaries 23 -20- or, immediately after the Effective Time, the Surviving Company and its Subsidiaries that, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect. (x) Glasstech and its Subsidiaries own or possess and, at and as of the Effective Time, the Surviving Company and its Subsidiaries will own or possess, the patents, patent rights, licenses, inventions, trademarks, service marks, trade names, copyrights and know-how, including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures (collectively, the "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the businesses now or proposed to be operated by it as described in the Final Memorandum, except as would not, individually or in the aggregate, have a Material Adverse Effect, and none of the Glasstech Entities or Glasstech's Subsidiaries has and, at and as of the Effective Time, the Surviving Company or its Subsidiaries will not have, received any notice of infringement of or conflict with (or know of any such infringement of or conflict with) alleged rights of others with respect to any Intellectual Property Rights which, if such alleged infringement or conflict were sustained, would have a Material Adverse Effect. (y) Each of the Transactions and the Transaction Documents conform in all material respects to the descriptions thereof in the Final Memorandum. (z) Assuming the accuracy of the Initial Purchaser's representations and warranties set forth in Section 3.2 hereof, and the due performance by the Initial Purchaser of the covenants and agreements set forth in Section 3.2 hereof, the offer and sale of the Securities to the Initial Purchaser in the manner contemplated by this Agreement and the Memorandum does not require registration under the Act and the Indenture does not require qualification under the Trust Indenture Act of 1939, as amended. (aa) Except as described in the Final Memorandum, each of the Glasstech Entities and Glasstech's Subsidiaries is and, at and as of the Effective Time, the Surviving Company and each of its Subsidiaries will be, in compliance with all federal, state, local and foreign laws, and any rules, regulations, orders, decrees, judgments or injunctions issued or promulgated thereunder relating to pollution and protection of public and employee health and 24 -21- the environment ("ENVIRONMENTAL LAW") and with the terms and conditions of any permit, license or approval required thereunder in connection with the ownership, operation or use of its business, property and assets where the failure to be in such compliance could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; except as disclosed in the Final Memorandum, and to the knowledge of the Issuer, none of the Glasstech Entities or Glasstech's Subsidiaries is, and at and as of the Effective Time none of the Surviving Company or its Subsidiaries will be, subject to any liability, absolute or contingent, under any Environmental Law which liability would, individually or in the aggregate, be reasonably likely to result in a Material Adverse Effect; except as disclosed in the Final Memorandum, there is no civil, criminal or administrative action, suit, demand, hearing, notice of violation or deficiency, investigation, proceeding or notice of potential responsibility or liability or demand letter or request for information pending or, to the knowledge of the Issuer, threatened against any of the Glasstech Entities or any of Glasstech's Subsidiaries under any Environmental Law which, if determined adversely to such Glasstech Entity or any such Subsidiary, would, individually or in the aggregate, be reasonably likely to result in a Material Adverse Effect. (bb) Except as set forth in the Final Memorandum, there is no strike, labor dispute, slowdown or work stoppage with the employees of Glasstech or any of its Subsidiaries which is pending or, to the best knowledge of the Issuer, threatened. (cc) Each of the Glasstech Entities and Glasstech's Subsidiaries carry and, immediately after the Effective Time, each of the Surviving Company and its Subsidiaries will carry, insurance (including self insurance) in such amounts and covering such risks as in its reasonable determination is adequate for the conduct of its business and the value of its properties. (dd) No securities of any Glasstech Entity or any of Glasstech's Subsidiaries are and, upon execution of the Supplemental Indenture, no securities of the Surviving Company or any of its Subsidiaries will be, of the same class (within the meaning of Rule 144A under the Act) as the Securities and listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system. 25 -22- (ee) None of the Glasstech Entities or any of Glasstech's Subsidiaries has taken, nor will any of them take, nor, after the Effective Time, will the Surviving Company or any of its Subsidiaries take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Securities. (ff) None of the Glasstech Entities or Glasstech's Subsidiaries, any of their respective Affiliates or any person acting on its or their behalf (other than the Initial Purchaser) has engaged in any directed selling efforts (as that term is defined in Regulation S under the Act ("REGULATION S") with respect to the Securities and each of the Glasstech Entities and Glasstech's Subsidiaries and their respective Affiliates and any person acting on its or their behalf (other than the Initial Purchaser) have acted in accordance with the offering restrictions requirement of Regulation S. (gg) Each of the Glasstech Entities has duly authorized each of the Transactions. (hh) The Surviving Company will have all requisite corporate power and authority to execute, deliver and perform its obligations under the Revolving Credit Facility and to consummate the transactions contemplated thereby. The Revolving Credit Facility has been duly authorized by the Issuer and Glasstech and, when executed and delivered by the Surviving Company, will constitute a valid and legally binding agreement of the Surviving Company, enforceable against the Surviving Company in accordance with its terms, except (i) that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (ii) The statistical and market-related data included in the Final Memorandum are based on or derived from sources which the Issuer believes to be reliable and accurate or represents the Issuer's good faith estimates that are made on the basis of data derived from such sources. 26 -23- (jj) Except as stated in the Final Memorandum, the Issuer does not know of any claims for services, either in the nature of a finder's fee or financial advisory fee, with respect to the offering of the Notes and the transactions contemplated by the Final Memorandum. Section 3.2. REPRESENTATIONS AND WARRANTIES OF HOLDING. Holding represents and warrants to and agrees with the Initial Purchaser as follows: (a) This Agreement has been duly authorized, executed and delivered by Holding and (assuming the due authorization, execution and delivery by the Initial Purchaser) is a valid and legally binding agreement of Holding enforceable against Holding in accordance with its terms except (i) that the enforcement hereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity or contribution hereunder may be limited by federal and state securities laws and public policy considerations. (b) Holding has all requisite corporate power and authority to execute, deliver and perform its obligations under the Warrant Agreement, the Units and the Warrants; the Warrant Agreement has been duly authorized by Holding and, when executed and delivered by Holding (assuming the due authorization, execution and delivery by the Warrant Agent), will constitute a valid and legally binding agreement of Holding, enforceable against Holding in accordance with its terms except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of any court before which any proceeding therefor may be brought. (c) The Warrants have been duly and validly authorized by Holding and, when executed by Holding and countersigned by the Warrant Agent in accordance with the provisions of the Warrant Agreement, and delivered to and paid for by the Initial Purchaser in accordance with the terms hereof, will be entitled to the benefits of the Warrant Agreement and will constitute valid and binding obliga- 27 -24- tions of Holding enforceable in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of any court before which any proceeding therefor may be brought. (d) When issued in accordance with the terms and conditions contained in the Warrant Agreement upon exercise of the Warrants, the Warrant Shares so exercised will be duly authorized, validly issued, fully paid and non-assessable and will not be subject to any preemptive or similar rights. The Warrant Shares have been duly reserved for issuance in accordance with the terms of the Warrants and the Warrant Agreement. (e) The Common Stock Registration Rights Agreement has been duly authorized by Holding and (assuming the due authorization, execution and delivery by the Initial Purchaser) is a valid and legally binding agreement of Holding, enforceable against it in accordance with its terms except (i) that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and to general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (ii) as any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (f) Holding is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 3.3. RESALE OF SECURITIES. The Initial Purchaser represents and warrants that it is a "qualified institutional buyer" as defined in Rule 144A under the Act ("QIB"). The Initial Purchaser agrees with Holding and the Issuer that it (a) has not and will not, directly or indirectly, solicit offers for, or offer or sell, the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act; (b) has not and will not, directly or indirectly, engage in any "directed selling efforts" (as defined in Regulation S under the Act); and (c) has solicited 28 -25- and will solicit offers for the Securities only from, and will offer the Securities only to (A) in the case of offers inside the United States, (i) Persons whom the Initial Purchaser reasonably believes to be QIBs or, if any such Person is buying for one or more institutional accounts for which such Person is acting as fiduciary or agent, only when such Person has represented to the Initial Purchaser that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A or (ii) a limited number of other institutional investors reasonably believed by the Initial Purchaser to be "Accredited Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the Act) that, prior to their purchase of the Notes, deliver to the Initial Purchaser a letter containing the representations and agreements set forth in Annex A to the Final Memorandum and (B) in the case of offers outside the United States, to Persons other than U.S. Persons ("foreign purchasers," which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)); PROVIDED, HOWEVER, that, in the case of this clause (B), in purchasing such Notes such Persons are deemed to have represented and agreed as provided under the caption "Notice to Investors" contained in the Final Memorandum. ARTICLE IV CONDITIONS PRECEDENT TO CLOSING ------------------------------- Section 4.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INITIAL PURCHASER. The obligation of the Initial Purchaser to purchase the Securities to be purchased by it hereunder is subject to the satisfaction of the following conditions: (a) The Initial Purchaser shall have received, at the Time of Purchase, a signed opinion of Baker & Hostetler LLP, as counsel to Holding and the Issuer, substantially in the form of EXHIBIT 1 hereto, dated the Time of Purchase and addressed to the Initial Purchaser and satisfactory to counsel for the Initial Purchaser. (b) The Initial Purchaser shall have received, at the Time of Purchase, a signed opinion of Cahill Gordon & Reindel, counsel to the Initial Purchaser, substantially in the form of EXHIBIT 2 hereto, dated the Time of Pur- 29 -26- chase and addressed to the Initial Purchaser and satisfactory to the Initial Purchaser. In rendering such opinions in accordance with Sections 4.1(a) and (b), each such counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of the Glasstech Entities and representations of the Initial Purchaser and by government officials, and upon such other documents as such counsel deem appropriate as a basis for their opinion. Each such counsel may specify the jurisdictions in which it is admitted to practice and that it is not admitted to practice in any other jurisdiction or an expert in the law of any other jurisdiction. To the extent such opinion concerns the laws of any other such jurisdiction such counsel may rely upon the opinion of counsel (satisfactory to the Initial Purchaser) admitted to practice in such jurisdiction. Any opinion relied upon by such counsel as aforesaid shall be delivered to the Initial Purchaser together with the opinion of such counsel, which opinion shall state that such counsel believes that their and the Initial Purchaser's reliance thereon is justified. (c) The Initial Purchaser shall have received from Ernst & Young a comfort letter or letters dated the date hereof and the Time of Purchase in form and substance reasonably satisfactory to counsel to the Initial Purchaser. (d) The representations and warranties made by Holding and the Issuer herein shall be true and correct in all material respects (except for changes expressly provided for in this Agreement) on and as of the Time of Purchase with the same effect as though such representations and warranties had been made on and as of the Time of Purchase, each of the Glasstech Entities shall have complied in all material respects with all agreements as set forth in or contemplated hereunder and in the other Basic Documents required to be performed by it at or prior to the Time of Purchase. (e) Subsequent to the date of the Final Memorandum, (i) there shall not have been any change, or any development involving a prospective change, which has had or could be reasonably likely to have a Material Adverse Effect, and (ii) the Glasstech Entities and Glasstech's Subsidiaries shall have conducted their respective businesses only in the ordinary course. 30 -27- (f) At the Time of Purchase and after giving effect to the consummation of the transactions contemplated by this Agreement and the other Basic Documents, there shall exist no Default or Event of Default. (g) The purchase of and payment for the Securities by the Initial Purchaser hereunder shall not be prohibited or enjoined (temporarily or permanently) by any applicable law or governmental regulation (including, without limitation, Regulation G, T, U or X of the Board of Governors of the Federal Reserve System). (h) At the Time of Purchase, the Initial Purchaser shall have received a certificate, dated the Time of Purchase, from the appropriate officer of each of the Glasstech Entities stating that the conditions specified in Sections 4.1(d), (e), (f) and (l) have been satisfied or duly waived at the Time of Purchase. (i) Each of the Basic Documents shall be reasonably satisfactory in form and substance to the Initial Purchaser and shall have been executed and delivered by all the respective parties thereto and shall be in full force and effect. (j) All proceedings taken in connection with the issuance of the Securities and the transactions contemplated by this Agreement, the other Basic Documents and all documents and papers relating thereto shall be reasonably satisfactory to the Initial Purchaser and counsel to the Initial Purchaser. The Initial Purchaser and counsel to the Initial Purchaser shall have received copies of such papers and documents as they may reasonably request in connection therewith, all in form and substance reasonably satisfactory to them. (k) The Issuer shall have furnished to the Initial Purchaser the form of Revolving Credit Facility and a true and correct executed copy of the Merger Agreement including all schedules and exhibits thereto. (l) The sale of the Securities hereunder shall not have been enjoined (temporarily or permanently) at the Time of Purchase. (m) There shall not have been any announcement by any "nationally recognized statistical rating organization," as defined for purposes of Rule 436(g) under the 31 -28- Act, that (A) it is downgrading its rating assigned to any debt securities of Glasstech, or (B) it is reviewing its rating assigned to any debt securities of Glasstech with a view to possible downgrading, or with negative implications, or direction not determined. (n) At the Time of Purchase, each Glasstech Entity shall have, to the extent it is a party thereto, complied in all material respects with all agreements and covenants in the Transaction Documents and performed all conditions specified therein (other than agreements or covenants which have been waived but only if such waivers are not required