-----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, OMA7pFKm3MgUOF0aqPB5e/nJaoPQl+ud+/Ko0KbBbYzRE/kErS/m7qi0ffYPNqn4 AxWTcUt6Tkgn7FQsrGD1Sw== 0000950131-98-005345.txt : 19980930 0000950131-98-005345.hdr.sgml : 19980930 ACCESSION NUMBER: 0000950131-98-005345 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19980929 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBE HOLDINGS INC CENTRAL INDEX KEY: 0000866395 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042017769 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64669 FILM NUMBER: 98717715 BUSINESS ADDRESS: STREET 1: 456 BEDFORD STREET CITY: FALL RIVER STATE: MA ZIP: 02720 BUSINESS PHONE: 5086743585 MAIL ADDRESS: STREET 1: 456 BEDFORD STREET CITY: FALL RIVER STATE: MA ZIP: 02720 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998. REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- GLOBE HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 3069 04-2017769 (STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.) INCORPORATION OR CLASSIFICATION NUMBER) ORGANIZATION) --------------------- 456 BEDFORD STREET FALL RIVER, MASSACHUSETTS 02720 TELEPHONE: (508) 674-3585 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) --------------------- THOMAS A. RODGERS, III 456 BEDFORD STREET FALL RIVER, MASSACHUSETTS 02720 TELEPHONE: (508) 674-3585 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) --------------------- COPY TO: LAURIE T. GUNTHER KIRKLAND & ELLIS 200 EAST RANDOLPH DRIVE CHICAGO, ILLINOIS 60601 TELEPHONE: (312) 861-2000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. --------------------- If any 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. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE - ------------------------------------------------------------------------------------ 14% Senior Discount Notes due 2009, Series B..................... $49,086,000 50.872% $24,970,992 $7,367 - ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- (1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f) 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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. --------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO 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 REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED SEPTEMBER , 1998 PRELIMINARY PROSPECTUS , 1998 GLOBE HOLDINGS, INC. LOGO OFFER TO EXCHANGE ITS 14% SENIOR DISCOUNT NOTES DUE 2009, SERIES B FOR ANY AND ALL OF ITS OUTSTANDING 14% SENIOR DISCOUNT NOTES DUE 2009. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. Globe Holdings, Inc., a Massachusetts 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 at maturity of its 14% Senior Discount Notes due 2009, Series B (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 at maturity of its outstanding 14% Senior Discount Notes due 2009 (the "Old Notes") of which $49,086,000 principal amount at maturity is outstanding. The form and terms of the New Notes are the same as the form and term of the Old Notes except that (i) the New Notes will bear a Series B designation and a different CUSIP number, (ii) the New Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (iii) holders of the New Notes will not be entitled to certain rights of holders of Old Notes under the Registration Rights Agreement (as defined). 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 August 6, 1998 (the "Indenture") by and among the Company and Norwest Bank Minnesota, National Association, as trustee, governing the Old Notes and the New Notes. 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 , 1998, 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. See "The Exchange Offer." The Notes were issued at a substantial discount from their principal amount. The Notes will accrete in value until August 1, 2003 at a rate of 14% per annum, compounded semiannually on February 1 and August 1 of each year to an aggregate principal amount of $49,086,000. Cash interest on the Notes will not accrue prior to August 1, 2003. Thereafter, the Notes will bear interest at a rate of 14% per annum, payable semiannually in arrears on February 1 and August 1 of each year, commencing on February 1, 2004. The Notes may be redeemed, in whole or in part, at any time on or after August 1, 2003 at the option of the Company, at the redemption prices set forth herein, plus, in each case, accrued and unpaid interest and Liquidated Damages (as defined), if any, to the date of redemption. In addition, at any time prior to August 1, 2001, the Company may, at its option, redeem up to 35% in aggregate principal amount at maturity of the Notes at a redemption price equal to 114.0% of the Accreted Value (as defined) thereof, plus Liquidated Damages, if any, to the date of redemption, with the net cash proceeds of one or more Equity Offerings (as defined); provided that not less than 65% of the aggregate principal amount at maturity of the Notes remain outstanding immediately after the occurrence of any such redemption. At any time prior to August 1, 2003, the Notes may be redeemed, in whole but not in part, at the option of the Company at any time within 180 days after a Change in Control (as defined), at a redemption price equal to the sum of (i) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of redemption, plus (ii) the Applicable Premium (as defined). See "Description of the Notes--Optional Redemption." The New Notes will be, as the Old Notes (which they replace) are, general unsecured obligations of the Company, and will, as the Old Notes (which they replace), be effectively subordinated to all secured obligations (Cover continued on following page) ------------- SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. of the Company and all obligations of the subsidiaries of the Company. The Notes will rank pari passu with any existing and future Senior Debt (as defined) of the Company and will rank senior to all Subordinated Debt (as defined) of the Company. As of June 30, 1998, on a pro forma basis after giving effect to the Transactions, (i) the Company would have had no outstanding Senior Debt (other than the Notes and its guarantee under the Senior Credit Facility (as defined) and (ii) the Company's subsidiaries would have had total debt and other liabilities of $289.1 million (excluding unused commitments of $45.0 million under the Senior Credit Facility). See "Description of the Notes." The Old Notes were sold by the Company on August 6, 1998 to BancAmerica Robertson Stephens (the "Initial Purchaser") in a transaction not registered under the Securities Act in reliance upon an exemption under the Securities Act (the "Initial Offering"). The Initial Purchaser subsequently placed the Old Notes with qualified institutional buyers in reliance upon Rule 144A under the Securities Act. Accordingly, the 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 in order to satisfy the obligations of the Company under the Registration Rights Agreement entered into by the Company and the Initial Purchaser in connection with the Initial Offering (the "Registration Rights Agreement"). See "The Exchange Offer." Based upon an interpretation by the staff of the Securities and Exchange Commission (the "Commission") set forth in certain no-action letters issued to third parties, the Company believes that the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than 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 requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such New Notes. See "The Exchange Offer--Resale of the New Notes." Holders of Old Notes wishing to accept the Exchange Offer must represent to the Company, as required by the Registration Rights Agreements, that such conditions have been met. 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." Shortly before the Initial Offering, Globe Manufacturing Corp. ("Globe Manufacturing"), a subsidiary of Globe Holdings, sold $150 million in initial aggregate principal amount of its 10% Senior Subordinated Notes due 2008 (the "Old Senior Subordinated Notes"). Concurrent with this Note Exchange Offer, Globe Manufacturing is offering to exchange $1,000 principal amount of its 10% Senior Subordinated Notes due 2008, Series B (the "New Senior Subordinated Notes," and, together with the Old Senior Subordinated Notes, the "Senior Subordinated Notes") registered under the Securities Act pursuant to a registration statement, for each $1,000 principal amount of its outstanding Old Senior Subordinated Notes, of which $150 million in initial aggregate principal amount is outstanding. See "The Transactions" and "Description of the Notes." The Company will not receive any proceeds from the Exchange Offer. The Company has agreed to bear the expenses of the Exchange Offer. No underwriter is being used in connection with 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 ii automated quotation system. The Old Notes are currently eligible for trading in the Private Offerings, Resales and Trading through Automatic Linkages ("PORTAL"). There can be no assurance that an active market for the New Notes will develop. See "Risk Factors--Absence of a Public Market Could Adversely Affect the Value of New Notes." 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. Except as described under "Book-Entry Procedures and Transfer," the Company expects that the New Notes issued pursuant to the Exchange Offer will be represented by one or more Global Notes (as defined), 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 Notes 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 Notes, Notes in certificated form will be issued in exchange for Global Notes only under limited circumstances as set forth in the Indenture. See "Book-Entry Procedures and Transfer." THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. PROSPECTIVE INVESTORS IN THE NEW NOTES ARE NOT TO CONSTRUE THE CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX, BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE NEW NOTES. THE COMPANY IS NOT MAKING ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE NEW NOTES REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS. AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 (the "Exchange Offer Registration Statement," which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the Exchange Offer contemplated 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, and periodic reports and other information filed by the Company with the Commission 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, and inspected at the Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60601. Copies of such iii 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 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. In addition, 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 Notes remain outstanding, it will furnish to the holders of the Notes and, to the extent permitted by applicable law or regulation, file with the Commission (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 thereof by the Company's independent certified public accountants and (ii) all reports that would be required to be filed on Form 8-K if it were required to file such reports. In addition, for so long as any of the Notes remain outstanding, the Company has agreed to make available to any prospective purchaser of the Notes or beneficial owner of the Notes, in connection with any sale thereof, the information required by Rule 144A(d)(4) under the Securities Act. The Company is a Massachusetts corporation with its principal executive offices located at 456 Bedford Street, Fall River, Massachusetts 02720, and its telephone number is (508) 674-3585. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE All reports and other documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus and prior to the Expiration Date shall be deemed to be incorporated by reference herein and to be a part hereof from the date of the filing of such reports and documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in any other subsequently filed document which also is incorporated or deemed to be incorporated by reference herein) modifies or supersedes such previous statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus and the Exchange Offer Registration Statement. This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. These documents are available without charge upon request from Lawrence R. Walsh, Vice President of Finance and Administration of Globe Holdings, Inc., 456 Bedford Street, Fall River, Massachusetts 02720, telephone (508) 674-3585. In order to ensure timely delivery of the documents, any request should be made by , 1998 (five business days prior to the expiration date). MARKET SHARE AND INDUSTRY DATA The market share and industry data presented herein are based upon estimates by management of the Company, utilizing various third party sources, where available. While management believes that such estimates are reasonable and reliable, in certain cases such estimates cannot be verified by information available from independent sources. Accordingly, no assurance can be given that such market share and industry data are accurate in all material respects. iv CERTAIN TERMINOLOGY As used herein, the following terms have the meanings specified below: circular knit: a type of weft knit in which the fabric is produced in the form of a tube, with threads running continuously around the fabric. In weft knit fabrics, the thread runs crosswise in the fabric, as opposed to lengthwise in warp knits. Circular knits are used in active wear, swimwear, casual wear and dress wear. denier: a weight per unit of length measure of any linear material. In fibers, a weight numerically equal to the weight in grams of 9,000 meters of the material. Lower numbers represent finer sizes, and higher numbers represent coarser sizes. elastomeric: describes any material (including yarn, fiber, film and sheets) which exhibits pronounced elastic properties, such elastic properties being the material's primary value attributes. gauge: the number of needles, fibers or other elements in a determined unit of length. For latex thread, gauge means the number of individual rubber threads which, when placed cross-sectionally beside one another, fit into a length of one inch. Lower numbers represent coarser sizes and higher numbers represent finer sizes. narrow fabric: any knit or woven fabric that is twelve inches or less in width and has a selvage on each side (other than ribbon and seam bindings). Narrow fabric applications include waist bands and straps. nonwoven: a type of fabric in which the fibers are fused or bonded in a random web or mat, as opposed to interlacing sets as in woven fabric. Nonwovens are employed in diapers, adult incontinence products, feminine hygiene products and medical bandages. spandex: a manufactured fiber in which the fiber-forming substance is a long-chain synthetic polymer comprised of at least 85% segmented polyurethane. warp knit: a type of knit in which the threads run lengthwise in the fabric, as opposed to crosswise in weft knits. Examples of warp knits include milanese knits, raschel knits and tricot knits. Warp knit applications include intimate apparel, body shaping garments, swimwear and footwear. woven: a type of fabric generally composed of two sets of yarns, warp and filling, that is formed by weaving interlacing sets of these yarns. v PROSPECTUS SUMMARY The following summary is qualified in its entirety by and should be read in conjunction with the detailed information and consolidated financial statements and notes thereto appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise indicates, "Company" or "Globe" or "Globe Holdings" refers to Globe Holdings, Inc. (formerly known as Globe Manufacturing Co.) and its subsidiaries, and "Globe Manufacturing" refers to Globe Manufacturing Corp. (formerly known as Globe Elastic Co., Inc.), the Company's wholly owned subsidiary. Except as otherwise set forth herein, references to "pro forma" information for a period ending on a specified date means information that gives pro forma effect to the Transactions as if the Transactions had occurred on such date for balance sheet data and as of the beginning of the period for statement of income data. See "--The Transactions." THE COMPANY OVERVIEW Globe is a leading domestic manufacturer and worldwide supplier of spandex and latex elastomeric fibers, marketing its products to more than 500 customers. The Company's fibers are used in a broad range of applications, including men's and women's hosiery, waistbands, intimate apparel, performance athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or foundation) garments, personal care products (including diapers and adult incontinence products) and footwear. The Company has produced elastomeric fibers exclusively for over 50 years and has developed long-term relationships with many of its principal customers, including