to be set forth in the Final Memorandum) to be complied with or performed at or prior to the Time of Purchase, and each of the Transaction Documents shall be in full force and effect. (o) At the Time of Purchase, the Initial Purchaser shall have received copies of all certificates, documents and opinions, reasonably requested by the Initial Purchaser, delivered by any of the Glasstech Entities or any of their counsels and such other certificates, documents and opinions reasonably obtainable by the Glasstech Entities under the Transaction Documents in connection with any of the Transactions, together with letters addressed to the Initial Purchaser, stating that the Initial Purchaser may rely on such certificates and opinions as if they had been addressed to the Initial Purchaser. (p) Each of the Transactions (other than the Offering) shall have been consummated, or shall be consummated simultaneously with the Offering, on the terms and conditions set forth in the Transaction Documents in the forms previously delivered to the Initial Purchaser and to which it shall not have reasonably objected. (q) At the Effective Time, a certificate of merger with respect to the Merger shall have been filed with the Secretary of State of the State of Delaware. (r) At the Time of Purchase, the Surviving Company shall have executed and delivered to the Initial Purchaser an agreement, in such form as is satisfactory to the Initial Purchaser, assuming the obligations of the Issuer under this Agreement, the Indenture and the Notes. (s) The Initial Purchaser shall have received, in the form and substance satisfactory to the Initial Pur- 32 -29- chaser and dated the Time of Purchase, a signed report of Brooks & Kushman, special patent counsel to Glasstech, substantially in the form of EXHIBIT 3 hereto. (t) Glasstech shall have received an opinion, in form and substance satisfactory to the Initial Purchaser and counsel for the Initial Purchaser and dated the Time of Purchase, of Houlihan, Lokey, Howard & Zukin, Inc., with respect to the solvency of the Surviving Company. (u) The redemption of the Existing Notes shall have been consummated or shall be consummated simultaneously with the Offering. (v) The Trustee shall have received letters, addressed to the Trustee, from Baker & Hostetler LLP to the effect that their respective opinions delivered in accordance with Section 4.1(a) may be relied upon by the Trustee as though the same were delivered to it. (w) The Initial Purchaser shall have sold 70,000 Units in accordance with the provisions of Section 3.3 hereof. On or before the Closing, the Initial Purchaser and counsel to the Initial Purchaser shall have received such further documents, opinions, certificates and schedules or other instruments relating to the business, corporate, legal and financial affairs of the Glasstech Entities and Glasstech's Subsidiaries as they may reasonably request. ARTICLE V COVENANTS --------- Section 5.1. COVENANTS OF HOLDING AND THE ISSUER. Holding and the Issuer jointly and severally covenant and agree with the Initial Purchaser that: (a) Neither Holding nor the Issuer nor, after the Effective Time, the Surviving Company will amend or supplement the Final Memorandum or any amendment or supplement thereto of which the Initial Purchaser shall not previously have been advised and furnished a copy for a reasonable period of time prior to the proposed amendment or supplement and as to which the Initial Purchaser shall not have given its consent, which consent shall not be unrea- 33 -30- sonably withheld. Holding and the Issuer and, after the Effective Time, the Surviving Company will promptly, upon the reasonable request of the Initial Purchaser or counsel to the Initial Purchaser, make any amendments or supplements to the Preliminary Memorandum or the Final Memorandum that may be necessary or advisable in the opinion of the Initial Purchaser or counsel to the Initial Purchaser in connection with the resale of the Notes by the Initial Purchaser. (b) Holding and the Issuer and, after the Effective Time, the Surviving Company will cooperate with the Initial Purchaser in arranging for the qualification of the Securities for offering and sale under the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchaser may designate and will continue such qualifications in effect for as long as may be reasonably necessary to complete the resale of the Securities; PROVIDED, HOWEVER, that in connection therewith, Holding and the Issuer and, after the Effective Time, the Surviving Company shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation in any such jurisdiction where it is not then so subject. (c) If, at any time prior to the completion of the distribution by the Initial Purchaser of the Securities, the Exchange Notes or the Private Exchange Notes, any event occurs or information becomes known as a result of which the Final Memorandum as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if for any other reason it is necessary at any time to amend or supplement the Final Memorandum to comply with applicable law, Holding and the Issuer and, after the Effective Time, the Surviving Company will promptly notify the Initial Purchaser thereof (who thereafter will not use such Final Memorandum until appropriately amended or supplemented) and will prepare, at the expense of Holding and the Issuer and, after the Effective Time, the Surviving Company, an amendment or supplement to the Final Memorandum that corrects such statement or omission or effects such compliance; PROVIDED, HOWEVER, that Holding's and the Issuer's and, after the Effective Time, the Surviving Company's respective obligations hereunder shall not be applicable to the extent resale by the Initial Purchaser may be accomplished pursu- 34 -31- ant to a Registration Statement or Registration Statements (as defined in the Registration Rights Agreement). (d) The Issuer and, after the Effective Time, the Surviving Company will, without charge, provide to the Initial Purchaser and to counsel to the Initial Purchaser as many copies of the Preliminary Memorandum and the Final Memorandum or any amendment or supplement thereto as the Initial Purchaser may reasonably request. (e) The Surviving Company will apply the net proceeds from the sale of the Notes as set forth under "Use of Proceeds" in the Final Memorandum. (f) From the Time of Purchase through the period ending on the date no Notes are outstanding, the Surviving Company will furnish to the Initial Purchaser copies of all reports and other communications (financial or otherwise) furnished by the Surviving Company to the Trustee or the holders of the Notes and, promptly after available, copies of any reports or financial statements furnished to or filed by the Surviving Company with the Commission or any national securities exchange on which any class of securities of the Surviving Company may be listed. (g) Prior to the Time of Purchase, the Issuer will furnish to the Initial Purchaser, as soon as they have been prepared, a copy of any unaudited interim financial statements of Glasstech and its Subsidiaries for any period subsequent to the period covered by the most recent financial statements appearing in the Final Memorandum. (h) None of Holding, the Issuer and, after the Effective Time, the Surviving Company or any of their respective Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Act) which could be integrated with the sale of the Securities in a manner which would require the registration under the Act of the Securities. (i) Holding and the Issuer will not, and will not permit any of the respective Subsidiaries to, and, after the Effective Date, the Surviving Company will not, and will not permit any of its Subsidiaries to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or 35 -32- in any manner involving a public offering within the meaning of Section 4(2) of the Act. (j) For so long as any of the Securities remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Act and not salable in full under Rule 144 under the Act (or any successor provision), Holding, in the case of the Units and Warrants, and the Surviving Company, in the case of the Notes, will make available, upon request, to any seller of such Securities the information specified in Rule 144A(d)(4) under the Act, unless Holding or the Surviving Company, as the case may be, is then subject to Section 13 or 15(d) of the Exchange Act. (k) Each of Holding and the Issuer will use its best efforts to (i) permit the Securities to be included for quotation on PORTAL and (ii) permit the Securities to be eligible for clearance and settlement through The Depository Trust Company. (l) Each of Holding and the Issuer and, after the Effective Time, the Surviving Company will use its best efforts to do and perform all things required to be done and performed by it under this Agreement and the other Basic Documents prior to or after the Closing and to satisfy all conditions precedent on its part to the obligations of the Initial Purchaser to purchase and accept delivery of the Securities. ARTICLE VI FEES ---- Section 6.1. COSTS, EXPENSES AND TAXES. Holding and the Issuer jointly and severally agree to pay and, after the Effective Time, the Surviving Company will pay, upon consummation of the Offering, all costs and expenses incident to the performance of their obligations under this Agreement, including, but not limited to, all costs and expenses incident to (i) its negotiation, preparation, printing, typing, reproduction, execution and delivery of this Agreement and each of the other Basic Documents, any amendment or supplement to or modification of any of the foregoing and any and all other documents furnished pursuant hereto or thereto or in connection herewith or therewith, (ii) any costs of printing the Preliminary Memorandum and the Final Memorandum and any amend- 36 -33- ment or supplement thereto, any other marketing related materials and any "Blue Sky" memoranda (which shall include the reasonable disbursements of counsel to the Initial Purchaser in respect thereof), (iii) all arrangements relating to the delivery to the Initial Purchaser of copies of the foregoing documents, (iv) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Glasstech Entities and of Cahill Gordon & Reindel, counsel for the Initial Purchaser, (v) preparation (including printing), issuance and delivery to the Initial Purchaser of the Notes, (vi) the qualification of the Notes under state securities and "Blue Sky" laws, including filing fees and reasonable fees and disbursements of counsel to the Initial Purchaser relating thereto, (vii) its expenses and the cost of any private or chartered jets in connection with any meetings with prospective investors in the Notes, (viii) fees and expenses of the Trustee including fees and expenses of counsel to the Trustee, (ix) all expenses and listing fees incurred in connection with the application for quotation of the Notes on PORTAL, (x) any fees charged by investment rating agencies for the rating of the Notes and (xi) except as limited by Article VII, all costs and expenses (including, without limitation, reasonable attorneys' fees and expenses), if any, in connection with the enforcement of this Agreement, the Securities or any other agreement furnished pursuant hereto or thereto or in connection herewith or therewith. In addition, Holding and the Issuer and, after the Effective Time, the Surviving Company shall pay any and all stamp, transfer and other similar taxes (but excluding any income, franchise, personal property, ad valorem or gross receipts taxes) payable or determined to be payable in connection with the execution and delivery of this Agreement, any of the other Basic Documents or the issuance of the Securities, and shall save and hold the Initial Purchaser harmless from and against any and all liabilities with respect to or resulting from any delay in paying, or omission to pay, such taxes (other than if such delay is caused by the Initial Purchaser). ARTICLE VII INDEMNITY --------- Section 7.1. INDEMNITY. (a) INDEMNIFICATION BY HOLDING AND THE ISSUER. Each of Holding and the Issuer jointly and severally agrees and covenants to and, after the Effective Time, the Surviving 37 -34- Company will, hold harmless and indemnify the Initial Purchaser and any Affiliates thereof (including any director, officer, employee, agent or controlling Person of any of the foregoing) from and against any losses, claims, damages, liabilities and expenses (including expenses of investigation) to which the Initial Purchaser and its Affiliates may become subject arising out of or based upon any untrue statement or alleged untrue statement of any material fact contained in the Memorandum and any amendments or supplements thereto, the Basic Documents, any documents filed with the Commission or any State Commission (collectively, the "OFFERING MATERIALS") or arising out of or based upon the omission or alleged omission to state in any of the Offering Materials a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that Holding and the Issuer and, after the Effective Time, the Surviving Company shall not be liable under this paragraph (a) to the extent that such losses, claims, damages or liabilities arose out of or are based upon an untrue statement or omission made in any of the documents referred to in this paragraph (a) in reliance upon and in conformity with the information relating to the Initial Purchaser furnished in writing by the Initial Purchaser for inclusion therein (or for a breach by the Initial Purchaser of any representation or warranty contained in this Agreement), PROVIDED, FURTHER, that Holding and the Issuer and, after the Effective Time, the Surviving Company shall not be liable under this paragraph (a) to the extent that such losses, claims, damages or liabilities arose out of or are based upon an untrue statement or omission made in any Preliminary Memorandum that is corrected in the Final Memorandum (or any amendment or supplement thereto) if the person asserting such loss, claim, damage or liability purchased Securities from the Initial Purchaser in reliance on such Preliminary Memorandum and was not given the Final Memorandum (or any amendment or supplement thereto) on or prior to the confirmation of the sale of such Notes. Holding and the Issuer and, after the Effective Time, the Surviving Company further agree to reimburse the Initial Purchaser for any reasonable legal and other expenses as they are incurred by it in connection with investigating, preparing to defend or defending any lawsuits, claims or other proceedings or investigations arising in any manner out of or in connection with such Person being the Initial Purchaser; PROVIDED that if Holding and the Issuer and, after the Effective Time, the Surviving Company reimburse the Initial Purchaser hereunder for any expenses incurred in connection with a lawsuit, claim or other proceeding for which indemnification is sought, the Initial Purchaser hereby agrees to refund such reimbursement of expenses to the extent that 38 -35- the losses, claims, damages or liabilities arise out of or are based upon an untrue statement or omission made in any of the documents referred to in this paragraph (a) in reliance upon and in conformity with the information relating to the Initial Purchaser furnished in writing by the Initial Purchaser for inclusion therein (or for a breach by the Initial Purchaser of any representation or warranty contained in this Agreement). Holding and the Issuer and, after the Effective Time, the Surviving Company further agree that the indemnification, contribution and reimbursement commitments set forth in this Article VII shall apply whether or not the Initial Purchaser is a formal party to any such lawsuits, claims or other proceedings. The indemnity, contribution and expense reimbursement obligations of Holding and the Issuer under this Article VII shall be in addition to any liability Holding and the Issuer may otherwise have. (b) INDEMNIFICATION BY THE INITIAL PURCHASER. The Initial Purchaser agrees and covenants to hold harmless and indemnify Holding and the Issuer and, after the Effective Time, the Surviving Company and any Affiliates thereof (including any director, officer, employee, agent or controlling Person of any of the foregoing) from and against any losses, claims, damages, liabilities and expenses insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement of any material fact contained in the Offering Materials, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with the information relating to the Initial Purchaser furnished in writing by the Initial Purchaser for inclusion therein. The indemnity, contribution and expense reimbursement obligations of the Initial Purchaser under this Article VII shall be in addition to any liability the Initial Purchaser may otherwise have. (c) PROCEDURE. If any Person shall