Fruit of the Loom, Inc., Kimberly-Clark Corporation, Minnesota Mining & Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and Worldtex, Inc. During the twelve months ended June 30, 1998, the Company had net sales of $179.1 million and EBITDA (as defined) of $46.3 million. Spandex fiber, which accounted for 80% of the Company's 1997 sales, is a highly desirable component of fabrics designed for performance, durability, comfort, control and resilience due to its unique chemical and physical properties. Spandex fiber is produced in a broad range of fine and heavy deniers and is sold on a private label basis and under brand names such as the Company's GLOSPAN(R) and CLEERSPAN(R), DuPont's Lycra(R) and Bayer's Dorlastan(R). Recent advances in fabric manufacturing technologies have facilitated the use of spandex fiber in an increasing number of apparel and non-apparel applications. Globe has benefited from this recent proliferation of spandex fiber applications due to its exclusive focus on elastomeric fibers, superior customer service, broad product line, strong market position and efficient manufacturing processes. Management estimates that in 1997 the worldwide market for spandex fiber was approximately 240 million pounds, representing approximately $2.0 billion in sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an estimated 11% compound annual growth rate, and the worldwide spandex fiber market is expected to grow at approximately 9% over the next three years. Since 1993, demand for fine denier spandex has increased faster than the overall market due to its growing use in lightweight and high quality apparel applications and this trend is expected to continue. The Company operates three manufacturing facilities, which are located in Fall River, Massachusetts, Tuscaloosa, Alabama and Gastonia, North Carolina. Since 1993, Globe has invested $97.5 million to increase manufacturing capacity, enhance productivity and shift its product mix to the faster growing, higher margin fine denier spandex fiber. During this period, the Company's annual fine denier spandex fiber production 1 capacity increased from 2.6 million to 10.6 million pounds. As a result of the Company's capital investment program and continuous improvement initiatives in its manufacturing facilities, Globe's fine denier spandex fiber production yields have improved by 35% and sales per employee have increased by 43% since 1993. TUSCALOOSA PLANT EXPANSION Globe is expanding production capacity at its Tuscaloosa, Alabama fine denier spandex fiber manufacturing facility in response to existing demand from current customers (the "Tuscaloosa Plant Expansion"). Through June 30, 1998, Globe had spent approximately $16.1 million of the estimated $22.1 million project cost. The Tuscaloosa facility, built in 1994, has undergone three prior capacity expansions. The Tuscaloosa Plant Expansion will increase the Company's fine denier manufacturing capacity by 3.6 million pounds per annum, or 34%, with approximately half of this increased capacity expected to be on line in the fourth quarter of 1998 and the balance expected to be on line in the first quarter of 1999. As of June 30, 1998, Globe's list price for 40 denier spandex fiber, the primary product currently produced at the Company's Tuscaloosa facility, was $11.50 per pound. COMPETITIVE STRENGTHS The Company's exclusive focus on elastomeric fibers for over 50 years has enabled it to develop the following competitive strengths: Long-Term Customer Relationships and Superior Customer Service. Globe has established long-term relationships with its principal customers by focusing on superior technical and customer service. The Company has been a supplier to Fruit of the Loom, Inc., Kimberly-Clark Corporation, Minnesota Mining and Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and Worldtex, Inc. for over ten years. Seven of the Company's ten largest customers have selected Globe as their preferred supplier of spandex fiber. Globe provides analytical laboratory services and on-site technical assistance to improve customers' manufacturing and engineering processes. As a result, a number of the Company's major customers have selected it as a technology partner to assist in the development of new spandex applications. Broad Product Line. The Company believes that it offers the broadest line of spandex and latex elastomeric fibers in the world. The Company produces a full line of spandex fibers in deniers ranging from 15 to 5040. These products feature an assortment of stretch, strength and other performance characteristics that may be customized for specific applications and manufacturing processes. Globe also manufactures a wide variety of latex threads in multiple gauges and formulations. This broad range of product offerings differentiates the Company in the industry and represents a competitive advantage, as many customers purchase multiple deniers of spandex fiber, as well as various gauges of latex thread, and prefer to utilize one vendor for their elastomeric fiber requirements. The proprietary technologies and customized equipment used by Globe in its multiple manufacturing processes enable the Company to cost-effectively produce this broad product line. Strong Positions in Growing Markets. The Company has established a strong market position in each of its principal product lines. The Company has an estimated 16% share of the domestic spandex fiber market and an estimated 7% share of the worldwide spandex fiber market (based on pounds produced). Management estimates that worldwide sales of spandex fiber will increase at a compound annual growth rate of approximately 9% over the next three years and that fine denier spandex sales will exceed the overall market growth rate during this period. Fine denier spandex demand has been driven by strong consumer demand for lightweight and high quality apparel and technological advances allowing for the use of spandex fibers in the manufacture of such apparel. Cost-Efficient Manufacturing. Management believes that the Company's manufacturing operations are among the most efficient in the industry, allowing the Company to become one of the world's lowest cost producers of high quality spandex fiber. Globe has developed proprietary chemical formulations and highly 2 efficient manufacturing processes that utilize sophisticated process control systems and custom fabricated manufacturing equipment designed and built by the Company's engineers. Management believes that Globe's in-house capability to design, engineer and build its own manufacturing equipment distinguishes the Company from many of its competitors and provides it with an important competitive advantage in maintaining product quality as well as controlling design, development and maintenance costs. In addition, increased production volume at the Company's facilities has enabled the Company to achieve significant economies of scale and raw material purchasing power. Experienced Management Team. The Company is led by an experienced management team with a track record of achieving profitable growth, developing new manufacturing processes and expanding the Company's customer base. Between 1993 and the twelve months ended June 30, 1998, the Company's net sales increased from $107.6 million to $179.1 million and EBITDA increased from $23.7 million to $46.3 million. The Company's executive officers average approximately 20 years with the Company. The Company's senior management team has a substantial financial interest in the Company's continued success through their direct investment in the Company. BUSINESS STRATEGY The Company's business objective is to become the leading global supplier of elastomeric fiber for use in selected apparel and non-apparel markets. The Company seeks to achieve this objective by pursuing the following strategies: Continue Shift in Product Mix to Higher Growth, More Profitable Fine Denier Products. Since 1993, Globe has expanded its annual production capacity of higher growth fine denier spandex fiber from 2.6 million to 10.6 million pounds. Fine denier spandex fiber is used in applications requiring lightweight or high quality fabric, and has been generally more profitable than heavy denier spandex fiber due to the complexity of the manufacturing process required and strong market demand. Fine denier spandex fiber sales accounted for approximately 49% of Globe's 1997 total sales, up from 25% in 1993. The Tuscaloosa Plant Expansion, which will increase the Company's annual production capacity for fine denier spandex fiber to 14.2 million pounds, will enable the Company to further address the increase in demand for fine denier spandex fiber. Develop Innovative Spandex Fiber Applications. Globe's product managers and research and development engineers work closely with existing and prospective customers to develop innovative applications for spandex fiber. For example, the Company worked with a fleece manufacturer for over two years to develop a new four-way stretch fleece product for outerwear that incorporates Globe's spandex fiber. Cooperative efforts such as this have enabled Globe to enhance its relationships with existing customers and attract new customers. Improve Manufacturing Productivity; Reduce Production Costs. The Company seeks to continually improve manufacturing efficiency and reduce production costs in order to maintain its position as one of the world's lowest cost producers of high quality spandex fiber. The Company seeks to improve manufacturing yields, increase equipment utilization, and reduce production costs by upgrading process monitoring equipment, enhancing production processes and increasing throughput. Each of the Company's manufacturing facilities is certified under ISO 9001, and the Company actively incorporates the principles of continuous improvement. Increase International Sales. Globe estimates that the international market accounts for two-thirds of the worldwide spandex fiber market. International spandex fiber markets are growing rapidly due to increasing consumerism of the world's population, coupled with increases in personal disposable income. From 1993 to 1997, Globe's international sales increased from 19% of sales to 28% of sales (primarily in western Europe and Latin America) as the Company expanded the size and geographic scope of its international sales to 46 countries. The Company seeks to further expand its international sales by leveraging its existing sales and marketing infrastructure and capitalizing on Globe's expanded manufacturing capacity. 3 THE TRANSACTIONS The consummation of the Initial Offering occurred shortly after the effectiveness of the recapitalization (the "Recapitalization") of the Company. The Recapitalization was effected pursuant to an agreement and plan of merger dated June 23, 1998 (the "Merger Agreement") between the Company and Globe Acquisition Company ("MergerCo"), a newly formed affiliate of Code Hennessy & Simmons, pursuant to which MergerCo merged with and into the Company (the "Merger"). As a result of the Merger and the Recapitalization, Code Hennessy & Simmons, certain members of management and certain other investors have an aggregate investment of $75.0 million in the Company, comprised of a rollover of approximately $7.2 million (the "Retained Investment") by management and other pre-Merger shareholders of the Company (the "Pre-Merger Shareholders"), an equity investment by Code Hennessy & Simmons and certain other investors in an aggregate amount equal to $42.8 million (the "New Investment" and, together with the Retained Investment, the "Equity Investment") and the CHS Loan of $25.0 million to the Company, which was repaid with the proceeds of the Initial Offering. Immediately prior to the Merger, the Company transferred substantially all of its assets and liabilities to Globe Manufacturing (the "Asset Drop Down"). Pursuant to the Merger and the Recapitalization: (i) Globe Manufacturing incurred approximately $120.0 million of borrowings (consisting of $115.0 million in term loans and approximately $5.0 million in revolving loans) under a new senior secured credit facility (the "Senior Credit Facility"); (ii) Globe Manufacturing received gross proceeds of $150.0 million from the offering (the "Initial Senior Subordinated Note Offering") of the Old Senior Subordinated Notes; (iii) Code Hennessy & Simmons provided the CHS Loan to the Company; (iv) Globe Holdings repaid its indebtedness outstanding under certain loan credit facilities (collectively, the "Old Credit Facility"); (v) holders of the shares of common stock of the Company outstanding prior to the Recapitalization received cash (including the payment by the Company of fees and expenses on their behalf) equal to $315.0 million less (x) the amount of the Company's outstanding indebtedness for borrowed money as of the date of the Merger and (y) the amount of the Retained Investment (the "Cash Merger Consideration"); and (vi) the Company deposited $15.0 million (the "Escrow Amount") into escrow to secure certain indemnification and other obligations of the Pre-Merger Shareholders under the Merger Agreement. See "Recent Developments," "Use of Proceeds," "Certain Relationships and Related Transactions--Recapitalization," and "Description of Senior Credit Facility." The Initial Offering, the Asset Drop Down, the Initial Senior Subordinated Note Offering, the CHS Loan (and the repayment thereof with the proceeds of the Initial Offering), the Equity Investment, the Recapitalization, the Merger, the initial borrowings under the Senior Credit Facility and the repayment of borrowings under the Old Credit Facility are collectively referred to herein as the "Transactions." See "Use of Proceeds" and "Description of Senior Credit Facility." RECENT DEVELOPMENTS On August 6, 1998 the Company consummated the Initial Offering under Rule 144A of the Securities Act, pursuant to which the Company issued and sold 49,086 units (the "Units"), each consisting of one Old Note and one warrant (a "Warrant") to purchase 1.4155 shares of Class A Common Stock, $.01 par value, of the Company. The Units were initially sold to BancAmerica Robertson Stephens. The aggregate purchase price of the Units was $25,000,000 and the net proceeds to the Company were $24,562,490, after deducting underwriting discounts and commissions and other expenses payable by the Company. The Old Notes were issued pursuant to the terms of the Indenture. Concurrently with the consummation of the private placement, the Company and BancAmerica Robertson Stephens entered into the Registration Rights Agreement, which grants the holders of the Old Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange rights which terminate upon the consummation of the Exchange Offer. 4 THE EXCHANGE OFFER Securities Offered........ $49,086,000 aggregate principal amount at maturity of 14% Senior Discount Notes due 2009, Series B. 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, $49,086,000 aggregate principal amount at maturity of Old Notes are outstanding. The Company will issue the New Notes to holders on or promptly after the Expiration Date. Based on an interpretation 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. 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 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." 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 could not rely on the position of the staff of the Commission enunciated 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 in such instance may result in such holder incurring liability under the Securities Act for which the holder is not indemnified by the Company. 5 Expiration Date........... 5:00 p.m., New York City time, on , 1998 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..................... No cash interest will be payable in respect of the New Notes prior to August 1, 2003. Thereafter, cash interest on the New Notes will accrue on the principal amount at maturity at the rate of 14% per annum and will be payable semi-annually on February 1 and August 1 of each year, commencing February 1, 2004. The Old Notes will continue to accrete at the rate of 14% per annum to, but excluding, the date of issuance of the New Notes. Any Old Notes not tendered or accepted for exchange will continue to accrete at the rate of 14% per annum in accordance with their terms. The Accreted Value of New Notes upon issuance will equal the Accreted Value of the Old Notes accepted for exchange immediately prior to issuance of the New Notes. Conditions to the The Exchange Offer is subject to certain customary Exchange Offer............ conditions, which may be waived by the Company. See "The Exchange Offer--Conditions." Procedures for Tendering Each holder of Old Notes wishing to accept the Old Notes................. 