be entitled to indemnity hereunder (each an "INDEMNIFIED PARTY"), such Indemnified Party shall give prompt written notice to the party or parties from which such indemnity is sought (each an "Indemnifying Party") of the commencement of any action, suit, investigation or proceeding, governmental or otherwise (a "PROCEEDING"), with respect to which such Indemnified Party seeks indemnification or contribution pursuant hereto; PROVIDED, HOWEVER, that the failure so to notify the Indemnifying Parties shall not relieve the Indemnifying Parties from any 39 -36- obligation or liability except to the extent that the Indemnifying Parties have been prejudiced materially by such failure. The Indemnifying Parties shall have the right, exercisable by giving written notice to an Indemnified Party promptly after the receipt of written notice from such Indemnified Party of such Proceeding, to assume, at the Indemnifying Parties' expense, the defense of any such Proceeding, with counsel reasonably satisfactory to such Indemnified Party; PROVIDED, HOWEVER, that an Indemnified Party or parties (if more than one such Indemnified Party is named in any Proceeding) shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or parties unless: (1) the Indemnifying Parties agree to pay such fees and expenses; or (2) the Indemnifying Parties fail promptly to assume the defense of such Proceeding or fail to employ counsel reasonably satisfactory to such Indemnified Party or parties; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party or parties and the Indemnifying Party or an Affiliate of the Indemnifying Party and such Indemnified Parties, and the Indemnified Parties shall have been advised in writing by counsel that there may be one or more legal defenses available to such Indemnified Party or parties that are different from or additional to those available to the Indemnifying Parties, in which case, if such Indemnified Party or parties notifies the Indemnifying Parties in writing that it elects to employ separate counsel at the expense of the Indemnifying Parties, the Indemnifying Parties shall not have the right to assume the defense thereof with respect to the Indemnified Parties and such counsel shall be at the expense of the Indemnifying Parties, it being understood, however, that the Indemnifying Parties shall not, in connection with any one such Proceeding or separate but substantially similar or related Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such Indemnified Party or parties, or for fees and expenses that are not reasonable. No Indemnified Party or Parties will settle any Proceeding without the consent of the Indemnifying Party or parties (but such consent shall not be unreasonably withheld). No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened Proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional 40 -37- release of such Indemnified Party from all liability or claims that are the subject of such Proceeding. Section 7.2. CONTRIBUTION. If for any reason the indemnification provided for in Section 7.1 of this Agreement is unavailable to an Indemnified Party, or insufficient to hold it harmless, in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other, but also the relative fault of the Indemnifying and Indemnified Parties in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Indemnifying and Indemnified Parties shall be deemed to be in the same proportion as the total proceeds from the offering of the Securities (before deducting expenses, but after giving effect to the Initial Purchaser's discount) received by the Issuer bear to the total discounts and commissions received by the Initial Purchaser. The relative fault of the Indemnifying and Indemnified Parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying or Indemnified Parties and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees or expenses incurred by such party in connection with investigating or defending any such claim. Holding and the Issuer and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to the immediately preceding paragraph were determined pro rata or per capita or by any other method of allocation which does not take into account the equitable considerations referred to in such paragraph. Notwithstanding any other provision of this Section 7.2, the Initial Purchaser shall not be obligated to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by the Initial Purchaser under this Agreement, less 41 -38- the aggregate amount of any damages that the Initial Purchaser has otherwise been required to pay by reason of the untrue or alleged untrue statements or a breach of a representation or warranty or the omissions or alleged omissions to state a material fact. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Section 7.3. REGISTRATION RIGHTS AGREEMENTS. Notwithstanding anything to the contrary in this Article VII, the indemnification and contribution provisions of the Registration Rights Agreement and the Common Stock Registration Rights Agreements shall govern any claim with respect thereto. ARTICLE VIII MISCELLANEOUS ------------- Section 8.1. SURVIVAL OF PROVISIONS. The representations, warranties and covenants of Holding and the Issuer, their respective officers and the Initial Purchaser made herein, the indemnity and contribution agreements contained herein and each of the provisions of Articles VI, VII and VIII shall remain operative and in full force and effect regardless of (a) the investigation made by or on behalf of Holding, the Issuer and, after the Effective Time, the Surviving Company, the Initial Purchaser or any Indemnified Party, (b) acceptance of any of the Securities and payment therefor, (c) any termination of this Agreement or (d) disposition of the Securities by the Initial Purchaser whether by redemption, exchange, sale or otherwise. Section 8.2. TERMINATION. (a) This Agreement may be terminated in the sole discretion of the Initial Purchaser by notice to Holding and the Issuer given prior to the Time of Purchase in the event that Holding or the Issuer shall have failed, refused or been unable to perform in all material respects all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior thereto or, in the event at or prior to the Closing: (i) any Glasstech Entity or any of Glasstech's Subsidiaries shall have sustained any loss or interference with respect to its businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any strike, labor dis- 42 -39- pute, slow down or work stoppage or any legal or governmental proceeding, which loss or interference, in the sole judgment of the Initial Purchaser, has had or has a Material Adverse Effect, or there shall have been, in the sole judgment of the Initial Purchaser, any event or development that, individually or in the aggregate, has or could be reasonably likely to have a Material Adverse Effect (including without limitation a change in control of any of the Glasstech Entities or any of Glasstech's Subsidiaries), except in each case as described in the Final Memorandum (exclusive of any amendment or supplement thereto); (ii) trading in securities generally on the New York Stock Exchange, American Stock Exchange or the Nasdaq National Market shall have been suspended or minimum or maximum prices shall have been established on any such exchange or market; (iii) a banking moratorium shall have been declared by New York or United States authorities; (iv) there shall have been (A) an outbreak or escalation of hostilities between the United States and any foreign power, or (B) an outbreak or escalation of any other insurrection or armed conflict involving the United States or any other national or international calamity or emergency, or (C) any material change in the financial markets of the United States which, in the case of (A), (B) or (C) above and in the sole judgment of the Initial Purchaser, makes it impracticable or inadvisable to proceed with the offering or the delivery of the Securities as contemplated by the Final Memorandum; or (v) any securities of any of the Glasstech Entities shall have been downgraded or placed on any "watch list" for possible downgrading by any nationally recognized statistical rating organization. (b) Termination of this Agreement pursuant to this Section 8.2 shall be without liability of any party to any other party except as provided in Section 8.1 hereof. Section 8.3. NO WAIVER; MODIFICATIONS IN WRITING. No failure or delay on the part of the Initial Purchaser, Holding or the Issuer and, after the Effective Time, the Surviving Company in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy pre- 43 -40- clude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Initial Purchaser, Holding or the Issuer and, after the Effective Time, the Surviving Company at law or in equity or otherwise. No waiver of or consent to any departure by the Initial Purchaser, Holding or the Issuer and, after the Effective Time, the Surviving Company from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof, PROVIDED that notice of any such waiver shall be given to each party hereto as set forth below. Except as otherwise provided herein, no amendment, modification or termination of any provision of this Agreement shall be effective unless signed in writing by or on behalf of each of the Initial Purchaser, Holding, and the Issuer and, after the Effective Time, the Surviving Company. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Initial Purchaser, Holding or the Issuer and, after the Effective Time, the Surviving Company from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on Holding or the Issuer and, after the Effective Time, the Surviving Company in any case shall entitle Holding or the Issuer and, after the Effective Time, the Surviving Company to any other or further notice or demand in similar or other circumstances. Section 8.4. INFORMATION SUPPLIED BY THE INITIAL PURCHASER. The statements set forth in the fourth and fifth sentences of the third paragraph and in the seventh and eighth paragraph under the heading "Plan of Distribution" in the Final Memorandum (to the extent such statements relate to the Initial Purchaser) constitute the only information furnished by the Initial Purchaser to Holding and the Issuer for the purposes of Sections 3.1(a) and 7.1(a) and (b) hereof. Section 8.5. COMMUNICATIONS. All notices, demands and other communications provided for hereunder shall be in writing, and, (a) if to the Initial Purchaser, shall be given by registered or certified mail, return receipt requested, telex, telegram, telecopy, courier service or personal delivery, addressed to CIBC Wood Gundy Securities Corp., 425 Lexington Avenue, 3rd Floor, New York, New York 10017, Attention: Mark Dalton, with a copy to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention: Roger Meltzer, 44 -41- Esq., and (b) if to Holding and/or the Issuer and, after the Effective Time, the Surviving Company, shall be given by similar means to Glasstech, Inc., Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551, Attention: President, with a copy to Baker & Hostetler LLP, 3200 National City Center, 1900 East Ninth Street, Cleveland, Ohio 44114-3485, Attention: William Appleton, Esq. In each case notices, demands and other communications shall be deemed given when received. Section 8.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 8.7. SUCCESSORS. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser, Holding, the Issuer and, after the Effective Time, the Surviving Company and their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other Person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained; this Agreement and all conditions and provisions hereof being intended of this Agreement, or any provisions herein contained; this to be and being for the sole and exclusive benefit of such Persons and for the benefit of no other Person except that (i) the indemnities of Holding, the Issuer and, after the Effective Time, the Surviving Company contained in Section 7.1(a) of this Agreement shall also be for the benefit of the directors, officers, employees and agents of the Initial Purchaser and any Person or Persons who control the Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchaser contained in Section 7.1(b) of this Agreement shall also be for the benefit of the respective directors of Holding and the Issuer and, after the Effective Time, the Surviving Company, their respective officers, employees and agents and any Person or Persons who control Holding or the Issuer and, after the Effective Time, the Surviving Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Securities from the Initial Purchaser will be deemed a successor because of such purchase. 45 -42- Section 8.8. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Section 8.9. SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 8.10. HEADINGS. The Article and Section headings and Table of Contents used or contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. 46 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. GLASSTECH HOLDING CO. By: /s/ Mark D. Christman -------------------------------- Name: Mark D. Christman Title: President GLASSTECH SUB CO. By: /s/ Mark D. Christman -------------------------------- Name: Mark D. Christman Title: President CIBC WOOD GUNDY SECURITIES CORP. By: /s/ Mark Dalton ----------------------------- Name: Mark Dalton Title: Managing Director 47 Exhibit 1 [FORM OF OPINION OF BAKER & HOSTETLER] 1 1. Each of the Glasstech Entities and Glasstech's Subsidiaries is and, after giving effect to the Merger, the Surviving Company and its Subsidiaries will be duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all requisite corporate power and authority to own its properties and to conduct its business as described in the Final Memorandum. Each of the Glasstech Entities and Glasstech's Subsidiaries is and, after giving effect to the Merger, the Surviving Company and its Subsidiaries, will be duly qualified to do business as a foreign corporation in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. 2. Glasstech has and, after giving effect to the Merger, the Surviving Company will have the authorized, issued and outstanding capitalization set forth in the Final Memorandum; all of the outstanding shares of capital stock of Glasstech and Glasstech's Subsidiaries have and, after giving effect to the Merger, the Surviving Company will have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights; except as set forth in the Final Memorandum, all of the outstanding shares of capital stock of Glasstech's Subsidiaries are owned, directly or indirectly, by Glasstech and, after giving effect to the Merger, all of the outstanding shares of capital stock of the Surviving Company's Subsidiaries will be owned, directly or indirectly, by the Surviving Company, in each case free and clear of all perfected security interests and, to the knowledge of such counsel, free and clear of all other liens, encumbrances, equities and _________________________ 1 Optionally, sections of this opinion can be provided by Kenneth Wetmore, General Counsel of the Company. 48 -2- claims or restrictions on transferability (other than those imposed by the Act and the securities or "Blue Sky" laws of certain jurisdictions) or voting. 3. Except as set forth in the Final Memorandum, (A) no options, warrants or other rights to purchase from Glasstech or any of its Subsidiaries shares of capital stock or ownership interests in Glasstech or any of its Subsidiaries are outstanding, (B) no agreements or other obligations to issue, or other rights to convert, any obligation into, or exchange any securities for, shares of capital stock or ownership interests in Glasstech or any of its Subsidiaries are outstanding and (C) no holder of securities of Glasstech or any of its Subsidiaries is entitled to have such securities registered under a registration statement filed by the Surviving Company pursuant to the Registration Rights Agreement. 4. The Issuer has all requisite corporate power and authority to execute, deliver and perform each of its obligations under the Indenture, the Notes, the Exchange Notes and the Private Exchange Notes; the Indenture meets the requirements for qualification under the TIA; the Indenture has been duly and validly authorized by the Issuer and, when duly executed and delivered by the Issuer (assuming the due authorization, execution and delivery thereof by the Trustee), will constitute the valid and legally binding agreement of the Issuer in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. 5. Upon consummation of the Merger, the Surviving Company will have all requisite corporate power and authority to execute, deliver and perform each of its obligations under the Indenture, the Supplemental Indenture, the Notes, the Exchange Notes and the Private Exchange Notes; the Supplemental Indenture has been duly and validly authorized by the Issuer and Glasstech and, when duly executed and delivered by the Surviving Company (assuming the due authorization, execution and delivery thereof by the Trustee), will constitute the valid and legally binding agreement of the Surviving Company, enforceable against the Surviving Company, in accordance with its terms, except that the enforcement thereof may be subject to (i) bank- 49 -3- ruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. 6. The Notes are in the form contemplated by the Indenture. The Notes have each been duly and validly authorized by the Issuer and, when duly executed and delivered by the Issuer and paid for by the Initial Purchaser in accordance with the terms of the Purchase Agreement (assuming the due authorization, execution and delivery of the Indenture by the Trustee and due authentication and delivery of the Notes by the Trustee in accordance with the Indenture), will constitute the valid and legally binding obligations of the Issuer and, upon consummation of the Merger, the Surviving Company, entitled to the benefits of the Indenture, as amended by the Supplemental Indenture, and enforceable against the Issuer and, upon consummation of the Merger, the Surviving Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. 7. The Exchange Notes and the Private Exchange Notes have been duly and validly authorized by the Issuer and Glasstech and, when the Exchange Notes and the Private Exchange Notes have been duly executed and delivered by the Surviving Company in accordance with the terms of the Registration Rights Agreement and the Indenture, as amended by the Supplemental Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee and due authentication and delivery of the Exchange Notes and the Private Exchange Notes by the Trustee in accordance with the Indenture, as amended by the Supplemental Indenture), will constitute the valid and legally binding obligations of the Surviving Company, entitled to the benefits of the Indenture, as amended by the Supplemental Indenture, and enforceable against the Surviving Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the 50 -4- discretion of the court before which any proceeding therefor may be brought. 8. The Surviving Company will have all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement; the Registration Rights Agreement has been duly and validly authorized by the Issuer and Glasstech and, when duly executed and delivered by the Surviving Company (assuming due authorization, execution and delivery thereof by the Initial Purchaser), will constitute the valid and legally binding agreement of the Surviving Company, enforceable against the Surviving Company in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (B) the enforcement of provisions imposing liquidating damages, penalties or an increase in interest rate upon the occurrence of a default may be limited in certain circumstances and (C) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. 9. The Issuer has all requisite corporate power and authority to execute, deliver and perform its obligations under the Purchase Agreement and to consummate the transactions contemplated thereby; after giving effect to the Merger, the Surviving Company will have all requisite corporate power and authority to perform its obligations under the Purchase Agreement and to consummate the transactions contemplated thereby; the Purchase Agreement and the consummation by the Glasstech Entities and the Surviving Company of the Transactions have been duly and validly authorized by each of the Glasstech Entities, and, when duly executed and delivered by the Issuer (assuming due authorization, execution and delivery thereof by the Initial Purchaser), will constitute the valid and legally binding agreement of the Issuer, and upon consummation of the Merger, the Surviving Company, enforceable against the Issuer, and upon consummation of the Merger, the Surviving Company in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discre- 51 -5- tion of the court before which any proceeding therefor may be brought and (B) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. 10. The Indenture, the Supplemental Indenture, the Notes and the Registration Rights Agreement conform in all material respects to the descriptions thereof contained in the Final Memorandum. 11. No legal or governmental proceedings are pending or, to the knowledge of such counsel, threatened to which any of the Glasstech Entities or Glasstech's Subsidiaries is a party or to which the property or assets of any of the Glasstech Entities or any of Glasstech's Subsidiaries is or, after giving effect to the Merger, the Surviving Company or any of its Subsidiaries will be subject which, if determined adversely to such party, would result, individually or in the aggregate, in a Material Adverse Effect, or which seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Notes to be sold hereunder or the consummation of the other Transactions. 12. None of Glasstech or its Subsidiaries is or, after giving effect to the Merger, none of the Surviving Company or its Subsidiaries will be (i) in violation of its certificate of incorporation or bylaws (or similar organizational document), (ii) to the knowledge of such counsel, in breach or violation of any statute, judgment, decree, order, rule or regulation applicable to any of them or any of their respective properties or assets, except for any such breach or violation which would not, individually or in the aggregate, have a Material Adverse Effect, or (iii) in breach or default under (nor has any event occurred which, with notice or passage of time or both, would constitute a default under) or in violation of any of the terms or provisions of any contract known to such counsel, except for any such breach, default, violation or event which would not, individually or in the aggregate, have a Material Adverse Effect. 13. The execution, delivery and performance of the Purchase Agreement, the Indenture, the Supplemental Indenture, the Registration Rights Agreement and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Notes to the Initial Purchaser) will not conflict with or consti- 52 -6- tute or result in a breach or a default under (or an event which with notice or passage of time or both would constitute a default under) or violation of any of (i) the terms or provisions of all other agreements and instruments to be executed and delivered by the Glasstech Entities or, upon consummation of the Merger, of the Surviving Company known to such counsel, except for any such conflict, breach, violation, default or event which would not, individually or in the aggregate, have a Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or similar organizational document) of the Glasstech Entities or any of Glasstech's Subsidiaries or, upon consummation of the Merger, of the Surviving Company or its Subsidiaries, or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws) any statute, judgment, decree, order, rule or regulation known to such counsel to be applicable to the Glasstech Entities or any of Glasstech Subsidiaries or, upon consummation of the Merger, of the Surviving Company or its Subsidiaries or any of their respective properties or assets, except for any such conflict, breach or violation which would not, individually or in the aggregate, have a Material Adverse Effect. 14. No consent, approval, authorization or order of any governmental authority is required for (i) the issuance and sale by the Issuer of the Notes to the Initial Purchasers or the consummation by the Company of the other transactions contemplated hereby or (ii) the consummation by the Issuer of the transactions contemplated by the RevolvingCredit Facility, except such as may be required under Blue Sky laws, as to which such counsel need express no opinion, and those which have previously been obtained. 15. Glasstech and its Subsidiaries and, upon consummation of the Merger, the Surviving Company and its Subsidiaries will own or possess the Intellectual Property Rights necessary to conduct the businesses now or proposed to be operated by them as described in the Final Memorandum, and none of the Glasstech Entities or Glasstech's Subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights which, if such assertion of infringement or conflict were sustained, would have a Material Adverse Effect. 16. To the knowledge of such counsel, there are no legal or governmental proceedings involving or affecting the 53 -7- Glasstech Entities or Glasstech's Subsidiaries or any of their respective properties or assets which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum, nor are there any material contracts or other documents which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum. 17. The Issuer is not and, immediately after the sale of the Notes to be sold hereunder and the application of the proceeds from such sale (as described in the Final Memorandum under the caption "Use of Proceeds"), the Surviving Company will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. 18. No registration under the Act of the Notes is required in connection with the sale of the Notes to the Initial Purchaser as contemplated by the Purchase Agreement and the Final Memorandum or in connection with the initial resale of the Notes by the Initial Purchaser in accordance with Section 3.2 of the Purchase Agreement, and prior to the commencement of the Exchange Offer (as defined in the Registration Rights Agreement) or the effectiveness of the Shelf Registration Statement (as defined in the Registration Rights Agreement), the Indenture is not required to be qualified under the TIA, in each case assuming (A) that the purchasers who buy such Notes in the initial resale thereof are qualified institutional buyers as defined in Rule 144A promulgated under the Act ("QIBs") or accredited investors as defined in Rule 501(a) (1), (2), (3) or (7) promulgated under the Act ("Accredited Investors") or (B) that the offer or sale of the Notes is made in an offshore transaction as defined in Regulation S. 19. Neither the consummation of the transactions contemplated by the Purchase Agreement nor the sale, issuance, execution or delivery of the Notes will violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 20. At the time the foregoing opinion is delivered, such counsel shall additionally state that it has participated in conferences with officers and other representatives of the Glasstech Entities, representatives of the independent public accountants for the Glasstech Entities, representatives of the Initial Purchaser and counsel for the Initial Purchaser, at which conferences the contents of the Final Memorandum and related matters were discussed, and, al- 54 -8- though it has not independently verified and is not passing upon and assumes no responsibility for the accuracy, completeness or fairness of the statements contained in the Final Memorandum (except to the extent specified in paragraph 6), no facts have come to its attention which lead it to believe that the Final Memorandum, on the date thereof or at the Time of Purchase, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading (it being understood that such firm need express no opinion with respect to the financial statements and related notes thereto and the other financial, statistical and accounting data included in the Final Memorandum). The opinion of such counsel described on this Exhibit 1 shall be rendered to the Initial Purchaser at the request of the Glasstech Entities and shall so state therein. References to the Final Memorandum in this Exhibit 1 shall include any amendment or supplement thereto prepared in accordance with the provisions of the Purchase Agreement at the Time of Purchase. 55 EXHIBIT 2 [FORM OF OPINION OF CAHILL GORDON & REINDEL] 1. The Purchase Agreement has been duly authorized, executed and delivered by the Issuer and constitutes a legal, valid and binding agreement of the Issuer and, upon consummation of the Merger, will constitute a legal, valid and binding agreement of the Surviving Company, enforceable against the Issuer and, upon consummation of the Merger, against the Surviving Company in accordance with its terms, except that (A) the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect affecting creditors' rights generally and by general principles of equity and discretion of the court before which any proceedings therefor may be brought and (B) rights to indemnification and contribution may be limited by federal or state securities laws or public policy considerations with respect thereto. 2. The Registration Rights Agreement has been duly authorized, executed and delivered by the Issuer and constitutes a legal, valid and binding agreement of the Issuer and, upon consummation of the Merger, will constitute a legal, valid and binding agreement of the Surviving Company, enforceable against the Issuer and, upon consummation of the Merger, against the Surviving Company in accordance with its terms, except that (A) the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect affecting creditors' rights generally and by general principles of equity and discretion of the court before which any proceedings therefor may be brought, (B) the enforceability of provisions imposing liquidated damages, penalties or an increase in interest rate upon the occurrence of a default may be limited in certain circumstances and (C) rights to indemnification and contribution may be limited by federal or state securities laws or public policy considerations with respect thereto. 3. The Indenture has been duly authorized, executed and delivered by the Issuer and, assuming the due authorization, execution and delivery thereof by the Trustee is a legal, valid and binding agreement of the Issuer, enforceable against the Issuer in accordance with its terms, except that the enforceability thereof may be subject to bankruptcy, insolvency, 56 -2- reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect affecting creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. 4. The Supplemental Indenture has been duly authorized by the Issuer and Glasstech and when executed and delivered by the Surviving Company and, assuming the due authorization, execution and delivery thereof by the Trustee is a legal, valid and binding agreement of the Surviving Company, enforceable against the Surviving Company in accordance with its terms, except that the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect affecting creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. 5. The Notes have been duly authorized, executed and delivered by the Issuer and, assuming due authentication of the Notes by the Trustee in accordance with the terms of the Indenture, are legal, valid and binding obligations of the Issuer and, upon consummation of the Merger, the Surviving Company, entitled to the benefits of the Indenture, as amended by the Supplemental Indenture, and enforceable against the Issuer and, upon consummation of the Merger, the Surviving Company in accordance with their terms, except that the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect affecting creditors' rights generally and by general principles of equity and the discretion of the court before which any proceedings therefor may be brought. 6. Assuming, without independent investigation, (a) that the Notes are sold to the Initial Purchaser, and initially resold by the Initial Purchaser, in accordance with the terms of, and in the manner contemplated by, the Purchase Agreement and the Offering Memorandum, (b) the accuracy of the representations and warranties of the Glasstech Entities set forth in the Purchase Agreement and in the certificates delivered by officers of the Glasstech Entities pursuant to the Purchase Agreement, (c) the accuracy of the Initial Purchaser's representations and warranties set forth in the Purchase Agreement, (d) the due performance by the Issuer of the covenants and agreements set forth in the Purchaser Agreement and the due performance by the Initial Purchaser of the covenants and agreements set forth in the Purchase Agreement, (e) the Initial 57 -3- Purchaser's compliance with the offering and transfer procedures and restrictions described in the Offering Memorandum, (f) the accuracy of the representations and warranties deemed to be made pursuant to the Offering Memorandum by purchasers to whom the Initial Purchaser initially resells the Notes and (g) that each purchaser to whom the Initial Purchaser initially resells Notes receives a copy of the Offering Memorandum prior to such sale, it is not necessary in connection with the issuance and sale to you of the Notes by the Issuer under the circumstances contemplated by the Purchase Agreement or in connection with the initial resale of the Notes by the Initial Purchaser in accordance with the offering and transfer procedures and restrictions described in the Offering Memorandum and in the Purchase Agreement, to register any of the Notes under the Securities Act of 1933, as amended, or to qualify the Indenture under the Trust Indenture Act of 1939, as amended, it being understood that no opinion is expressed as to any subsequent resale of the Notes. 