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, together with the Old Notes and any other required documentation to the Exchange Agent (as defined) 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 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 under Rule 405 of the Securities Act, of the Company. See "The Exchange Offer--Purpose and Effect of the Exchange Offer" and "--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 foreign person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities 6 Act. See "The Exchange Offer--Consequences of Failure to Exchange." Shelf Registration If any holder of the Old Notes (other than any such Statement................. holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) is not eligible under applicable securities laws to participate in the Exchange Offer, and such holder has satisfied certain conditions relating to the provision of information to the Company for use therein, the Company has agreed to register the Old Notes on a shelf registration statement (the "Shelf Registration Statement") and use its best efforts to cause it to be declared effective by the Commission as promptly as practical on or after the consummation of the Exchange Offer. The Company has agreed to maintain the effectiveness of the Shelf Registration Statement for, under certain circumstances, a maximum of two years, to cover resales of the Old Notes held by any such holders. 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. Guaranteed Delivery Holders of Old Notes who wish to tender their Old Procedures................ 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." Use of Proceeds........... There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent............ Norwest Bank Minnesota, National Association is serving as Exchange Agent in connection with the exchange offer of New Notes for Old Notes. 7 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 and have a different CUSIP number than the Old Notes, (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 liquidated damages 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 Indentures. See "Description of New Notes." Issuer.................... Globe Holdings, Inc. Securities Offered........ $49,086,000 aggregate principal amount at maturity of 14% Senior Discount Notes due 2009, Series B. Maturity Date............. August 1, 2009. Interest Payment Dates.... Cash interest will not accrue or be payable on the New Notes prior to August 1, 2003. Thereafter, cash interest on the New Notes will accrue at a rate of 14% per annum and will be payable semi-annually in arrears on February 1 and August 1 of each year, commencing February 1, 2004. Original Issue Discount... The New Notes are being offered with original issue discount for United States federal income tax purposes. Although cash interest will not be due on the New Notes prior to February 1, 2004, original issue discount will accrue from the Issue Date and will be included as interest income periodically (including for periods ending prior to February 1, 2004) in a holder's gross income for United States federal income tax purposes in advance of receipt of the cash payments to which the income is attributable. Mandatory Sinking Fund or Redemption................ None. Optional Redemption....... The New Notes may be redeemed, in whole or in part, at any time on or after August 1, 2003, at the option of the Company, at the redemption prices set forth herein, plus, in each case, accrued and unpaid interest and Liquidated Damages, if any, to the date of redemption. In addition, at any time prior to August 1, 2001, the Company may, at its option, redeem up to 35% in aggregate principal amount at maturity of the New Notes at a redemption price of 114% of the Accreted Value thereof, plus Liquidated Damages, if any, to the date of redemption, with the net cash proceeds of one or more Equity 8 Offerings, provided that not less than 65% of the aggregate principal amount at maturity of the New Notes remain outstanding immediately after the occurrence of any such redemption. Change of Control......... In the event of a Change of Control, each Holder will have the right to require the Company to make an offer to repurchase such Holder's New Notes, in whole or in part, at a price, on or prior to August 1, 2003, equal to 101% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of repurchase and thereafter at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of repurchase. In addition, upon the occurrence of a Change of Control at any time prior to August 1, 2003, the New Notes may be redeemed, in whole but not in part, at the option of the Company at a redemption price equal to the sum of (i) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of redemption, plus (ii) the Applicable Premium. Ranking................... The New Notes will be senior unsecured obligations of the Company and will be effectively subordinated to all obligations of the subsidiaries of the Company (including Globe Manufacturing) and to all secured obligations of the Company to the extent of the value of the assets securing such obligations. The New Notes will rank pari passu with any existing and future Senior Debt of the Company and will rank senior to all Subordinated Debt of the Company. The Company is a holding company with no operations of its own and its only material asset is the capital stock of Globe Manufacturing (all of which is pledged to secure obligations under the Senior Credit Facility). As a result of this holding company structure, the New Notes will effectively rank junior in right of payment to all creditors of Globe Manufacturing and its subsidiaries, including the lenders under the Senior Credit Facility, holders of the Senior Subordinated Notes and trade creditors. As of June 30, 1998, on a pro forma basis after giving effect to the Transactions, (i) the Company would have had no outstanding Senior Debt (other than the New Notes and its guarantee under the Senior Credit Facility) and (ii) the Company's subsidiaries would have had total debt and other liabilities of $289.1 million (excluding unused commitments of $45.0 million under the Senior Credit Facility). The Indenture (as defined) permits the Company and its subsidiaries to incur additional debt, subject to certain limitations. See "Description of the New Notes." Guarantees................ None. Certain Covenants......... The Indenture pursuant to which the New Notes will be issued (the "Indenture"), among other things, limits the ability of the Company and its Restricted Subsidiaries to: (i) incur additional debt; (ii) issue Disqualified Stock; (iii) make certain restricted payments; (iv) grant liens on assets; (v) merge, consolidate or transfer substantially all of their assets; (vi) enter into transactions with Related Persons; (vii) 9 impose restrictions on any Restricted Subsidiary's ability to pay dividends or make certain other payments to the Company and its Restricted Subsidiaries; (viii) enter into certain guarantees; (ix) sell assets; and (x) issue capital stock of Restricted Subsidiaries. A description of the terms of the Notes, including definitions of terms which are capitalized above, is set forth herein under "Description of the Notes." RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered before tendering Old Notes in exchange for New Notes, including factors affecting forward-looking statements. These risk factors are generally applicable to the Old Notes as well as the New Notes. 10 SUMMARY CONSOLIDATED FINANCIAL DATA The following information is qualified in its entirety by the consolidated financial statements of the Company. The following summary consolidated financial data as of the dates and for the periods indicated were derived from the audited and unaudited consolidated financial statements of the Company contained elsewhere in this Prospectus. The unaudited consolidated financial data at June 30, 1998 and for the six months ended June 30, 1997 and June 30, 1998 include all adjustments (consisting only of normal recurring adjustments) which management considers necessary for a fair presentation of the financial information for these unaudited periods. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of the results of operations that may be expected for the full fiscal year 1998. The unaudited pro forma consolidated financial data and the summary unaudited pro forma consolidated balance sheet data as of June 30, 1998 give effect to the Transactions as if they had occurred on such date (for balance sheet data) or at the beginning of the period (for statement of income data). None of the pro forma consolidated financial data set forth below (including the summary unaudited pro forma consolidated balance sheet data) purport to be indicative of the results that actually would have been obtained had all of the events been completed as of the date assumed and for the periods presented and are not intended to be a projection of the Company's future results or financial position. The following summary consolidated financial information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of the Company and the related notes thereto.
PRO FORMA FISCAL YEAR ENDED SIX MONTHS SIX MONTHS DECEMBER 31, PRO FORMA ENDED JUNE 30, ENDED ---------------------------- DECEMBER 31, ---------------- JUNE 30, 1995 1996 1997 1997 1997 1998 1998 -------- -------- -------- ------------ ------- ------- ---------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales............... $128,319 $152,603 $170,941 $170,941 $84,283 $92,490 $ 92,490 Cost of sales........... 97,182 110,609 115,099 115,099 56,450 59,556 59,556 -------- -------- -------- -------- ------- ------- -------- Gross margin........... 31,137 41,994 55,842 55,842 27,833 32,934 32,934 Selling, general and administrative expenses............... 18,515 21,705 24,381 24,286 10,616 12,083 12,042 Research and development costs.................. 2,260 2,533 2,633 2,633 1,190 2,040 2,040 -------- -------- -------- -------- ------- ------- -------- Operating income....... 10,362 17,756 28,828 28,923 16,027 18,811 18,852 Other income (expenses): Interest, net........... (6,030) (5,285) (3,968) (29,406) (2,097) (1,788) (14,805) Loss in investment in joint venture (1)...... (643) -- -- -- -- -- -- Other income, etc....... 438 875 372 372 86 655 655 -------- -------- -------- -------- ------- ------- -------- Income before income taxes and extraordinary income.. 4,127 13,346 25,232 (111) 14,016 17,678 4,702 Provision for income taxes.................. 1,718 4,784 8,383 (1,805) 5,255 6,638 1,422 -------- -------- -------- -------- ------- ------- -------- Income before extraordinary item.... 2,409 8,562 16,849 1,694 8,761 11,040 3,280 Loss from write-off of deferred financing cost, net (2).......... 1,294 -- 301 301 301 -- -- -------- -------- -------- -------- ------- ------- -------- Net income.............. $ 1,115 $ 8,562 $ 16,548 $ 1,393 $ 8,460 $11,040 $ 3,280 ======== ======== ======== ======== ======= ======= ======== OTHER FINANCIAL DATA: Gross margin %.......... 24.3% 27.5% 32.7% 32.7% 33.0% 35.6% 35.6% EBITDA (3) (5).......... $ 22,480 $ 28,960 $ 42,377 $ 42,249 $21,203 $25,161 $ 25,097 EBITDA margin % (4) (5). 17.5% 19.0% 24.8% 24.7% 25.2% 27.2% 27.1% Depreciation and amortization........... $ 10,688 $ 9,676 $ 12,208 $ 12,208 $ 4,562 $ 5,366 $ 5,366 Capital expenditures.... 8,640 5,806 17,101 17,230 6,913 17,127 17,192 Ratio of Earnings to Fixed Charges.......... N/A(9) 1.29x
11
JUNE 30, 1998 ------------------ PRO ACTUAL FORMA (5) -------- --------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Cash........................................................ $ 2,466 $ 2,919 Working capital............................................. 14,877 28,961 Working capital as adjusted (7)............................. 30,567 32,873 Property, plant and equipment, net.......................... 69,814 69,814 Total assets................................................ 121,853 136,169 Total debt (8).............................................. 60,716 296,273 Shareholders' equity (deficit) (8).......................... 42,149 (179,052)
- --------------------- (1) Represents the Company's share of the operating losses incurred by a joint venture in which the Company acquired a 40% interest in 1990. The Company accounted for its investment in the joint venture using the equity method of accounting. (2) Reflects non-recurring charges related to the write-off of the unamortized balance of deferred financing costs in the year in which the related refinancing occurred. The amounts are shown net of applicable income tax. (3) EBITDA represents income before interest expense (net), income taxes, depreciation and amortization, gain or loss on disposal of assets, noncash charges associated with net periodic postretirement benefit costs, non-cash stock based compensation and extraordinary, unusual, non-recurring charges consisting of (a) those referred to in footnotes (1) and (2) above, (b) certain nonrecurring legal expenses related to environmental matters of $454,000 in 1997, $308,000 and $67,000 in the six months ended June 30, 1997 and 1998, respectively, and $214,000 in the twelve months ended June 30, 1998 and (c) fees and expenses relating to the Transactions. EBITDA is not intended to represent cash flow from operations or net income as defined by generally accepted accounting principles and should not be considered as a measure of liquidity or an alternative to, or more meaningful than, operating income or operating cash flow as an indication of the Company's operating performance. EBITDA is included herein because management believes that certain investors find it a useful tool for measuring the Company's ability to service its debt. (4) EBITDA margin represents EBITDA as calculated in footnote (3) above as a percentage of net sales. (5) The unaudited pro forma consolidated financial data and related ratios give effect to the consummation of the Transactions as if they occurred on the first day of such period for statement of income data and as of such date for balance sheet data. Pro forma EBITDA represents EBITDA for such period as adjusted (a) to exclude the amount ($872,000) by which the salary and bonus paid by the Company to Thomas A. Rodgers, Jr. during such period exceeds the amount that will be paid to Mr. Rodgers following the Transactions, and (b) to include the annual $1.0 million management fee to be paid to an affiliate of Code Hennessy & Simmons following the consummation of the Transactions. In connection with the Transaction the Company incurred a one time compensation expense charge of $3,318 associated with the vesting of stock options and $2,320 associated with bonuses paid to certain members of management. Although the Company expects to charge such amounts in the period following the transaction date, such charge is not reflected in the accompanying pro forma financial information. See "Management" and "Certain Relationships and Related Transactions--Management Agreement" and "--Consulting Agreement." (6) Cash interest expense represents interest expense less the non-cash amortization of debt issuance costs and less the non-cash interest expense from the accretion of original issue discount on the Notes. (7) Working capital as adjusted represents the difference between current assets less cash, and current liabilities less the current portions of long term debt and long term capital leases and notes payable. (8) Of the $25.0 million gross proceeds from the Offering, $24.4 million has been allocated to the Notes and $0.6 million has been allocated to the Warrants. (9) Earnings on a pro forma basis for the full year ended December 31, 1997 were inadequate to cover fixed charges by $746. 12 RISK FACTORS The following risk factors should be considered carefully in addition to the other information contained in this Prospectus, before tendering the Old Notes in exchange for the New Notes. In connection with the forward-looking statements which appear in this Prospectus, prospective purchasers of New Notes should carefully review the factors discussed below and the cautionary statements referred to in "Disclosure Regarding Forward-Looking Statements." The risk factors set forth below are generally applicable to the Old Notes as well as the New Notes. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of 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. The Company does not currently anticipate that it will register the Old Notes under the Securities Act. Based on interpretations by the staff of the Commission set forth in no- action letters issued to third parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1988) (the "Exxon Capital Letter"), Morgan Stanley & Co. Incorporated, SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley Letter"), and similar letters, the Company believes that the New Notes issued pursuant to the Exchange Offer may be offered for resale, resold or 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 such Holder has no arrangement with any person to participate in the distribution of such New Notes. Notwithstanding the foregoing, each 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 broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (other than Old Notes acquired directly from the Company). The Company has agreed that, for a period of 180 days from the Expiration Date, it will make this Prospectus available to any broker- dealer for use in connection with any such resale. See "Plan of Distribution." Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes cannot rely on the Morgan Stanley Letter or similar letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. To the extent that 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." ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE NOTES The Old Notes were issued to, and the Company believes 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 this 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 new issues 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. 13 The Initial Purchaser has advised the Company that they currently intend to make a market in the New Notes, but they are 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 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 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. FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS Issuance of the New Notes in exchange for the Old Notes pursuant to the Exchange Offer will be made only after a timely receipt by the Company of such Old Notes, a properly completed and duly executed Letter of Transmittal (or Agent's Message) and all other required documents. Therefore, holders of the Old Notes desiring to tender such Old Notes in exchange for New Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Old Notes for exchange. Old Notes that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof, and, upon consummation of the Exchange Offer certain registration rights under the Registration Rights Agreement will terminate. 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. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." 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. See "The Exchange Offer." SUBSTANTIAL LEVERAGE AND DEBT SERVICE REQUIREMENTS The Company is highly leveraged. As a result of the Transactions, including the Initial Offering and the Initial Senior Subordinated Note Offering and the payment of a substantial portion of the net proceeds therefrom as the Cash Merger Consideration, the Company's aggregate indebtedness for borrowed money and interest expense increased and its shareholders' equity decreased. On a pro forma basis, after giving effect to the Transactions, the Company would have had total Debt (as defined) of $296.3 million and a shareholders' deficit of approximately $179.1 million as of June 30, 1998. In addition, subject to the restrictions in the Senior Credit Facility, the Indenture and the indenture governing the Senior Subordinated Notes (the "Senior Subordinated Note Indenture"), the Company may incur additional Debt from time to time to finance working capital, capital expenditures, acquisitions, or for other purposes. The Indenture, the Senior Subordinated Note Indenture and the Senior Credit Facility (or any replacement facilities of the Company or any subsidiary of the Company) contain certain restrictive financial and other covenants. The Company's high degree of leverage and restrictions in its debt agreements could have important consequences to the holders of the Securities, including the following: (i) a substantial portion of the Company's cash flow from operations will be dedicated to debt service and will not be available for operations and other 14 purposes; (ii) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes may be limited or impaired; (iii) the Company's operating flexibility with respect to certain matters will be limited by covenants contained in the Indenture, the Senior Subordinated Note Indenture and the Senior Credit Facility which will limit the ability of the Company and its Restricted Subsidiaries to, among other things, incur additional indebtedness, grant liens on assets, merge, consolidate or transfer substantially all of their assets, enter into transactions with Related Persons, impose restrictions on any Restricted Subsidiary's ability to pay dividends or make certain other payments to the Company and its Restricted Subsidiaries, enter into certain guarantees, sell assets and issue capital stock of Restricted Subsidiaries; (iv) the Company will be substantially more leveraged than certain of its competitors, which may place the Company at a competitive disadvantage; (v) the Company's degree of leverage may make it more vulnerable to economic downturns, may reduce its flexibility in responding to changing business and economic conditions and may limit its ability to pursue other business opportunities, to finance its future operations or capital needs, and to implement its business strategy; and (vi) certain of the Company's borrowings will be at variable rates of interest, which will expose the Company to the risk of increased interest rates. See "Business--Business Strategy," "Description of Senior Credit Facility," "Description of Senior Subordinated Notes" and "Description of the Notes." Required payments of principal and interest on the Company's long-term debt are expected to be financed from cash flow from operations and debt financings. The Company's ability to generate cash for the repayment of debt will be dependent upon the future performance of the Company's businesses, which will in turn be subject to financial, business, economic, and other factors affecting the business and operations of the Company, including factors beyond its control, such as prevailing economic conditions. There can be no assurance that cash flow from operations will be sufficient to enable the Company to service its debt and meet its other obligations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION Globe is a holding company and does not have any material operations or assets other than ownership of Globe Manufacturing. Accordingly, the Notes are effectively subordinated to all existing and future liabilities of the Company's subsidiaries, including indebtedness under the Senior Credit Facility and the Senior Subordinated Notes. As of June 30, 1998, after giving pro forma effect to the Transactions, the aggregate amount of liabilities of the Company's subsidiaries to which holders of the Notes would be effectively subordinated would have been approximately $286.6 million. The Company and its subsidiaries may incur additional indebtedness in the future, subject to certain limitations contained in the instruments governing their indebtedness. Any right of the Company to participate in any distribution of assets of its subsidiaries upon the liquidation, reorganization or insolvency of any such subsidiary (and the consequent right of the holders of the Notes to participate in the distribution of those assets) will be subject to the prior claims of the respective subsidiary's creditors. See "Description of Senior Credit Facility." LIMITATION ON THE PAYMENT OF FUNDS TO THE COMPANY BY ITS SUBSIDIARIES The Company's cash flow, and consequently its ability to service its debt, including its obligations under the Indenture, is dependent upon the cash flows of its subsidiaries and the payment of funds by such subsidiaries to the Company in the form of loans, distributions or otherwise. The Company's subsidiaries have no obligations, contingent or otherwise, to pay any amounts due pursuant to the Notes or to make any funds available therefor. In addition, the Senior Credit Facility and the Senior Subordinated Note Indenture impose, and agreements entered into in the future may impose, significant restrictions on distributions and the making of loans by Globe Manufacturing to the Company. Accordingly, repayments of the Notes may depend upon the ability of the Company to effect an equity offering or to refinance the Notes. 15 ORIGINAL ISSUE DISCOUNT The Old Notes were issued at a substantial discount from their principal amount. The New Notes are treated as a continuation of the Old Notes for Federal income tax purposes and the New Notes will also be considered to have been issued at a substantial discount. Consequently, holders generally will be required to include amounts in gross income for U.S. Federal income tax purposes in advance of receipt of any cash payment on the Notes to which the income is attributable. In addition, the Notes will be subject to the "applicable high yield discount obligation" rules under the Internal Revenue Code of 1986, as amended, which will defer and, in part, eliminate the Company's ability to deduct original issue discount that accrues with respect to the Notes. Prospective investors should consult their own tax advisors with respect to the application of the original discount rules and the "applicable high yield discount obligation" rules (including the limited availability of a dividends received deduction for a corporate holder). See "Certain United States Federal Tax Considerations" for a more detailed discussion of the U.S. Federal income tax considerations relevant to holders with respect to the purchase, ownership and disposition of the Notes. If a bankruptcy case is commenced by or against the Company under the United States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the Notes, the claim of a holder of Notes with respect to the principal amount thereof will likely be limited to an amount equal to the sum of (i) the issue price of the Notes and (ii) the original issue discount that is not deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code. Any original issue discount that was not amortized as of any such bankruptcy filing would likely constitute "unmatured interest." CHANGE OF CONTROL A Change of Control (as defined) could require the Company and Globe Manufacturing to refinance substantial amounts of indebtedness, including indebtedness under the Notes, the Senior Subordinated Notes and the Senior Credit Facility. Upon the occurrence of a Change of Control, the holders of the Notes would be entitled to require the Company to repurchase the Notes at a purchase price equal to 101% of the Accreted Value thereof plus Liquidated Damages, if any (if such date of repurchase is prior to August 1, 2003) or 101% of the principal amount of such Notes, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of repurchase (if such date of repurchase is on or after August 1, 2003). The source of funds for any such repurchase would be cash dividended to the Company by Globe Manufacturing or other sources, including borrowings, sales of equity or funds provided by a new controlling person. The Senior Credit Facility and the Senior Subordinated Note Indenture limit the ability of Globe Manufacturing to issue dividends, and there can be no assurance that sufficient funds will be available at the time of any Change of Control to make any required repurchases of the Notes tendered. In addition, the Senior Credit Facility prohibits the repurchase of the Notes by the Company in such an event, unless and until such time as the indebtedness under the Senior Credit Facility is repaid in full. These requirements and the effective subordination of the Notes will limit the ability of the Company to repurchase the Notes. The Company's failure to make such repurchases in such instances would result in a default under the Notes. Future indebtedness of the Company may also contain restrictions or repayment requirements with respect to certain events or transactions that would constitute a Change of Control. In the event of a Change of Control, there can be no assurance that the Company would have sufficient assets to satisfy all of its obligations under the Notes. The effect of such requirements may make it more difficult or delay attempts by others to obtain control of the Company. See "Description of the Notes--Change in Control," "Description of Senior Credit Facility" and "Description of Senior Subordinated Notes." COMPETITION The elastomeric fiber industry is highly competitive. The Company competes in the spandex fiber markets primarily with E.I. du Pont de Nemours and Company ("DuPont") and Bayer AG ("Bayer"), both of which have domestic facilities, and with a number of foreign competitors. The Company's primary competitors in the latex thread markets are foreign producers. Some of the Company's competitors have substantially greater 16 financial, marketing, manufacturing, distribution, sales and support resources, market share and brand awareness than the Company. There can be no assurance that the Company will be able to compete successfully in the future against its competitors or that the Company will not experience increased price competition, which could materially and adversely affect the Company's results of operations, financial condition and its ability to meet its obligations under the Notes. See "Business--Competition." ENVIRONMENTAL COMPLIANCE The Company is subject to comprehensive and evolving federal, state and local environmental, health and safety requirements, including laws and regulations relating to air emissions, wastewater management, the handling and disposal of waste and the cleanup of properties affected by hazardous substances. Violations of environmental, health and safety laws may result in the imposition of significant fines and other penalties, and certain environmental laws impose joint and several liability, without regard to fault, on persons responsible for releases of hazardous substances to the environment. The Company's management believes that its operations have been and are in substantial compliance with environmental, health and safety requirements, and that it has no liabilities arising under such requirements, except as would not be expected to have a material adverse effect on the Company's operations, financial condition or competitive position. Some risk of environmental, health and safety liability is inherent in the Company's business, however, and there can be no assurance that material environmental, health or safety costs will not arise in the future. Since 1986, the Company has received requests for information and related correspondence from the U.S. Environmental Protection Agency (the "U.S. EPA") and other third parties indicating that the Company might be responsible under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") or equivalent state laws (collectively, the "Superfund laws") for costs associated with the investigation and cleanup of ten contaminated sites. The Company's management believes that the Company has resolved its involvement with respect to eight of these sites (five of which were inter-related) since 1988 and that the Company's involvement in matters arising under the Superfund laws will not have a material adverse effect on the Company's operations, liquidity or financial condition. In December 1996, the Company's management learned that U.S. EPA and the U.S. Attorney's Office were conducting an investigation into whether the Company had engaged in criminal violations of environmental laws with respect to its Fall River, Massachusetts facility. The investigators have not informed the Company of the scope of their inquiry. The Company has provided certain information regarding its Fall River operations to the federal investigators and believes it has cooperated fully with their inquiry. The Company does not know whether the investigation is currently active. If the Company is charged with violations of environmental laws, it may be subject to substantial fines and other penalties, which could have a material adverse effect on the Company's results of operations, financial condition and its ability to meet its obligations under the Notes. See "Business--Environmental, Health and Safety Matters." DEPENDENCE ON SIGNIFICANT CUSTOMERS The Company's top ten customers accounted for approximately 48% of 1997 sales, with one customer, Unifi, Inc. (a manufacturer of covered yarns for men's and women's hosiery and narrow fabrics), accounting for approximately 9% of 1997 sales. As is customary in the elastomeric fiber industry, the Company does not generally have long-term supply agreements with its customers. While the Company believes its customer relationships are generally good, a significant decrease or interruption in business from any of the Company's significant customers could have a material adverse effect on the Company's results of operations, financial condition and its ability to meet its obligations under the Notes. See "Business--Customers." 