7. The Notes, the Indenture and the Supplemental Indenture conform in all material respect to the descriptions thereof in the Offering Memorandum under the caption "Description of the Notes." 58 EXHIBIT 3 [FORM OF OPINION OF BROOKS & KUSHMAN] 1. To the best of such counsel's knowledge, all patents, trademarks and service marks (registered or unregistered), and trade names, including pending applications for any of the foregoing, that are owned, licensed or used by Glasstech or any of its Subsidiaries in the United States or abroad, are listed on Schedule A attached to such counsel's opinion (the "Intellectual Property"; Intellectual Property licensed or registered abroad the "Foreign Intellectual Property." Intellectual Property other than Foreign Intellectual Property the "Domestic Intellectual Property."). 2. Except as disclosed in the Offering Memorandum, Glasstech is the sole and exclusive owner of all right, title and interest in and to the Domestic Intellectual Property free and clear of all liens, claims, charges, rights of use, encumbrances, and restrictions whatsoever and to the best knowledge of such counsel, Glasstech is the sole and exclusive owner of all right, title and interest in and to the Foreign Intellectual Property free and clear of all liens, claims, charges, rights of use, encumbrances, and restrictions whatsoever (in all cases without payment to any other person or entity, except as set forth in any sales contract in the ordinary course of business, and except for maintenance fees payable to governmental entities in the ordinary course of business). 3. Except as disclosed in the Final Memorandum, to the best of such counsel's knowledge, the business of Glasstech or any of its Subsidiaries, as conducted prior to the Time of Purchase, and the consummation of the Offering and the other Transactions was not, is not, and will not be in contravention of any patent, trademark, service mark, trade name, copyright, or other proprietary right of any third party. 4. Except as disclosed in the Final Memorandum, to the best of such counsel's knowledge, the Intellectual Property rights are not infringed by any person or other entity. 5. To the best of such counsel's knowledge, no product, process method or operation presently sold, engaged in or em- 59 -2- ployed by Glasstech or any of its Subsidiaries infringes upon any rights owned by any other person, firm, corporation or other legal entity. 6. Such statements in the Final Memorandum as counsel shall have reasonably determined relate to Intellectual Property rights, insofar as such statements constitute summaries of matters of law, are accurate and complete statements or summaries of such matters of law set forth therein. References to the Final Memorandum in this Exhibit 2 shall include any amendment or supplement thereto prepared in accordance with the provisions of the Purchase Agreement at the Time of Purchase. EX-10.14 22 EXHIBIT 10.14 1 EXHIBIT 10.14 REGISTRATION RIGHTS AGREEMENT Dated as of July 2, 1997 by and between GLASSTECH SUB CO. and CIBC WOOD GUNDY SECURITIES CORP., as Initial Purchaser 2 TABLE OF CONTENTS -----------------
PAGE ---- 1. Definitions............................................................................... 1 2. Exchange Offer............................................................................ 5 3. Shelf Registration........................................................................ 9 (a) Initial Shelf Registration.......................................................... 9 (b) Subsequent Shelf Registrations...................................................... 10 (c) Supplements and Amendments.......................................................... 10 4. Additional Interest....................................................................... 10 5. Registration Procedures................................................................... 12 6. Registration Expenses..................................................................... 23 7. Indemnification........................................................................... 24 8. Rules 144 and 144A........................................................................ 28 9. Underwritten Registrations................................................................ 28 10. Miscellaneous............................................................................. 29 (a) Remedies............................................................................ 29 (b) Enforcement......................................................................... 29 (c) No Inconsistent Agreements.......................................................... 29 (d) Adjustments Affecting Registrable Notes............................................. 29 (e) Amendments and Waivers.............................................................. 29 (f) Notices............................................................................. 30 (g) Successors and Assigns.............................................................. 31 (h) Counterparts........................................................................ 31 (i) Headings............................................................................ 31 (j) Governing Law....................................................................... 31 (k) Severability........................................................................ 31 (l) Entire Agreement.................................................................... 31 (m) Notes Held by the Company or Its Affiliates......................................... 31
-i- 3 REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") dated as of July 2, 1997, by and between GLASSTECH SUB CO., a Delaware corporation (the "ISSUER"), and CIBC WOOD GUNDY SECURITIES CORP., as initial purchaser (the "INITIAL PURCHASER"). This Agreement is entered into in connection with the Securities Purchase Agreement, dated as of June 27, 1997, by and among Glasstech Holding Co., a Delaware corporation ("HOLDING"), the Issuer and the Initial Purchaser (the "PURCHASE AGREEMENT") relating to the sale by Holding and the Issuer to the Initial Purchaser of 70,000 units (the "UNITS") consisting of $70,000,000 aggregate principal amount of 12 3/4% Senior Notes due 2004 of the Issuer (the "NOTES") and Warrants to purchase 877.21 shares of Class A Common Stock, par value $0.01 per share, of Holding (the "WARRANTS" and, together with the Units and the Notes, the "SECURITIES"). Upon completion of the sale of the Notes, the Issuer will be merged (the "MERGER") into Glasstech, Inc., a Delaware corporation ("GLASSTECH", and Glasstech shall become the surviving corporation (the "SURVIVING COMPANY") and obligor on the Notes. Upon consummation of the Merger, the Surviving Company shall assume each and every covenant, agreement and undertaking of the Issuer in this Agreement. In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Company (as defined herein) has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchaser. The execution and delivery of this Agreement is a condition to the Initial Purchaser's obligation to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: 1. DEFINITIONS ----------- As used in this Agreement, the following terms shall have the following meanings: ADDITIONAL INTEREST: See Section 4(a). ADVICE: See Section 5. APPLICABLE PERIOD: See Section 2(b). CLOSING: See the Purchase Agreement. 4 -2- COMPANY: Prior to the effective time of the Merger, the Issuer and, at and subsequent to the effective time of the Merger, the Surviving Company. EFFECTIVENESS DATE: The 150th day after the Issue Date. EFFECTIVENESS PERIOD: See Section 3(a). EVENT DATE: See Section 4(b). EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE NOTES: See Section 2(a). EXCHANGE OFFER: See Section 2(a). EXCHANGE REGISTRATION STATEMENT: See Section 2(a). FILING DATE: The 60th day after the Issue Date. HOLDER: Any holder of a Registrable Note or Registrable Notes. INDEMNIFIED PERSON: See Section 7(c). INDEMNIFYING PERSON: See Section 7(c). INDENTURE: The Indenture, dated as of July 2, 1997, by and between the Issuer and United States Trust Company of New York, as trustee, pursuant to which the Notes are being issued, as supplemented by the Supplemental Indenture and as further amended or supplemented from time to time in accordance with the terms thereof. INITIAL PURCHASER: See the introductory paragraph to this Agreement. INITIAL SHELF REGISTRATION: See Section 3(a). INSPECTORS: See Section 5(o). ISSUE DATE: The date on which the original Notes are sold to the Initial Purchaser pursuant to the Purchase Agreement. 5 -3- ISSUER: See the introductory paragraph to this Agreement. LIEN: See the Indenture. MERGER: See the introductory paragraphs to this Agreement. NASD: See Section 5(t). NOTES: See the introductory paragraphs to this Agreement. PARTICIPANT: See Section 7(a). PARTICIPATING BROKER-DEALER: See Section 2(b). PERSON: An individual, corporation, partnership, joint VENTURE, association, joint stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof). PRIVATE EXCHANGE: See Section 2(b). PRIVATE EXCHANGE NOTES: See Section 2(b). PROSPECTUS: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. PURCHASE AGREEMENT: See the introductory paragraphs to this Agreement. RECORDS: See Section 5(o). REGISTRABLE NOTES: The Notes upon original issuance of the Notes and at all times subsequent thereto and, if issued, the Private Exchange Notes, until in the case of any such Notes or any such Private Exchange Notes, as the case may be, 6 -4- (i) a Registration Statement covering such Notes or such Private Exchange Notes has been declared effective by the SEC and such Notes or such Private Exchange Notes, as the case may be, have been disposed of in accordance with such effective Registration Statement, (ii) such Notes or such Private Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii) in the case of any Note, the Exchange Offer has been consummated, (iv) such Notes or such Private Exchange Notes, as the case may be, cease to be outstanding or (v) two years have passed from the Issue Date. REGISTRATION DEFAULT: See Section 4(a). REGISTRATION STATEMENT: Any registration statement of the Company, including, but not limited to, the Exchange Registration Statement, which covers any of the Registrable Notes pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted BY the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. RULE 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. SECURITIES: See the introductory paragraph to this Agreement. 7 -5- SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. SHELF NOTICE: See Section 2(c). SHELF REGISTRATION: See Section 3(b). SUBSEQUENT SHELF REGISTRATION: See Section 3(b). SUPPLEMENTAL INDENTURE: The Supplemental Indenture dated July 2, 1997 by and between the Surviving Company and the Trustee pursuant to which the Surviving Company assumes the obligations of the Issuer under the Indenture and the Notes. SURVIVING COMPANY: See the introductory paragraphs to this Agreement. TIA: The Trust Indenture Act of 1939, as amended. TRUSTEE: The trustee under the Indenture and, if existent, the trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any). UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter(s) for reoffering to the public. UNITS: See the introductory paragraphs to this Agreement. WARRANTS: See the introductory paragraphs to this Agreement. 2. EXCHANGE OFFER -------------- (a) The Company agrees to use its best efforts to file with the SEC as soon as practicable after the Closing, but in no event later than the Filing Date, an offer to exchange (the "EXCHANGE OFFER") any and all of the Notes for a like aggregate principal amount of debt securities of the Company which are identical to the Notes (the "EXCHANGE NOTES") (and which are entitled to the benefits of the Indenture or a trust indenture which is substantially identical to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA) and which, in either case, has been 8 -6- qualified under the TIA), except that the Exchange Notes shall have been registered pursuant to an effective Registration Statement under the Securities Act. The Exchange Offer will be registered under the Securities Act on an appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Company agrees to use its best efforts to (x) cause the Exchange Registration Statement to become effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 60th day following the date on which the Exchange Registration Statement is declared effective. Each Holder who participates in the Exchange Offer will be required to represent that any Exchange Notes received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, and that such Holder is not an affiliate of the Company within the meaning of Rule 405 promulgated under the Securities Act or if it is such an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act, to the extent applicable. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, MUTATIS MUTANDIS, solely with respect to Registrable Notes that are Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers (as defined below), and the Company shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers) pursuant to Section 3 of this Agreement. (b) The Company shall include within the Prospectus contained in the Exchange Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchaser, which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Initial Purchaser, represent the prevailing views of the staff of the SEC. Such "Plan of Distribution" section shall also al- 9 -7- low the use of the Prospectus by all persons subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes. The Company shall use its best efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes, PROVIDED that such period shall not exceed 180 days (or such longer period if extended pursuant to the last paragraph of Section 5) after the date of the consummation of the Exchange Offer (the "APPLICABLE PERIOD"). If, prior to consummation of the Exchange Offer, the Initial Purchaser holds any Notes acquired by it and having, or which are reasonably likely to be determined to have, the status as an unsold allotment in the initial distribution, the Company upon the request of the Initial Purchaser shall, simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to the Initial Purchaser, in exchange (the "PRIVATE EXCHANGE") for the Notes held by such Initial Purchaser, a like principal amount of debt securities of the Company that are identical in all material respects to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and which are issued pursuant to the same indenture as the Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and any Private Exchange Notes will accrue from (A) the later of (i) the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or (ii) if the Notes are surrendered for exchange on a date in a period which includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (B), if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, 10 -8- together with an appropriate letter of transmittal and related documents; (ii) utilize the services of a depository for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; and (iii) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall: (i) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; (ii) deliver to the Trustee for cancellation all Notes so accepted for exchange; and (iii) cause the Trustee to authenticate and deliver promptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Exchange Notes and the Private Exchange Notes may be issued under (i) the Indenture or (ii) an indenture substantially identical to the Indenture, which in either event will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that the Exchange Notes, the Private Exchange Notes and the Notes will vote and consent together on all matters as one class and that neither the Exchange Notes, the Private Exchange Notes nor the Notes will have the right to vote or consent as a separate class on any matter. (c) If (1) prior to the consummation of the Exchange Offer, the Company or Holders of at least a majority in aggregate principal amount of the Registrable Notes reasonably determine in good faith that (i) the Exchange Notes would not, upon receipt, be tradeable by such Holders which are not affiliates (within the meaning of the Securities Act) of the Company without restriction under the Securities Act and without restrictions under applicable state securities laws, (ii) the 11 -9- interests of the Holders under this Agreement would be adversely affected by the consummation of the Exchange Offer or (iii) after conferring with counsel, the SEC is unlikely to permit the consummation of the Exchange Offer prior to 60 days after the Effectiveness Date, (2) subsequent to the consummation of the Private Exchange, any holder of the Private Exchange Notes so requests, or (3) the Exchange Offer is commenced and not consummated within 210 days of the date of this Agreement, then the Company shall promptly deliver to the Holders and the Trustee written notice thereof (the "SHELF NOTICE") and shall file an Initial Shelf Registration pursuant to Section 3. Following the delivery of a Shelf Notice to the Holders of Registrable Notes (in the circumstances contemplated by clauses (1) and (3) of the preceding sentence), the Company shall not have any further obligation to conduct the Exchange Offer or the Private Exchange under this Section 2. 3. SHELF REGISTRATION ------------------ If a Shelf Notice is delivered as contemplated by Section 2(c), then: (a) INITIAL SHELF REGISTRATION. The Company shall prepare and file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the "INITIAL SHELF REGISTRATION"). If the Company shall have not yet filed an Exchange Registration Statement, the Company shall use its best efforts to file with the SEC the Initial Shelf Registration on or prior to the Filing Date. In any other instance, the Company shall use its best efforts to file with the SEC the Initial Shelf Registration within 30 days of the delivery of the Shelf Notice. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by such Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Company shall not permit any securities other than the Registrable Notes to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below). The Company shall use its best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until two years from the Issue Date (the "EFFECTIVENESS PERIOD"), or such shorter period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration or 12 -10- (ii) a Subsequent Shelf Registration covering all of the Registrable Notes has been declared effective under the Securities Act. (b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (prior to the sale of all of the securities registered thereunder), the Company shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 days of such cessation of effectiveness amend the Shelf Registration in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes (a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Company shall use its best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Registration Statement continuously effective during the Effectiveness Period. As used herein the term "SHELF REGISTRATION" means the Initial Shelf Registration and any Subsequent Shelf Registration. (c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter(s) of such Registrable Notes. 4. ADDITIONAL INTEREST ------------------- (a) The Company and the Initial Purchaser agree that the Holders of Registrable Notes will suffer damages if the Company fails to fulfill its obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company agrees to pay additional interest on the Notes ("ADDITIONAL INTEREST") under the circumstances set forth below: (i) if neither the Exchange Registration Statement nor the Initial Shelf Registration has been filed on or prior to the Filing Date; 13 -11- (ii) if neither the Exchange Registration Statement nor the Initial Shelf Registration has been declared effective on or prior to the Effectiveness Date; and/or (iii) if either (A) the Company has not exchanged the Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to 60 days after the date on which the Exchange Registration Statement was declared effective or (B) the Exchange Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (C) if applicable, the Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time prior to the earlier of the date on which all Registrable Notes covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration or the third anniversary of the Issue Date; (each such event referred to in clauses (i) through (iii) above is a "REGISTRATION DEFAULT"), the sole remedy available to holders of the Notes will be the immediate accrual of Additional Interest as follows: the per annum interest rate on the Notes will increase by 0.5% upon the occurrence of a Registration Default; and the per annum interest rate will increase by an additional 0.25% for each subsequent 90-day period during which the Registration Default remains uncured, up to a maximum additional interest rate of 2.0% per annum, PROVIDED, HOWEVER, that (1) upon the filing of the Exchange Registration Statement or the Initial Shelf Registration (in the case of (i) above), (2) upon the effectiveness of the Exchange Registration Statement or a Shelf Registration (in the case of (ii) above) or (3) upon the exchange of Exchange Notes for all Notes tendered (in the case of (iii)(A) above), or upon the effectiveness of the Exchange Registration Statement which had ceased to remain effective (in the case of (iii)(B) above), or upon the effectiveness of the Shelf Registration which had ceased to remain effective (in the case of (iii)(C) above), Additional Interest on the Notes as a result of such clause (i), (ii) or (iii) (or the relevant subclause thereof), as the case may be, shall cease to accrue and the interest rate on the Notes will revert to the interest rate originally borne by the Notes and PROVIDED, FURTHER, that in the case of a Registration Default under (iii)(c) above, Additional Interest will only be payable with respect to Notes so long as they are Registrable Notes. (b) The Company shall notify the Trustee within one business day after each and every date on which an event occurs 14 -12- in respect of which Additional Interest is required to be paid (an "EVENT DATE"). Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash semi-annually on each January 1 and July 1 (to the Holders of record on the December 15 and June 15 immediately preceding such dates), commencing with the first such date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest with respect to each Note will be determined by multiplying the applicable Additional Interest rate by the principal amount of such Note, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. 5. REGISTRATION PROCEDURES ----------------------- In connection with the registration of any Registrable Notes or Private Exchange Notes pursuant to Section 2 or 3 hereof, the Company shall effect such registrations to permit the sale of such Registrable Notes or Private Exchange Notes in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall: (a) Prepare and file with the SEC, prior to the Filing Date, a Registration Statement or Registration Statements as prescribed by Section 2 or 3, and to use its best efforts to cause each such Registration Statement to become effective and remain effective as provided herein, PROVIDED that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall, if requested, furnish to and afford the Holders of the Registrable Notes and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriter(s), if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (at least 5 business days prior to such filing). The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportu- 15 -13- nity to review prior to the filing of such document, if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriter(s), if any, shall reasonably object; PROVIDED, HOWEVER, during any delay in meeting the time frames contemplated by Section 4 hereof as a result of actions of any Holder of Registrable Notes, no Additional Interest shall accrue or be payable to such Holder. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; the Company shall be deemed not to have used its best efforts to keep a Registration Statement effective during the Applicable Period if it voluntarily takes any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law or unless the Company complies with this Agreement, including without limitation, the provisions of clause 5(c)(v) below. (c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the 16 -14- managing underwriter(s), if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any prospectus supplement or post-effective amendment thereto has been filed, and, with respect to a Registration Statement or any post-effective amendment thereto, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment thereto including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary Prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 5(n) below cease to be true and correct, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in, or amendments or supplements to, such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (vi) the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. 17 -15- (d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use its best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if reasonably requested by the managing underwriter(s), if any, or the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering, (i) promptly incorporate in a Prospectus supplement or post-effective amendment thereto such information as the managing underwriter(s), if any, or such Holders reasonably request to be included therein, (ii) make all required filings of such Prospectus supplement or such post-effective amendment thereto as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment thereto and (iii) supplement or make amendments to such Registration Statement. (f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests and to counsel and the managing underwriter(s), if any, without charge, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. 18 -16- (g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel, and the managing underwriter or underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary Prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the managing underwriter or underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, to use its best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes or Exchange Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters, if any, reasonably request in writing, PROVIDED that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Company agrees to cause its counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such 19 -17- Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; PROVIDED that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction. (i) If a Shelf Registration is filed pursuant to Section 3, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request and which are consistent with the terms of the indenture under which the Registrable Notes are issued. (j) Use its best efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the managing underwriter or underwriters, if any, to consummate the disposition of such Registrable Notes, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals at such sellers' cost and expense. (k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) 20 -18- above, as promptly as reasonably practicable prepare and (subject to Section 5(a) above) file with the SEC, at the expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer during the Applicable Period, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Use its best efforts to cause the Registrable Notes covered by a Registration Statement or the Exchange Notes sold by a Participating Broker-Dealer during the Applicable Period, as the case may be, to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement (provided such Holders hold at least $20 million principal amount of Registrable Notes) or the managing underwriter or underwriters, if any. (m) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with printed certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes. (n) In connection with an underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing underwriter(s), if any, in order to expedite or facilitate the registration or the disposition of such Registrable Notes, and in such connection, (i) make such representations and warranties to the managing underwriter or underwriters on behalf of any underwriters, with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be 21 -19- incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities, and confirm the same if and when requested; (ii) obtain opinions of counsel to the Company and updates thereof in form and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the managing underwriter or underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt securities and such other matters as may be reasonably requested by underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to the managing underwriter or underwriters on behalf of any underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities and such other matters as reasonably requested by the managing underwriter or underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent 22 -20- retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Company determines, in good faith, to be confidential and any Records which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or material omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public other than through the Inspectors' breach of any confidentiality agreement. Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer or underwriter will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it for any purpose other than discharging due diligence responsibilities. In addition, such information shall not be used as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public. Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the Records deemed confidential at its expense. (p) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a), as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer Registration Statement or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any 23 -21- such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (q) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (r) Upon consummation of an Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Company, in a form customary for underwritten offerings of debt securities similar to the Notes, addressed to the Trustee for the benefit of all Holders of Registrable Notes participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) the Company has duly authorized, executed and delivered the Exchange Notes and Private Exchange Notes and the related indenture and (ii) each of the Exchange Notes or the Private Exchange Notes, as the case may be, and related indenture constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms (with customary exceptions). (s) If an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Regis- 24 -22- trable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; and, in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (t) Cooperate with each seller of Registrable Notes covered by any Registration Statement and the managing underwriter(s), if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (u) Use its best efforts to take all other steps necessary to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes or Participating Broker-Dealer as to which any registration is being effected to furnish to the Company such information regarding such seller or Participating Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Notes of any seller or Participating Broker-Dealer who unreasonably fails to furnish such information within a reasonable time after receiving such request, and during any delay in meeting the time frames contemplated by Section 4 hereof as a result of a delay in receiving any such information, no Additional Interest shall accrue or be payable. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k), or until it is advised in writing (the "ADVICE") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any 25 -23- amendments or supplements thereto. In the event the Company shall give any such notice, the Applicable Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Exchange Notes to be sold by such Participating Broker-Dealer, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) or (y) the Advice. 