17 DEPENDENCE ON SUPPLIERS During 1997, raw materials represented 42% of the Company's total cost of sales and 28% of net sales. The primary raw materials used by the Company are polytetramethylene ether glycol, which the Company purchases from BASF Corporation ("BASF"), and polyester resin, which the Company purchases from two suppliers. These materials are used in a wide variety of products, and based on its experience, management believes that adequate quantities of these materials will be available from existing or alternative suppliers in the foreseeable future. There can be no assurance, however, that such materials will continue to be available in adequate supply in the future or that shortages or disruptions in supply will not result in a material adverse effect on the Company's results of operations, financial condition or ability to meet its obligations under the Notes. The Company's ten largest suppliers accounted for approximately 93% of its total raw material purchases and 31% of its total cost of sales in 1997, with BASF, Polyurethane Specialties Corp. and Ennar-Latex, Inc. accounting for 39%, 24% and 16% of such raw material purchases, respectively. Although the prices for the Company's raw materials have generally been stable over the past five years, the prices of certain of the raw materials used by the Company have fluctuated, and there can be no assurance that the prices of the Company's raw materials will not fluctuate in the future. A significant increase in the price of raw materials that cannot be passed on to customers could have a material adverse effect on the Company's results of operations, financial condition and its ability to meet its obligations under the Notes. FOREIGN SALES RISK Sales to international customers represented approximately 28% of sales in 1997 and 47% of total receivables as of December 31, 1997, and the Company is seeking to increase its international sales. Demand for the Company's products is affected by economic and political conditions in each of the countries in which it sells its products and by certain other risks of doing business abroad, including fluctuations in the value of currencies (which may affect demand for products priced in United States dollars), import duties, changes to import and export regulations (including quotas), possible restrictions on the transfer of funds, labor or civil unrest, long payment cycles, greater difficulty in collecting accounts receivable and the burdens and cost of compliance with a variety of foreign laws. Changes in policies by foreign governments could result in, for example, increased duties, higher taxation, currency conversion limitations, or limitations on imports or exports, any of which could have a material adverse effect on the Company's results of operations, financial condition and its ability to meet its obligations under the Notes. Globe's principal export markets are Europe, Central/South America and Asia. The current economic crisis in Asia has resulted in a flood of fiber, fabric and apparel into Europe from Asia, which has had a negative impact on prices and the Company's sales in Europe. A continued economic crisis in Asia may precipitate further downturns in spandex fiber consumption in all of Globe's export markets. TEXTILE INDUSTRY AND CYCLICALITY In 1997, approximately 92% of the Company's sales were to the textile and apparel industries. These industries are highly cyclical and are characterized by rapid shifts in consumer demand, as well as competitive pressures and price and demand volatility. The demand for the Company's products is principally dependent upon the level of demand for certain types of apparel. The demand for apparel is in turn dependent on consumer spending, which may be adversely affected by economic downturns, changing retailer and consumer demands, declines in consumer confidence or spending, and other factors beyond the Company's control. A reduction in the level of demand for apparel or a decrease in consumer demand for products containing elastomeric fibers could have a material adverse effect on the Company's result of operations, financial condition and its ability to meet its obligations under the Notes. CONTROL BY PRINCIPAL SHAREHOLDER Code Hennessy & Simmons owns approximately 75.6% of the outstanding voting stock of the Company. Consequently, Code Hennessy & Simmons, through its ability to designate all of the members of the board of directors of the Company, exercises significant influence over the policies and direction of the Company. Code Hennessy & Simmons' interests may differ from the interests of the holders of the Notes. See "Management--Executive Officers and Directors" and "Certain Relationships and Related Transactions." 18 PROTECTION OF INTELLECTUAL PROPERTY The Company's success is dependent on the proprietary technology included in its manufacturing processes. Much of this technology is not patented. The Company relies primarily on intellectual property laws, confidentiality procedures and contractual provisions to protect its intellectual property. The Company seeks to protect the majority of its technology under trade secret laws, which afford only limited protection. There can be no assurance that intellectual property laws will protect the confidentiality of the Company's technology and processes. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to obtain and use information that the Company regards as proprietary. Furthermore, there can be no assurance that others will not independently develop similar technology or design around any intellectual property rights held by the Company. In addition, no assurance can be given that alternative technologies will not be developed that are superior to or less costly than the Company's existing technology. The Company may in the future be notified that it is infringing certain patent or other intellectual property rights of others, although there are no such pending lawsuits against the Company or unresolved notices that it is infringing intellectual property rights of others. No assurance can be given that in the event of such infringement, licenses could be obtained on commercially reasonable terms, if at all, or that litigation will not occur. The failure to obtain necessary licenses or other rights or the occurrence of litigation arising out of such claims could have a material adverse effect on the Company's results of operations and financial condition and its ability to meet its obligations under the Notes. EXPANSION OF PRODUCTION CAPACITY All of the Company's significant spandex fiber competitors have been engaged in production expansion, product improvement and global marketing programs since 1993. The Company's ability to achieve its strategic objectives and to retain or increase its current share of the spandex fiber market will require it to make significant capital expenditures in order to expand its production capacity, particularly for fine denier spandex fiber. The Company is adding 3.6 million pounds of fine denier spandex fiber capacity to its facility in Tuscaloosa, Alabama at an estimated cost of $22.1 million, with approximately half of this increased capacity expected to be on line in the fourth quarter of 1998 and the balance expected to be on line in the first quarter of 1999. There can be no assurance that the expansion will be completed within the Company's timetable or budget. A lengthy delay in the completion of the Tuscaloosa plant expansion or significant cost over-runs in connection therewith could have a material adverse effect on the Company's result of operations, financial condition and its ability to meet its obligations under the Notes. ANTITRUST AND ANTIDUMPING PROCEEDINGS In April 1997 two domestic purchasers of extruded latex thread filed a complaint against a number of foreign manufacturers and distributors of such thread, including an Indonesian limited liability company in which the Company then owned a 40% interest (the "Joint Venture"). The complaint alleges an international conspiracy to restrain trade in, and fix prices of, the thread in the United States ("U.S."). Neither the Company nor Globe Manufacturing has been named as a defendant in the case. The Joint Venture has alleged in its motion to dismiss that not all parties to the conspiracy have been joined, and there can be no assurance that the Company will not be named in the future. On March 31, 1998 a petition was filed with the U.S. Department of Commerce alleging subsidization and dumping of Indonesian extruded latex thread. The Department of Commerce is currently conducting an investigation into the allegations. The proceedings could result in additional duties being levied on extruded latex thread imported from Indonesia. During 1996 and 1997, the Company purchased approximately $5.9 million and $9.9 million of latex thread from the Joint Venture for resale in the North American market. 19 DEPENDENCE ON SENIOR MANAGEMENT The Company's success depends to a significant extent upon the efforts and abilities of the Company's senior management employees. The loss of the services of one or more of such persons could have a material adverse effect on the Company. The Company believes that its continued future success will depend on its ability to attract, retain or develop highly skilled managerial, technical and marketing personnel. There can be no assurance that it will be able to do so. See "Management." IMPACT OF THE YEAR 2000 ISSUE The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. If the Company, its significant customers or suppliers fail to make necessary modifications and conversions on a timely basis, the year 2000 issue could have a material adverse effect on Company operations. However, the impact cannot be quantified at this time. The Company believes that its competitors face similar risks. The Company has established a corporate-wide project team to identify non- compliant software and complete the corrections required for the year 2000 issue. The Company has completed its repairs for major manufacturing systems in all locations. The Company also completed its repair of its major financial systems. The Company's current target is to resolve compliance issues in its distribution systems and other ancillary systems by March 31, 1999. The Company also has made inquiry of its major customers and suppliers to assess their compliance. Nevertheless, there can be no absolute assurance that there will not be a material adverse effect on the Company if third party governmental or business entities do not convert or replace their systems in a timely manner and in a way that is compatible with the Company's systems. Costs related to the year 2000 issue are funded through operating cash flows. Through June 30, 1998, the Company expended approximately $108,000 in systems development and remediation efforts, including the cost of new software and modifying the applicable code of existing software. The Company estimates remaining costs to be between $50,000 and $100,000. The Company presently believes that the total cost of achieving year 2000 compliant systems is not expected to be material to the Company's financial condition, liquidity or results of operations. Time and cost estimates are based on currently available information. Developments that could affect estimates include, but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code and systems and remediation success of the Company's customers and suppliers. CERTAIN INSOLVENCY CONSIDERATIONS The incurrence by the Company of indebtedness such as the Notes to finance the Transactions 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, or the exchange of the Old Notes for New Notes, and the application of the proceeds therefrom, either (a) the Company incurred such indebtedness with the intent of hindering, delaying or defrauding creditors or (b) the Company received less than reasonably equivalent value or consideration for incurring such indebtedness and (i) was insolvent or was rendered insolvent by reason of such transactions, (ii) was engaged in a business or transaction for which the assets remaining with the Company constituted unreasonably small capital or (iii) intended to incur, 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 or obligations of the Company, avoid the issuance of such indebtedness and direct the 20 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 mature. There can be no assurance as to what standard a court would apply in order to determine insolvency. A court may find that the Company did not receive fair consideration or reasonably equivalent value for the incurrence of the indebtedness represented by the Old Notes. In addition, if a court were to find that any of the components of the Transactions constituted a fraudulent transfer, a court may find that the Company did not receive fair consideration or reasonably equivalent value for the incurrence of the indebtedness represented by the Old Notes and the New Notes. The Company believes that it received equivalent value at the time the indebtedness under the Notes was incurred. In addition, the Company does not believe that, after giving effect to the Transactions, it (i) was or will be insolvent or rendered insolvent, (ii) was or will be engaged in a business or transaction for which its remaining assets constituted unreasonably small capital or (iii) intends or intended to incur, or believes or believed that it will or would incur, debts beyond its ability to pay such debts as they mature. These beliefs are based on the Company's operating history and analysis of internal cash flow projections and estimated values of assets and liabilities of the Company at the time of the Initial Offering. There can be no assurance, however, that a court passing on these issues would make the same determination. ABSENCE OF ESTABLISHED PUBLIC MARKET The Notes are a new issue of securities for which there is no established trading market. While application has been made to have the Notes accepted for trading in the PORTAL market, there can be no assurance that an active trading market for the Notes will develop in the PORTAL market or elsewhere. The Company has been advised by the Initial Purchaser that the Initial Purchaser currently intends to make a market in the Notes; however, it is not obligated to do so and any market making activity may be discontinued at any time. Therefore, there can be no assurance that an active public market for the Notes will develop or, if developed, will continue to exist. If a public trading market develops for the Notes, future trading prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's results of operations and the markets for similar securities. See "Plan of Distribution." RISKS REGARDING FORWARD-LOOKING STATEMENTS This Prospectus contains certain forward-looking statements, including, without limitation, statements concerning the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "plans," or "continue" or the negative thereof or variations thereon or similar terminology. Without limiting the foregoing, forward-looking statements are set forth herein under the captions "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, those identified under "Risk Factors" and elsewhere in this Prospectus and other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. Actual results could differ materially from these forward-looking statements. 21 USE OF PROCEEDS This Exchange Offer is intended to satisfy certain of the Company's obligations under the Purchase Agreement and the Registration Rights Agreement. The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. In consideration for issuing the New Notes contemplated in this Prospectus, the Company will receive Old Notes in like principal amount, the form and terms of which are the same as the form and terms of the New Notes (which replace the Old Notes), except as otherwise described herein. The Old Notes surrendered in exchange for New Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the New Notes will not result in any increase or decrease in the indebtedness of the Company. As such, no effect has been given to the Exchange Offer in the pro forma statements or capitalization table. The net proceeds to the Company from the sale of the Old Notes in the Initial Offering (after deducting discounts and estimated fees and expenses) were utilized by the Company to repay the CHS Loan. See "Certain Relationships and Related Transactions--Recapitalization," "Description of Senior Credit Facility" and "Description of Senior Subordinated Notes." 22 CAPITALIZATION The following table sets forth the unaudited historical consolidated capitalization of the Company as of June 30, 1998 and as adjusted on a pro forma basis to give effect to the Transactions as if they had occurred on June 30, 1998. See "Use of Proceeds." This table should be read in conjunction with the "Selected Consolidated Financial Data" and the related notes thereto, and the Company's consolidated financial statements, including related notes thereto, included elsewhere in this Prospectus.