6. REGISTRATION EXPENSES (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the Holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h), in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is reasonably requested by the managing underwriter or underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or of such Exchange Notes, as the case may be), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and fees and disbursements of special counsel for the sellers of Registrable Notes (subject to the provisions of Section 6(b)), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(n)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees, (vii) Securities Act liability insurance, if the 26 -24- Company desires such insurance, (viii) fees and expenses of the Trustee (including, without limitation, fees and disbursements of counsel), (ix) fees and expenses of all other Persons retained by the Company, (x) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (xi) the expense of any annual audit, (xii) the fees and expenses incurred in connection with any listing of the securities to be registered on any securities exchange if the Company elects to list any such securities and (xiii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) In connection with any Shelf Registration hereunder, the Company shall reimburse the Holders of the Registrable Notes being registered in such registration for the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Notes to be included in such Registration Statement and other reasonable out-of-pocket expenses of the Holders of Registrable Notes incurred in connection with the registration of the Registrable Notes. The Company shall not have any obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities. 7. INDEMNIFICATION --------------- (a) The Company agrees to indemnify and hold harmless each Holder of Registrable Notes and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the officers and directors of each such person, and each person, if any, who controls any such person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "PARTICIPANT"), from and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary Prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, 27 -25- in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant or underwriter furnished to the Company in writing by such Participant or underwriter expressly for use therein; PROVIDED that the foregoing indemnity with respect to any preliminary Prospectus shall not inure to the benefit of any Participant or underwriter (or to the benefit of any person controlling such Participant or underwriter) from whom the person asserting any such losses, claims, damages or liabilities purchased Registrable Notes or Exchange Notes if such untrue statement or omission or alleged untrue statement or omission made in such preliminary Prospectus is eliminated or remedied in the related Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) and a copy of the related Prospectus (as so amended or supplemented) shall have been furnished to such Participant or underwriter at or prior to the sale of such Registrable Notes or Exchange Notes, as the case may be, to such person or at a time the Company had notified persons under the last paragraph of Section 5 hereof to cease using such Registration Statement or Prospectus. (b) Each Participant will be required to agree, severally and not jointly, to indemnify and hold harmless the Company, its directors and officers and each person who controls any such person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Participant, but only with reference to information relating to such Participant furnished to the Company in writing by such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary Prospectus. The liability of any Participant under this paragraph (b) shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) of this Section 7, such person (the "INDEMNIFIED Person") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon request of the Indemnified Per- 28 -26- son, shall retain one counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses incurred by such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representations of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate law firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Participants and such control persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes sold by all such Participants and any such separate firm for the Company, its directors, its officers and such control persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses incurred by counsel as contemplated by the third sentence of this paragraph, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement; PROVIDED, HOWEVER, that the Indemnifying Person shall not be liable for any settlement effected without its consent pursuant to this sentence if the Indemnifying Party is contesting, in 29 -27- good faith, the request for reimbursement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding. If the indemnification provided for in paragraphs (a) and (b) of this Section 7 is unavailable to an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Participants on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and the Participants on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Participants and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties shall agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by PRO RATA allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omis- 30 -28- sion. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. RULES 144 AND 144A ------------------ The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Registrable Notes, make publicly available other information of a like nature until no longer necessary to permit sales pursuant to Rule 144 or Rule 144A. The Company further covenants that so long as any Registrable Notes remain outstanding to make available to any Holder of Registrable Notes in connection with any sale thereof, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Notes pursuant to (a) such Rule 144A, or (b) any similar rule or regulation hereafter adopted by the SEC, unless at such time the Registrable Notes are fully salable under Rule 144 or any successor provision. 9. UNDERWRITTEN REGISTRATIONS -------------------------- If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Company. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 31 -29- 10. MISCELLANEOUS ------------- (a) REMEDIES. In the event of a breach by the Company of any of its obligations under this Agreement, other than the occurrence of an event which requires payment of Additional Interest, each Holder of Registrable Notes, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) ENFORCEMENT. The Trustee shall be authorized to enforce the provisions of this Agreement for the ratable benefit of the Holders. (c) NO INCONSISTENT AGREEMENTS. The Company does not have, as of the date hereof, and the Company shall not, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The Company has not entered and will not enter into any agreement with respect to any of its securities which will grant to any Person piggy-back rights with respect to a Registration Statement. (d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (e) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of at least a majority of the then outstanding aggregate principal amount of Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of 32 -30- Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold by such Holders pursuant to such Registration Statement, PROVIDED that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. (f) NOTICES. All notices and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a Holder of Registrable Notes, at the most current address given by the Trustee to the Company; and (ii) if to the Company: Glasstech, Inc., Ampoint Industrial Park, 995 Fourth Street, Perrysburg, Ohio 43551, Attention: President, with a copy to: Baker & Hostetler LLP, 3200 National City Center, 1900 East Ninth Street, Cleveland, Ohio 44114-3485, Attention: R. Steven Kestner, Esq. All such notices and communications shall be deemed to have been duly given: (i) when delivered by hand, if personally delivered; (ii) three business days after being deposited in the mail, postage prepaid, if mailed; (iii) one business day after being timely delivered to a next-day air courier; and (iv) when receipt is acknowledged by the addressee, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in such Indenture. 33 -31- (g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Registrable Notes. (h) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (i) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (k) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. (l) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. (m) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be 34 -32- deemed outstanding for such purpose and shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 35 -33- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. GLASSTECH SUB CO. By: /s/ Mark D. Christman ------------------------ Name: Mark D. Christman Title: President CIBC WOOD GUNDY SECURITIES CORP. By: /s/ Mark Dalton ---------------------------- Name: Mark Dalton Title: President EX-12.1 23 EXHIBIT 12.1 1 Exhibit 12.1
GLASSTECH, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES PREDECESSOR COMPANY REORGANIZED COMPANY --------------- ----------------------------------------------------- PERIOD FROM PERIOD FROM JULY 1, 1994 JANUARY 4, 1995 THROUGH THROUGH YEAR ENDED YEAR ENDED JANUARY 3, 1995 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1997 --------------- --------------- ------------- ------------- | Consolidated income before income taxes $ 219 | $ 915 $ 3,400 $ 9,127 Add: | Interest expense - | 2,077 4,200 4,200 Amortization of deferred financing costs - | - - - Portion of operting lease rentals deemed | to be interest 50 | 50 100 100 --------------- | --------------- ------------- ------------- Consolidated income as adjusted $ 269 | $ 3,042 $ 7,700 $ 13,427 =============== | =============== ============= ============= | Fixed charges: | Interest expense $ - | 2,077 4,200 4,200 Amortization of deferred financing costs - | - - - Portion of operting lease rentals deemed | to be interest 50 | 50 100 100 --------------- | --------------- ------------- ------------- Total fixed charges $ 50 | $ 2,127 $ 4,300 $ 4,300 =============== | =============== ============= ============= | Ratio of earnings to fixed charges 5.40 | 1.40 1.80 3.12 |
EX-21.1 24 EXHIBIT 21.1 1 Exhibit 21.1 LIST OF SUBSIDIARIES -------------------- 1. Stir-Melter, a Delaware corporation 2. Glasstech Ltd., a company organized under the laws of the United Kingdom EX-23.1 25 EXHIBIT 23.1 1 EXHIBIT 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" and to the use of our report dated August 15, 1997, in the Registration Statement and related Prospectus of Glasstech, Inc. dated August 26, 1997. /s/ Ernst & Young LLP Ernst & Young LLP Toledo, Ohio August 26, 1997 EX-25.1 26 EXHIBIT 25.1 1 Exhibit 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 -------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE -------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _______ -------------------------- UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I. R. S. Employer if not a U. S. national bank) Identification No.) 114 West 47th Street 10036-1532 New York, New York (Zip Code) (Address of principal executive offices) -------------------------- GLASSTECH, INC. (Exact name of OBLIGOR as specified in its charter) Delaware 13-3440225 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) Ampoint Industrial Park 43551 995 Fourth Street (Zip code) Perrysburg, OH (Address of principal executive offices) -------------------------- Series B 12-3/4% Senior Notes due 2004 (Title of the indenture securities) ================================================================================ 2 - 2 - GENERAL 1. GENERAL INFORMATION ------------------- Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Washington, D.C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH THE OBLIGOR ----------------------------- If the obligor is an affiliate of the trustee, describe each such affiliation. None 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15: The obligor is currently not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. LIST OF EXHIBITS ---------------- T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. 3 - 3 - 16. LIST OF EXHIBITS ---------------- (cont'd) T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE - ---- As of August 20, 1997, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U.S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. ------------------ Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 25th day of August, 1997. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: /s/ Patricia Stermer ----------------------------------- Patricia Stermer Assistant Vice President 4 EXHIBIT T-1.6 ------------- The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 September 1, 1995 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK _____________________________________ By: /S/Gerard F. Ganey Senior Vice President 5 EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION JUNE 30, 1997 ------------- (IN THOUSANDS) ASSETS - ------ Cash and Due from Banks $ 83,529 Short-Term Investments 259,746 Securities, Available for Sale 924,165 Loans 1,437,342 Less: Allowance for Credit Losses 13,779 ----------- Net Loans 1,423,563 Premises and Equipment 61,515 Other Assets 122,696 ----------- TOTAL ASSETS $ 2,875,214 =========== LIABILITIES - ----------- Deposits: Non-Interest Bearing $ 763,075 Interest Bearing 1,409,017 ----------- Total Deposits 2,172,092 Short-Term Credit Facilities 404,212 Accounts Payable and Accrued Liabilities 132,213 ----------- TOTAL LIABILITIES $ 2,708,517 =========== STOCKHOLDER'S EQUITY - -------------------- Common Stock 14,995 Capital Surplus 49,541 Retained Earnings 100,930 Unrealized Gains (Losses) on Securities Available for Sale, Net of Taxes (1,231) ----------- TOTAL STOCKHOLDER'S EQUITY 166,697 ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 2,875,214 =========== I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkmann, SVP & Controller August 7, 1997 EX-27.1 27 EXHIBIT 27.1
5 1,000 YEAR JUN-30-1997 JUL-01-1996 JUN-30-1997 53,334 0 6,999 (141) 4,265 64,938 11,701 (3,311) 99,364 25,420 42,000 10 0 0 29,222 99,364 76,433 76,433 45,603 45,603 19,766 0 4,200 9,127 2,629 6,498 0 0 0 6,498 0 0
EX-99.1 28 EXHIBIT 99.1 1 Exhibit 99.1 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- GLASSTECH, INC. LETTER OF TRANSMITTAL SERIES B 12 3/4% SENIOR NOTES DUE 2004 TO: UNITED STATES TRUST COMPANY OF NEW YORK, THE EXCHANGE AGENT
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M. United States Trust Company of New York United States Trust Company of New York P.O. Box 844 770 Broadway Cooper Station New York, New York 10003 New York, New York 10276-0844 Attn: Corporate Trust BY HAND TO 4:30 P.M.: BY FACSIMILE: United States Trust Company of New York United States Trust Company of New York 111 Broadway (212) 780-0592 Lower Level Attn: Corporate Trust New York, New York 10006 Corporate Trust Window CONFIRM BY TELEPHONE: (800) 548-6565 (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. 2 HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. The undersigned acknowledges receipt of the Prospectus dated _____________ ___, 1997 (the "Prospectus") of GLASSTECH, INC. (the "Company") and this Letter of Transmittal (the "Letter of Transmittal"), which together constitute the Company's Offer to Exchange (the "Exchange Offer") $1,000 principal amount of its Series B 12 3/4% Senior Notes Due 2004 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its outstanding 12 3/4% Senior Notes Due 2004 (the "Old Notes"), of which $70,000,000 principal amount is outstanding, upon the terms and conditions set forth in the Prospectus. Other capitalized terms used but not defined herein have the meaning given to them in the Prospectus. For each Old Note accepted for exchange, the holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. Interest on the New Notes will accrue from the last interest payment date on which interest was paid on the Old Notes surrendered in exchange therefor or, if no interest has been paid on the Old Notes, from the date of original issue of the Old Notes. Holders of Old Notes accepted for exchange will be deemed to have waived the right to receive any other payments or accrued interest on the Old Notes. The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall notify holders of the Old Notes of any extension by means of a press release or other public announcement prior to 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. This Letter of Transmittal is to be used by Holders if: (i) certificates representing Old Notes are to be physically delivered to the Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in the Prospectus under "The Exchange Offer--Procedures for Tendering" by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Old Notes; or (iii) tender of Old Notes is to be made according to the guaranteed delivery procedures set forth in the prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Holder" with respect to the Exchange Offer means any person: (i) in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered Holder; or (ii) whose Old Notes are held of record by DTC who desires to deliver such Old Notes by book-entry transfer at DTC. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction 11 herein. -2- 3 HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW.
- ----------------------------------------------------------------------------------------------------------------------------- BOX 1 - DESCRIPTION OF 12 3/4% SENIOR NOTES DUE 2004 (OLD NOTES) - ----------------------------------------------------------------------------------------------------------------------------- AGGREGATE PRINCIPAL PRINCIPAL AMOUNT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REGISTERED BY TENDERED (PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) (IF LESS THAN ALL)** - ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- Total - ----------------------------------------------------------------------------------------------------------------------------- * Need not be completed by Holders tendering by book-entry transfer. **Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Old Notes will be deemed to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old Notes. All other tenders must be integral multiples of $1,000. -3- 4
- ---------------------------------------------------------------- ------------------------------------------------------------ BOX 2 BOX 3 SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6) To be completed ONLY if certificates for Old Notes in a To be completed ONLY if certificates for Old principal amount not tendered or not accepted for exchange, or Notes in a principal amount not tendered or not accepted New Notes issued in exchange for Old Notes accepted for for exchange are to be sent to someone other than the exchange, are to be issued in the name of someone other than the undersigned, or to the undersigned at an address other than undersigned, or if the Old Notes tendered by book-entry transfer that shown above. that are not accepted for exchange are to be credited to an account maintained by DTC. Issue certificate(s) to: Return mail to: Name: Name: ------------------------------------------------- ----------------------------------------------------- (PLEASE PRINT) (PLEASE PRINT) Address: Address: ---------------------------------------------- --------------------------------------------------- - ------------------------------------------------------ ----------------------------------------------------------- (INCLUDE ZIP CODE) (INCLUDE ZIP CODE) - ------------------------------------------------------ ----------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) - ------------------------------------------------------ ------------------------------------------------------------ - ---------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ------------------------------------------------- DTC Book-Entry Account: --------------------------------------------------------- Transaction Code No.: ----------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ------------------------------------------------ Window Ticket Number (if any): -------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ----------------------------- IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING: Account Number: Transaction Code Number: ----------------------- --------------- - -------------------------------------------------------------------------------- -4- 5 - -------------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: --------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND ARE RECEIVING NEW NOTES FOR YOUR OWN ACCOUNT IN EXCHANGE FOR OLD NOTES THAT WERE ACQUIRED AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. Name: --------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- -5- 6 LADIES AND GENTLEMEN: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of Old Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Old Notes tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to the Old Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company and as Trustee under the Indenture for the Old Notes and New Notes) with respect to the tendered Old Notes with full power of substitution to (i) deliver certificates for such Old Notes to the Company, or transfer ownership of such Old Notes on the account books maintained by DTC and deliver all accompanying evidence of transfer and authenticity to, or upon the order of, the Company and (ii) present such Old Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and subject to the conditions of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim, when the same are acquired by the Company. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the Holder receiving such New Notes, whether or not such person is the Holder; that neither the Holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such New Notes; and that neither the Holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or any of its subsidiaries. The undersigned also acknowledges that this Exchange Offer is being made based on certain interpretations issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties in unrelated transactions. Based on those interpretations, the Company believes that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangements or understandings with any person to participate in the distribution of such New Notes. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the assignment, transfer and purchase of the Old Notes tendered hereby. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns, trustees in bankruptcy or other legal representatives of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal of Tenders" section of the Prospectus. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. -6- 7 If any tendered Old Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Old Notes will be returned (except as noted below with respect to tenders through DTC), without expense, to the undersigned at the address shown below or at a different address as may be indicated under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. The undersigned acknowledges that tenders of Old Notes pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated under "Special Payment Instructions," please issue the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and return any Old Notes not tendered or not exchanged in the name(s) of the undersigned (or in either such event, in the case of the Old Notes tendered through DTC, by credit to the undersigned's account at DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and any certificates for Old Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s), unless, in either event, tender is being made through DTC. In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and return any Old Notes not tendered or not exchanged in the name(s) of, and send said certificates to, the person(s) so indicated. The Company has no obligation pursuant to the "Special Payment Instructions" and "Special Delivery Instructions" to transfer any Old Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Old Notes so tendered. Holders of Old Notes who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent, or cannot complete the procedure for book-entry transfer, prior to the Expiration Date, may tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the completion of the Letter of Transmittal printed below. -7- 8 - -------------------------------------------------------------------------------- PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY X Date ---------------------------------- -------------------------------- X Date ---------------------------------- -------------------------------- Signature(s) of Registered Holder(s) Or Authorized Signatory Area Code and Telephone Number ------------------------- The above lines must be signed by the registered Holder(s) of Old Notes as their name(s) appear(s) on the Old Notes or, if the Old Notes are tendered by a participant in DTC, as such participant's name appears on a security position listing as the owner of Old Notes, or by person(s) authorized to become registered Holder(s) by a properly completed bond power from the registered Holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Old Notes to which this Letter of Transmittal relates are held of record by two or more joint Holders, then all such Holders must sign this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority to act. See Instruction 4 regarding the completion of this Letter of Transmittal printed below. Name: --------------------------------------------------------------------------- (PLEASE PRINT) Capacity: ----------------------------------------------------------------------- Address: ------------------------------------------------------------------------ (INCLUDE ZIP CODE) Signature(s) Guaranteed by an Eligible Institution: (If required by Instruction 4) - -------------------------------------------------------------------------------- (AUTHORIZED SIGNATURE) - -------------------------------------------------------------------------------- (TITLE) - -------------------------------------------------------------------------------- (NAME OF FIRM) Dated: -------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -8- 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by noteholders, either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer--Procedures for Tendering" section of the Prospectus. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile hereof) and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of maturity of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined in Instruction 4 below); (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, or a Book-Entry Confirmation, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or Book-Entry confirmation, as the case may be, and all other documents required by this Letter of Transmittal, are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter of Transmittal, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit the delivery to the Exchange Agent prior to 5:00 p.m. New York City time, on the Expiration Date. See "The Exchange Offer" section in the Prospectus. 2. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the registered holder and who wishes to tender should arrange with the registered holder to execute and deliver this Letter of Transmittal on his or her behalf or must, prior to completing and executing this Letter of Transmittal and delivering his or her Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such holder's name or obtain a properly completed bond power from the registered holder. 3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of any Old Notes is tendered, the tendering holder should fill in the principal amount tendered in the fourth column of the box entitled "Description of 12 3/4% Senior Notes Due 2004 (Old Notes)" above. The entire principal amount of Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Old Notes is not tendered, then Old Notes for the principal amount of Old Notes not tendered and a certificate or certificates representing New Notes issued in exchange for any Old Notes accepted will be sent to the holder at his or her registered address, unless a -9- 10 different address is provided in the appropriate box on this Letter of Transmittal promptly after the Old Notes are accepted for exchange. 4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; POWERS OF ATTORNEY AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of certificates. When this Letter of Transmittal is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate powers of attorney are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate powers of attorney are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the names on the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on powers of attorney required by this Instruction 4 must be guaranteed by a firm which is a participant in a recognized signature guarantee medallion program ("Eligible Institutions"). Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution unless the Old Notes are tendered (i) by a registered holder of Old Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on this Letter of Transmittal, or (ii) for the account of an Eligible Institution. 5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box or boxes, the name and address to which New Notes or substitute Old Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of tender of Old Notes through DTC, if different from DTC). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. Noteholders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal. -10- 11 6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder whose offered Old Notes are accepted for exchange must provide the Company (as payer) with his, her or its correct Taxpayer Identification Number ("TIN"), which, in the case of an exchanging holder who is an individual, is his or her social security number. If the Company is not provided with the correct TIN or an adequate basis for exemption, such holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS"), and payments made with respect to Old Notes purchased pursuant to the Exchange Offer may be subject to backup withholding at a 31% rate. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9." To prevent backup withholding, each exchanging holder must provide his, her or its correct TIN by completing the Substitute Form W-9 enclosed herewith, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder has not been notified by the IRS that he, she or it is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified the holder that he, she or it is no longer subject to backup withholding. In order to satisfy the Exchange Agent that a foreign individual qualifies as an exempt recipient, such holder must submit a statement signed under penalty of perjury attesting to such exempt status. Such statements may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the Substitute Form W-9 for information on which TIN to report. If you do not provide your TIN to the Company within 60 days, backup withholding will begin and continue until you furnish your TIN to the Company. 7. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Old Notes listed in this letter. 8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend, waive or modify specified conditions in the Exchange Offer in the case of any Old Notes tendered. 9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Existing Notes nor shall any of them incur any liability for failure to give any such notice. 10. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. -11- 12 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent at the address specified in the Prospectus. (DO NOT WRITE IN THE SPACE BELOW) CERTIFICATE OLD NOTES OLD NOTES SURRENDERED TENDERED ACCEPTED - ---------------------- ---------------------- ---------------------- - ---------------------- ---------------------- ---------------------- - ---------------------- ---------------------- ---------------------- - ---------------------- ---------------------- ---------------------- DELIVERY PREPARED BY: Checked By - -------------------------------------------------- Date - -------------------------------------------------- -12- 13 - -------------------------------------------------------------------------------- PAYER'S NAME: GLASSTECH, INC. - -------------------------------------------------------------------------------- NAME (if joint names, list first and circle the name of the person or entity whose number you enter in Part I below. See instructions if your name has changed.) - -------------------------------------------------------------------------------- ADDRESS ------------------------------------------------------------------------- CITY, STATE AND ZIP CODE -------------------------------------------------------- LIST ACCOUNT NUMBER(S) HERE (OPTIONAL) ------------------------------------------ - -------------------------------------------------------------------------------- SUBSTITUTE PART 1--PLEASE PROVIDE YOUR FORM W-9 TAXPAYER IDENTIFICATION OR TIN NUMBER ("TIN") IN THE BOX ________________________________ AT RIGHT AND CERTIFY BY Social security number or TIN SIGNING AND DATING BELOW. ----------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY PART 2--Check the box if you are NOT PART 3-- INTERNAL REVENUE SERVICE subject to backup withholding under the provisions of section 3408(a)(1)(C) of the Awaiting TIN [ ] Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to PAYER'S REQUEST FOR backup TAXPAYER IDENTIFICATION withholding. NUMBER (TIN) ----------------------------------------------------------------------------------- CERTIFICATION--Under the penalties of perjury, I certify that the information provided on this form is true, correct and complete. Signature Date --------------------------- ---------------------------- - -----------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. -13- EX-99.2 29 EXHIBIT 99.2 1 Exhibit 99.2 GLASSTECH, INC. NOTICE OF GUARANTEED DELIVERY FOR Series B 12 3/4% SENIOR NOTES DUE 2004 As set forth in the Prospectus dated ___________, 1997 (the "Prospectus") of GLASSTECH, INC., a Delaware corporation (the "Company"), and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent hereto must be used to accept the Company's offer to exchange (the "Exchange Offer") all of its outstanding 12 3/4% Senior Notes Due 2004 (the "Old Notes") for its Series B 12 3/4% Senior Notes Due 2004, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), if certificates for the Old Notes are not immediately available or if the Old Notes, the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent, or the procedure for book-entry transfer cannot be completed, prior to 5:00 P.M., New York City time, on the Expiration Date (as defined in the Prospectus). This form may be delivered by an Eligible Institution (as defined in the Prospectus), by hand or transmitted by facsimile transmission, overnight courier or mail to the Exchange Agent as set forth below. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. TO: UNITED STATES TRUST COMPANY OF NEW YORK, THE EXCHANGE AGENT BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M. United States Trust Company of New York United States Trust Company of New York P.O. Box 844 770 Broadway Cooper Station New York, New York 10003 New York, New York 10276-0844 Attn: Corporate Trust BY HAND TO 4:30 P.M.: BY FACSIMILE: United States Trust Company of New York United States Trust Company of New York 111 Broadway (212) 780-0592 Lower Level Attn: Corporate Trust New York, New York 10006 Corporate Trust Window CONFIRM BY TELEPHONE: (800) 548-6565 (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal to be used to tender Old Notes is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. 2 LADIES AND GENTLEMEN: The undersigned hereby tenders to GLASSTECH, INC., a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, $_______________ principal amount of Old Notes pursuant to the guaranteed delivery procedures set forth in Instruction 1 of the Letter of Transmittal. The undersigned acknowledges that tenders of Old Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned acknowledges that tenders of Old Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
Certificate No(s). for Old Notes (if available Name(s) of Record Holder(s) ----- - ---------------------------------------------------- --------------------------------------------- - ---------------------------------------------------- --------------------------------------------- - ---------------------------------------------------- --------------------------------------------- - ---------------------------------------------------- --------------------------------------------- (PLEASE PRINT OR TYPE) Principal Amount of Old Notes --------------------- Address - ---------------------------------------------------- --------------------------------------- - ---------------------------------------------------- --------------------------------------------- . - ---------------------------------------------------- --------------------------------------------- Area Code and Tel. No. ------------------------ Signature(s): x --------------------------------------------- x --------------------------------------------- Dated: ---------------------------------------- If Old Notes will be delivered by book-entry transfer at the Depository Trust Company, Depository Account No. -------------------------------------
-2- 3 This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Old Notes exactly as its (their) name(s) appears on certificates for Old Notes or on a security position listing as the owner of Old Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information: PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): ----------------------------------------------------------------------- Capacity: ---------------------------------------------------------------------- Address(es): ------------------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a) represents that the above named person(s) "own(s)" the Old Notes tendered hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents that such tender of Old Notes complies with Rule 14e-4 under the Exchange Act, and (c) guarantees that delivery to the Exchange Agent of certificates for the Old Notes tendered hereby, in proper form for transfer (or confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's Account at the Depository Trust Company, pursuant to the procedures for book-entry transfer set forth in the Prospectus), with delivery of a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signatures and any other required documents, will be received by the Exchange Agent at one of its addresses set forth above within three New York Stock Exchange ("NYSE") trading days after the execution of this Notice of Guaranteed Delivery. THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED. Name of Firm ------------------------------------------------------------------ Address --------------------------- ---------------------------------- Authorized Signature - ------------------------------------ - ------------------------------------ Name - ------------------------------------ ------------------------------- (Please Print or Type) Area Code and Tel. No. ------------------------ Title ------------------------------ Dated: , 1997 ------------------------- NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT WITHIN FIVE NYSE TRADING DAYS AFTER THE EXECUTION OF THIS NOTICE OF GUARANTEED DELIVERY. -3- -----END PRIVACY-ENHANCED MESSAGE-----