AS OF JUNE 30, 1998 ------------------- ACTUAL PRO FORMA -------- --------- (DOLLARS IN THOUSANDS) Cash and cash equivalents........................... $ 2,466 $ 2,919 ======== ========= Long-term debt (including current maturities): Old Credit Facility............................... $ 60,625 $ -- Senior Credit Facility: (1) Revolving loan facility......................... -- 6,800 Term loan facility.............................. -- 115,000 Old Senior Subordinated Notes..................... -- 150,000 Old Notes (2)..................................... -- 24,382 Capital lease obligations......................... 91 91 -------- --------- Total long-term debt.......................... 60,716 296,273 -------- --------- Shareholders' equity (deficit): Series A Cumulative Preferred Stock, $0.01 par value, 30,000 shares authorized, no shares issued and outstanding actual; no shares authorized, issued or outstanding pro forma.................. -- -- Class A Preferred stock, $0.01 par value, no shares authorized, issued or outstanding actual, 40,000 shares authorized and 29,100 shares issued and outstanding pro forma (3).................... -- -- Paid in capital on preferred stock................ -- 25,850 Common Stock: Class A Common Stock, $0.01 par value, 2,000,000 shares authorized, 100,000 issued and outstanding actual; 5,000,000 shares authorized, 2,179,150 shares issued and outstanding pro forma (4)...... -- -- Class B Common Stock, $0.01 par value, 2,000,000 shares authorized, 931,404 shares issued and outstanding actual; 350,000 shares authorized, no shares issued or outstanding pro forma........... -- -- Class C Common Stock, $0.01 par value, no shares authorized, issued or outstanding actual; 600,000 shares authorized, no shares issued or outstanding actual............................... -- 22 Paid in capital on common stock (2)............... 10,785 17,830 Less treasury stock............................. (32,844) -- -------- --------- Retained earnings (deficit)................... 64,190 (222,754) -------- --------- 42,149 (179,052) -------- --------- Total capitalization.......................... $102,865 $ 117,221 ======== =========
- ---------------------- (1) The Senior Credit Facility provides for term loans in an aggregate principal amount of $115.0 million and revolving loans of up to $50.0 million. See "Description of Senior Credit Facility." (2) Of the $25.0 million gross proceeds from the Initial Offering, $24.4 million has been allocated to the Notes and $0.6 million has been allocated to the Warrants. (3) Excludes the 900 shares of Class A Preferred Stock issuable upon exercise of options. (4) Excludes the 69,481 shares of Common Stock issuable upon exercise of the Warrants and the 67,395 shares of Common Stock issuable upon exercise of stock options. 23 SELECTED CONSOLIDATED FINANCIAL DATA The following information is qualified in its entirety by the consolidated financial statements of the Company. The following selected consolidated financial data as of the dates and for the periods indicated were derived from the audited and unaudited consolidated financial statements of the Company contained elsewhere in this Prospectus, except data as of, and for the years ended December 31, 1993, and 1994, which was derived from audited consolidated financial statements of the Company not included in this Prospectus. The unaudited consolidated financial statements for the six months ended June 30, 1997 and June 30, 1998 include all adjustments consisting only of normal recurring adjustments which management considers necessary for a fair presentation of results for these unaudited periods. The results of operations for the six months ended June 30, 1998 are not necessarily indicative of results of operations that may be expected for the full fiscal year 1998. The following selected consolidated financial information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of the Company and the related notes thereto appearing elsewhere in this Prospectus.
SIX MONTHS ENDED FISCAL YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------ ----------------- 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- -------- ------- -------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Net sales............... $107,612 $112,475 $128,319 $152,603 $170,941 $84,283 $ 92,490 Cost of sales........... 75,980 84,321 97,182 110,609 115,099 56,450 59,556 -------- -------- -------- -------- -------- ------- -------- Gross margin........... 31,632 28,154 31,137 41,994 55,842 27,833 32,934 Selling, general and administrative expenses............... 13,467 14,152 18,515 21,705 24,381 10,616 12,083 Research and development costs.................. 1,561 3,506 2,260 2,533 2,633 1,190 2,040 -------- -------- -------- -------- -------- ------- -------- Operating income....... 16,604 10,496 10,362 17,756 28,828 16,027 18,811 Other income (expenses): Interest, net........... (2,212) (3,514) (6,030) (5,285) (3,968) (2,097) (1,788) Loss in investment in joint venture (1)...... -- (617) (643) -- -- -- -- Other income, etc....... 492 341 438 875 372 86 655 -------- -------- -------- -------- -------- ------- -------- Income before income taxes and extraordinary income.. 14,884 6,706 4,127 13,346 25,232 14,016 17,678 Provision for income taxes.................. 5,680 2,882 1,718 4,784 8,383 5,255 6,638 -------- -------- -------- -------- -------- ------- -------- Income before extraordinary item.... 9,204 3,824 2,409 8,562 16,849 8,761 11,040 Loss from write-off of deferred financing cost, net (2)................ -- -- 1,294 -- 301 301 -- -------- -------- -------- -------- -------- ------- -------- Net income............. $ 9,204 $ 3,824 $ 1,115 $ 8,562 $ 16,548 $ 8,460 $ 11,040 ======== ======== ======== ======== ======== ======= ======== OTHER FINANCIAL DATA: Gross margin %.......... 29.4% 25.0% 24.3% 27.5% 32.7% 33.0% 35.6% EBITDA (3).............. $ 23,747 $ 20,509 $ 22,480 $ 28,960 $ 42,377 $21,203 $ 25,161 EBITDA margin % (4)..... 22.1% 18.2% 17.5% 19.0% 24.8% 25.2% 27.2% Depreciation and amortization........... $ 5,284 $ 8,228 $ 10,688 $ 9,676 $ 12,208 $ 4,562 $ 5,366 Capital expenditures.... $ 24,542 $ 24,284 $ 8,640 $ 5,806 $ 17,101 $ 6,913 $ 17,127 Ratio of earnings to fixed charges (5)...... 6.4x 1.9x 1.6x 3.4x 6.3x 6.8x 8.8x DECEMBER 31, JUNE 30, ------------------------------------------------ ----------------- 1993 1994 1995 1996 1997 1997 1998 -------- -------- -------- -------- -------- ------- -------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Cash.................... $ 2,241 $ 1,336 $ 3,143 $ 3,101 $ 1,947 $ 2,376 $ 2,466 Working capital......... 8,021 9,391 5,052 4,263 19,453 19,339 14,877 Working capital as adjusted (6)........... 11,308 19,361 20,747 17,250 27,518 25,522 30,567 Property, plant and equipment, net......... 40,332 56,323 53,499 50,122 57,950 52,554 69,814 Total assets............ 69,599 93,414 92,824 91,329 105,133 98,509 121,853 Total debt.............. 50,141 69,182 66,698 50,615 56,917 59,215 60,716 Redeemable cumulative preferred stock........ 6,466 6,466 6,466 6,466 -- -- -- Shareholders' equity.... 2,324 5,298 5,563 13,594 31,109 20,230 42,149
24 - ---------------------- (1) Represents the Company's share of the operating losses incurred by a joint venture in which the Company acquired a 40% interest in 1990. The Company accounted for its investment in the joint venture using the equity method of accounting. (2) Reflects non-recurring charges related to the write-off of the unamortized balance of deferred financing costs in the year in which the related refinancing occurred. The amounts are shown net of applicable income tax. (3) EBITDA represents income before interest expense (net), income taxes, depreciation and amortization, gain or loss on disposal of assets, noncash charges associated with net periodic postretirement benefit costs, non- cash stock based compensation and extraordinary, unusual, non-recurring charges consisting of (a) those referred to in footnotes (1) and (2) above, and (b) certain nonrecurring legal expenses related to environmental matters of $454,000 in 1997, $308,000 and $67,000 in the six months ended June 30, 1997 and 1998, respectively, and $214,000 in the twelve months ended June 30, 1998. EBITDA is not intended to represent cash flow from operations or net income as defined by generally accepted accounting principles and should not be considered as a measure of liquidity or an alternative to, or more meaningful than, operating income or operating cash flow as an indication of the Company's operating performance. EBITDA is included herein because management believes that certain investors find it a useful tool for measuring the Company's ability to service its debt. (4) EBITDA margin represents EBITDA as calculated in footnote (3) above as a percentage of net sales. (5) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as earnings before taxes plus fixed charges. Fixed charges consist of interest expense, capitalized interest costs, amortization of debt issuance costs and the portion of rental expense on capital and operating leases deemed representative of the interest factor. (6) Working capital as adjusted represents the difference between current assets less cash, and current liabilities less the current portions of long term debt and long term capital leases and notes payable. 25 [THIS PAGE INTENTIONALLY LEFT BLANK] 26 GLOBE HOLDINGS, INC. The following unaudited pro forma financial statements (the "Pro Forma Financial Statements") are based on the historical financial statements of the Company included elsewhere in this Prospectus. The unaudited pro forma balance sheet gives effect to the Transactions as though such events were consummated on June 30, 1998. The unaudited pro forma statement of operations for the year ended December 31, 1997 gives effect to the Transactions as if such events were consummated on January 1, 1997. The unaudited pro forma statement of operations for the six months ended June 30, 1998 gives effect to the Transactions as if such events were consummated on January 1, 1997. The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable. The Pro Forma Financial Statements do not purport to be indicative of the results that would have been obtained had such transactions described above occurred as of the assumed dates. In addition, the Pro Forma Financial Statements do not purport to project the Company's results of operations for any future date or period. The Pro Forma Financial Statements should be read in conjunction with the financial statements of the Company and the notes thereto, included elsewhere herein. 27 GLOBE HOLDINGS, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998 --------------------------------- 1998 ADJUSTMENTS PRO FORMA -------- ----------- --------- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents.................. $ 2,466 $ 453 (a) $ 2,919 Accounts receivable, net................... 29,659 -- 29,659 Receivable from joint venture.............. 210 -- 210 Taxes receivable........................... -- 2,266 (b) 2,266 Inventories................................ 11,825 -- 11,825 Prepaid expenses and other assets.......... 1,207 -- 1,207 Deferred income taxes...................... 2,449 -- 2,449 -------- ------- -------- Total current assets......................... 47,816 2,719 50,535 Property, plant and equipment: Land and land improvements................. 942 -- 942 Building and building improvements......... 33,122 -- 33,122 Manufacturing equipment.................... 79,265 -- 79,265 Furniture and equipment.................... 2,087 -- 2,087 Autos and trucks........................... 319 -- 319 Construction in progress................... 23,086 -- 23,086 -------- ------- -------- 138,821 -- 138,821 Less accumulated depreciation.............. (69,007) -- (69,007) -------- ------- -------- Net property, plant and equipment............ 69,814 -- 69,814 Deferred income taxes........................ 2,694 112 (b) 2,806 Cash surrender value of life insurance, net of loans.................................... 927 -- 927 Intangible assets............................ -- -- -- Investment in joint venture.................. -- -- -- Notes receivable from officers............... 286 -- 286 Other Assets................................. 10 -- 10 Deferred financing costs, new................ -- 11,791 (c) 11,791 Deferred financing costs, net of amortization................................ 306 (306)(d) -- -------- ------- -------- Total assets............................. $121,853 $14,316 $136,169 ======== ======= ========
- -------- (a) Reflects the impact of the sources and uses of funds of the Transactions. (b) Reflects a statutory income tax rate of 40.2% for the pro forma adjustments related to certain pro forma changes. (c) Reflects the cost of raising additional debt. (d) Reflects write off of deferred fees associated with Old Credit Facility. 28 GLOBE HOLDINGS, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998 ---------------------------------- 1998 ADJUSTMENTS PRO FORMA -------- ----------- --------- (DOLLARS IN THOUSANDS) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable......................... $ 8,883 $ -- $ 8,883 Accrued expenses......................... 5,900 (40)(e) 5,860 Payable to joint venture................. -- -- -- Dividend payable......................... -- -- -- Note payable............................. 10,000 (3,200)(f) 6,800 Taxes payable............................ -- -- -- Long-term lease obligations due within one year................................ 31 -- 31 Long-term debt obligations due within one year.................................... 8,125 (8,125)(f) -- -------- --------- --------- Total current liabilities.................. 32,939 (11,365) 21,574 Long-term debt............................. 42,500 72,500 (f) 115,000 Senior subordinated notes.................. -- 150,000 (g) 150,000 Senior discount notes...................... -- 24,382 (k) 24,382 Long-term lease obligation................. 60 -- 60 Other long-term postretirement liability... 4,205 -- 4,205 Minimum pension liability.................. -- -- -- STOCKHOLDERS' EQUITY Preferred stock.......................... -- -- -- Common stock, Class A.................... 2 (2)(h) -- Common stock, Class B.................... 16 (16)(h) -- Common stock, Class C.................... -- 22 (i) 22 Paid in capital.......................... 10,785 32,895 (i) 43,680 Retained earnings........................ 67,508 (290,262)(h) (222,754) -------- --------- --------- 78,311 (257,363) (179,052) Less treasury stock, at cost: Common, Class A.......................... (4,187) 4,187 (h) -- Common, Class B.......................... (28,657) 28,657 (h) -- -------- --------- --------- (32,844) 32,844 -- Unearned compensation...................... (3,318) 3,318 (j) -- -------- --------- --------- Total stockholders' equity................. 42,149 (221,201) (179,052) -------- --------- --------- Total liabilities & stockholders' equity................................ $121,853 $ 14,316 $ 136,169 ======== ========= =========
- -------- (e) Reflects payment of certain Old Credit Facility fees. (f) Reflects net payment of Old Credit Facility and proceeds of new Senior Credit Facility. (g) Reflects proceeds from the Old Notes. (h) Reflects payment for redemption of previous stockholders and retirement of treasury stock. (i) Reflects new equity contribution. (j) Reflects vesting of outstanding options. (k) Reflects proceeds from the Senior Discount Notes. 29 GLOBE HOLDINGS, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED DECEMBER 31, ------------------------------------- 1997 ADJUSTMENTS PRO FORMA(D) -------- ----------- ------------ (DOLLARS IN THOUSANDS) Net sales................................. $170,941 $ -- $170,941 Cost of sales............................. 115,099 -- 115,099 -------- -------- -------- Gross margin.......................... 55,842 -- 55,842 Selling, general and administrative expenses................................. 24,381 (95)(a) 24,286 Research and development costs............ 2,633 -- 2,633 -------- -------- -------- Operating income...................... 28,828 95 28,923 Other Income/(Expense).................... Interest................................ (3,968) (25,438)(b) (29,406) Loss in investment in joint venture..... -- -- -- Other income, net....................... 372 -- 372 -------- -------- -------- Income before income taxes and extraordinary items.................. 25,232 (25,343) (111) Provision for income taxes................ 8,383 (10,188)(c) (1,805) -------- -------- -------- Income before extraordinary item...... $ 16,849 $(15,155) $ 1,694 ======== ======== ========
- -------- (a) Represents amortization of debt issuance costs associated with the old credit facility. (b) Adjustment to reflect pro forma interest expense calculated using (i) 7.94% per annum on $6,000 for the revolver; (ii) 7.94% on $60,000 for the Term Loan A; (iii) 8.44% on $55,000 for the Term Loan B; (iv) 10.0% on $150,000 for the Senior Subordinated Note; (v) accretion of the 14% senior discount note; (vi) amortization of deferred finance charges; (vii) less capitalized interest costs of $635. (c) Reflects a statutory income tax rate of 40.2% for the pro forma adjustments. (d) In connection with the transaction the Company incurred a one time compensation expense charge of $3,318 associated with the vesting of stock options and $2,320 associated with bonuses paid to certain members of management. Although the Company expects to charge such amounts in the period following the transaction date, such charge is not reflected in the accompanying pro forma financial information. 30 GLOBE HOLDINGS, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR PERIOD ENDED JUNE 30, ------------------------------------- 1998 ADJUSTMENTS PRO FORMA(D) ------- ----------- ------------ (DOLLARS IN THOUSANDS) Net sales................................. $92,490 $ -- $ 92,490 Cost of sales............................. 59,556 -- 59,556 ------- -------- -------- Gross margin.......................... 32,934 -- 32,934 Selling, general and administrative expenses................................. 12,083 (41) (a) 12,042 Research and development costs............ 2,040 -- 2,040 ------- -------- -------- Operating income...................... 18,811 41 18,852 Other Income/(Expense) Interest................................ (1,788) (13,017) (b) (14,805) Loss in investment in joint venture..... -- -- -- Other income, net....................... 655 -- 655 ------- -------- -------- Income before income taxes............ 17,678 (12,976) 4,702 Provision for income taxes................ 6,638 (5,216) (c) 1,422 ------- -------- -------- Net income................................ $11,040 $ (7,760) $ 3,280 ======= ======== ========
- -------- (a) Represents amortization of debt issuance costs associated with the old credit facility. (b) Reflects pro forma interest expense calculated using (i) 7.94% per annum on $6,000 for the revolver; (ii) 7.94% on $60,000 for the Term Loan A; (iii) 8.44% on $55,000 for the Term Loan B; (iv) 10.0% on $150,000 for the Senior Subordinated Note; (v) accretion of the 14% senior discount note; (vi) amortization of deferred finance charges; (vii) less capitalized interest costs of $469. (c) Reflects a statutory income tax rate of 40.2% for the pro forma adjustments. (d) In connection with the transaction the Company incurred a one time compensation expense charge of $3,318 associated with the vesting of stock options and $2,320 associated with bonuses paid to certain members of management. Although the Company expects to charge such amounts in the period following the transaction date, such charge is not reflected in the accompanying pro forma financial information. 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company's financial condition and results of operations is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements of the Company and related notes thereto included elsewhere in this Prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors including, but not limited to, those discussed in "Risk Factors," "Business" and elsewhere in this Prospectus. The Company disclaims any obligation to update information contained in any forward-looking statement. See "Risk Factors--Risks Regarding Forward-Looking Statements." RESULTS OF OPERATIONS The following table sets forth for the periods indicated information derived from the consolidated financial statements of income expressed as a percentage of net sales. There can be no assurance that the trends in sales growth or operating results will continue in the future.
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, -------------------- ------------- 1995 1996 1997 1997 1998 ------ ------ ------ ------ ------ Net sales.................................... 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales................................ 75.7% 72.5% 67.3% 67.0% 64.4% Gross margin................................. 24.3% 27.5% 32.7% 33.0% 35.6% Selling, general & administrative expenses... 14.4% 14.2% 14.3% 12.6% 13.1% Research and development expenses............ 1.8% 1.7% 1.5% 1.4% 2.2% Operating income............................. 8.1% 11.6% 16.9% 19.0% 20.3%
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997 Net sales of the Company for the six months ended June 30, 1998 increased $8.2 million, or 9.7%, to $92.5 million from $84.3 million for the corresponding period in 1997. The increase in sales was primarily attributable to a 34.0% increase in fine denier spandex fiber volume and a 6.4% increase in average heavy denier spandex fiber price associated with a change in mix within the Company's heavy denier product line. Gross margin of the Company for the six months ended June 30, 1998 increased $5.1 million, or 18.3%, to $32.9 million from $27.8 million for the corresponding period in 1997. The Company's gross margin as a percentage of net sales increased to 35.6% for the six months ended June 30, 1998 from 33.0% for the corresponding period in 1997. The increase in gross margin was primarily due to a 4.9% reduction in fine denier spandex fiber unit costs attained through operating efficiencies and economies of scale resulting from increased capacity at the Company's Tuscaloosa, Alabama facility and a favorable shift in product mix towards higher margin fine denier spandex fiber products. Fine denier spandex fiber sales represented 56.0% of total sales in the six months ended June 30, 1998, compared to 47.2% in the corresponding period in 1997. Selling, general and administrative expenses for the Company for the six months ended June 30, 1998 increased $1.5 million, or 14.2%, to $12.1 million from $10.6 million for the corresponding period in 1997. Selling, general and administrative expenses for the Company as a percentage of net sales increased to 13.1% for the six months ended June 30, 1998 from 12.6% in the corresponding period in 1997. The change from the previous year was primarily due to an increase in allowances for bad debt and additional selling expenses associated with an increased level of foreign sales. Research and development expenses for the Company for the six months ended June 30, 1998 increased $0.8 million, or 66.7%, to $2.0 million from $1.2 million for the corresponding period in 1997. Research and 32 development expenses for the Company as a percentage of net sales increased to 2.2% for the six months ended June 30, 1998 from 1.4% for the corresponding period in 1997. The increase in research and development expense was associated with the development of new heavy denier spandex fiber products. Net interest expense for the Company for the six months ended June 30, 1998 decreased $0.3 million, or 14.3%, to $1.8 million from $2.1 million in the corresponding period in 1997. The decrease in interest expense was primarily attributable to an increase in capitalized interest as well as a decrease in interest rates. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Net sales of the Company for 1997 increased $18.3 million, or 12.0%, to $170.9 million from $152.6 million in 1996. The increase in sales was primarily due to a 5.3% increase in average fine denier spandex fiber prices and a 17.7% increase in fine denier spandex fiber volume. Gross margin of the Company for 1997 increased $13.8 million, or 32.9%, to $55.8 million from $42.0 million in 1996. The Company's gross margin as a percentage of net sales increased to 32.7% in 1997 from 27.5% in 1996. The increase in gross margin reflects a reduction in fine denier spandex fiber unit costs attributable to economies of scale created by an increase in fine denier spandex fiber capacity at the Company's Tuscaloosa, Alabama facility, gains in efficiencies achieved through improved production processes and a decline in latex raw material costs. The increase in gross margin also reflects a favorable shift in product mix toward higher margin fine denier spandex fiber products. Fine denier spandex fiber sales represented 49.4% of total net sales in 1997 compared to 44.2% in 1996. Selling, general and administrative expenses for the Company in 1997 increased $2.7 million, or 12.4%, to $24.4 million from $21.7 million in 1996. The increase in selling, general and administrative expenses was primarily attributable to the higher level of net sales achieved in 1997. As a percentage of net sales, selling, general and administrative expenses increased to 14.3% in 1997 from 14.2% in 1996. Research and development expenses for the Company in 1997 increased $0.1 million, or 4.0%, to $2.6 million from $2.5 million in 1996. Research and development expenses for the Company as a percentage of net sales decreased to 1.5% in 1997 from 1.7% in 1996. The decrease was primarily due to the higher level of net sales attained in 1997. Net interest expense for the Company in 1997 decreased $1.3 million, or 24.5%, to $4.0 million from $5.3 million in 1996. The decrease in interest expense was primarily due to a decline in interest rates and the capitalization of $0.5 million of interest expense in 1997 in connection with a capital expansion project. Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Net sales of the Company for 1996 increased $24.3 million, or 18.9%, to $152.6 million from $128.3 million in 1995. The increase in sales was primarily due to a 56.4% increase in fine denier spandex fiber volume related to increased manufacturing capacity. Gross margin of the Company for 1996 increased $10.9 million, or 35.0%, to $42.0 million from $31.1 million for the corresponding period in 1995. The Company's gross margin as a percentage of net sales increased to 27.5% in 1996 from 24.3% in 1995. The increase in gross margin was primarily due to a favorable shift in product mix toward higher margin fine denier spandex fiber products. Fine denier spandex fiber sales represented 44.2% of total net sales in 1996 compared to 34.8% in 1995. In addition, the Company's gross margin in 1995 was negatively impacted by Globe's first expansion of its Tuscaloosa facility, which temporarily reduced manufacturing efficiencies, and by lower average selling prices of fine denier spandex resulting from Bayer entering the domestic market. Selling, general and administrative expenses for the Company in 1996 increased $3.2 million, or 17.3%, to $21.7 million from $18.5 million in 1995. Selling, general and administrative expenses for the Company as a percentage of net sales decreased to 14.2% in 1996 from 14.4% in 1995. The decrease in selling, general and administrative expense as a percentage of net sales was primarily attributable to the increase in sales noted above. 33 Research and development expenses for the Company in 1996 increased $0.2 million, or 8.7%, to $2.5 million from $2.3 million in 1995. Research and development expenses for the Company as a percentage of net sales decreased to 1.7% in 1996 from 1.8% in 1995. The decrease in research and development expense as a percentage of net sales reflects the higher level of net sales achieved in 1996. Net interest expense for the Company in 1996 decreased $0.7 million, or 11.7%, to $5.3 million from $6.0 million in 1995. The decrease in interest expense was primarily due to a decrease in the average debt outstanding throughout the year and a decline in interest rates. The Company reported an extraordinary loss of $1.3 million, net of tax, in 1995 to reflect the write-off of unamortized deferred financing costs associated with the restatement of its credit agreement. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $12.7 million in 1995, $21.9 million in 1996 and $20.3 million in 1997. The increase in cash provided by operating activities for 1996 was primarily due to increases in profitability, accounts payable, taxes payable, accrued expenses and a reduction of inventory balances, partially offset by an increase in accounts receivable. The reduction in cash provided by operating activities in 1997 was due to increases in accounts receivable, inventory balances and deferred tax assets, and a reduction in taxes payable, partially offset by an increase in amortization of unearned compensation. For the six months ended June 30, 1998, cash provided by operating activities was $14.0 million compared to $7.2 million for the same period in 1997. This increase was primarily attributable to increases in profitability, accounts payable and accrued expenses and a reduction in inventory, partially offset by an increase in accounts receivable. The average days' sales outstanding for accounts receivable was approximately 44, 54 and 56 days for the years ended 1995, 1996 and 1997, respectively. Average days' sales outstanding was 64 days at June 30, 1998. The increase in average days' sales outstanding was primarily attributable to an increase in foreign sales. Foreign sales represented 27.5% and 32.2% of sales for the year end December 31, 1997 and for the six months ended June 30, 1998, respectively. The Company's inventories decreased from $15.9 million at December 31, 1995 to $11.8 million at December 31, 1996. This decrease was primarily attributable to a decrease in fine denier spandex fiber quantities and cost aggregating to a 42%, or $2.3 million, decrease. The Company's inventory increased from $11.8 million at December 31, 1996 to $13.8 million at December 31, 1997. This increase was primarily due to higher fine denier production capacity and anticipated higher heavy denier sales levels. The Company's inventories decreased from $13.5 million at June 30, 1997 to $11.8 million at June 30, 1998. This decrease was primarily due to lower fine denier spandex thread manufacturing costs and reduced latex thread inventory. The Company's accounts payable increased from $4.7 million at December 31, 1995 to $7.2 million at December 31, 1996. The Company's accounts payable increased from $7.2 million at December 31, 1996 to $7.4 million at December 31, 1997. The increase in accounts payable was attributable to capital expenditures incurred to increase fine denier spandex fiber capacity. The Company's accounts payable increased from $7.7 million at June 30, 1997 to $8.9 million at June 30, 1998. The increase was primarily due to capital expenditures incurred to increase fine denier capacity. The Company has historically financed its operations and acquisitions through a combination of internally generated funds and borrowings under its existing credit agreement. The Company financed the construction of the Tuscaloosa plant, as well as the subsequent expansions of the facility, under its existing credit facilities. Capital expenditures were $5.8 million in 1996, $17.1 million in 1997 and $17.1 million for the six months ended June 30, 1998. Capital expenditures incurred during 1996 consisted primarily of general maintenance and process improvement expenditures, and the capital expenditures incurred during 1997 consisted primarily of expenditures for the expansion of the Tuscaloosa facility and general maintenance and process improvement expenditures. The capital expenditures incurred during the first six months of 1998 included $12.6 million of plant expansion expenditures. The Company anticipates that its capital expenditures for the balance of 1998 will 34 be approximately $10.0 million, of which $6.0 million is related to the Tuscaloosa Plant Expansion and $1.5 million is related to the Company's new enterprise resource planning system, which is expected to be installed in 1998 and 1999. The Company estimates that based on anticipated levels of operations its capital expenditures will be approximately $6.0 million in each of 1999 and 2000. In connection with the Transactions, Globe Manufacturing entered into the Senior Credit Facility enabling Globe Manufacturing to borrow up to $165.0 million, subject to certain borrowing conditions. The Senior Credit Facility is fully secured and consists of a $115.0 million term loan facility, which was fully drawn upon the consummation of the Transactions, and a $50.0 million revolving loan facility. The revolving loan facility is available for general corporate and working capital purposes. The obligations of Globe Manufacturing under the Senior Credit Facility are fully and unconditionally guaranteed by the Company. See "Description of Senior Credit Facility." In connection with the Transactions, Globe Manufacturing also issued $150.0 million in aggregate principal amount of the Old Senior Subordinated Notes. See "Description of Senior Subordinated Notes." After consummation of the Initial Offering and the other Transactions, the Company's total consolidated debt significantly increased. Interest payments on the Senior Subordinated Notes and under the Senior Credit Facility represent significant liquidity requirements for the Company. The Senior Subordinated Notes require semi-annual interest payments and interest on the loans under the Senior Credit Facility is due at least quarterly. The Company is a holding company with no operations of its own and its only material asset is the capital stock of Globe Manufacturing (all of which is pledged to secure obligations under the Senior Credit Facility). The Senior Credit Facility and the Senior Subordinated Note Indenture impose, and agreements entered into in the future may impose, significant restrictions on distributions and the making of loans by Globe Manufacturing to the Company. Accordingly, repayments of the Notes may depend upon the ability of the Company to effect an equity offering or to refinance the Notes. Although there can be no assurance, the Company anticipates that its consolidated cash flow generated from operations and borrowings under the Senior Credit Facility will be sufficient to fund the Company's working capital needs, planned capital expenditures, scheduled interest payments (including interest payments on the Senior Subordinated Notes and amounts outstanding under the Senior Credit Facility) and other cash needs for the next twelve months. However, the Company may require additional funds if it enters into strategic alliances, acquires significant assets or businesses or makes significant investments in furtherance of its growth strategy. The ability of the Company to satisfy its capital requirements will be dependent upon the future financial performance of the Company, which in turn will be subject to general economic conditions and to financial, business, and other factors, including factors beyond the Company's control. Instruments governing the Company's indebtedness, including the Indenture, the Senior Credit Facility and the Senior Subordinated Note Indenture, contain financial and other covenants that restrict, among other things, the Company's ability to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of substantially all of the assets of the Company. Such limitations, together with the highly leveraged nature of the Company, could limit corporate and operating activities, including the Company's ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities. See "Risk Factors--Substantial Leverage and Debt Service Requirements." IMPACT OF THE YEAR 2000 ISSUE The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. If the Company, its significant customers or suppliers fail to make necessary modifications and conversions on a timely basis, the year 2000 issue could have a material adverse effect on Company operations. However, the impact cannot be quantified at this time. The Company believes that its competitors face similar risks. 35 The Company has established a corporate-wide project team to identify non- compliant software and complete the corrections required for the year 2000 issue. The Company has completed its repairs for major manufacturing systems in all locations. The Company also completed its repair of its major financial systems. The Company's current target is to resolve compliance issues in its distribution systems and other ancillary systems by March 31, 1999. The Company also has made inquiry of its major customers and suppliers to assess their compliance. Nevertheless, there can be no absolute assurance that there will not be a material adverse effect on the Company if third party governmental or business entities do not convert or replace their systems in a timely manner and in a way that is compatible with the Company's systems. Costs related to the year 2000 issue are funded through operating cash flows. Through June 30, 1998, the Company expended approximately $ in systems development and remediation efforts, including the cost of new software and modifying the applicable code of existing software. The Company estimates remaining costs to be between $ and $ . The Company presently believes that the total cost of achieving year 2000 compliant systems is not expected to be material to the Company's financial condition, liquidity or results of operations. Time and cost estimates are based on currently available information. Developments that could affect estimates include, but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code and systems and remediation success of the Company's customers and suppliers. INFLATION The Company does not believe that inflation has had any material effect on the Company's business over the past three years. IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("Statement 130"), which establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Statement 130 is effective for fiscal years beginning after December 15, 1997. Disclosure of total comprehensive income is required in interim period financial statements. Management does not believe that comprehensive income for prior periods will differ significantly from net income in those periods. In June, 1997, the FASB issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("Statement 131"), which is effective for years beginning after December 15, 1997. However, Statement 131 need not be applied to interim financial statements in the initial year of application. Statement 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Since Statement 131 is effective for financial statements for fiscal years beginning after December 15, 1997, the Company will adopt the new requirements retroactively in 1998. Management has not yet determined the impact Statement 131 will have on disclosures of the Company's reported segments. In February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits ("Statement 132"), that revises disclosure requirements of FASB Statements No. 87, Employers' Accounting for Pensions, and No. 106, Employers' 36 Accounting for Postretirement Benefits Other Than Pensions. Statement 132 is effective for fiscal years beginning after December 15, 1997. The Statement does not change the recognition or measurement of pension or post-retirement benefit plans, but standardizes disclosure requirements for pensions and other post-retirement benefits, eliminates certain disclosures and requires additional information. Management does not anticipate that the adoption of Statement 132 will have a material impact on its financial position or the results of its operations. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and for Hedging Activities ("Statement 133"). Statement 133 is effective for years beginning after June 15, 1999. Statement 133 provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. Management does not anticipate that the adoption of Statement 133 will have a material impact on its financial position or the results of its operations. 37 BUSINESS OVERVIEW Globe is a leading domestic manufacturer and worldwide supplier of spandex and latex elastomeric fibers, marketing its products to more than 500 customers. The Company's fibers are used in a broad range of applications, including men's and women's hosiery, waistbands, intimate apparel, performance athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or foundation) garments, personal care products (including diapers and adult incontinence products) and footwear. The Company has produced elastomeric fibers exclusively for over 50 years and has developed long-term relationships with many of its principal customers, including Fruit of the Loom, Inc., Kimberly-Clark Corporation, Minnesota Mining & Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and Worldtex, Inc. During the twelve months ended June 30, 1998, the Company had net sales of $179.1 million and EBITDA of $46.3 million. Spandex fiber, which accounted for 80% of the Company's 1997 sales, is a highly desirable component of fabrics designed for performance, durability, comfort, control and resilience due to its unique chemical and physical properties. Spandex fiber is produced in a broad range of fine and heavy deniers and is sold on a private label basis and under brand names such as the Company's GLOSPAN(R) and CLEERSPAN(R), DuPont's Lycra(R) and Bayer's Dorlastan(R). Recent advances in manufacturing technologies have facilitated the use of spandex fiber in an increasing number of apparel and non-apparel applications. Globe has benefited from this recent proliferation of spandex fiber applications due to its exclusive focus on elastomeric fibers, superior customer service, broad product line, strong market position and efficient manufacturing processes. Management estimates that in 1997 the worldwide market for spandex fiber was approximately 240 million pounds, representing approximately $2.0 billion in sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an estimated 11% compound annual growth rate, and the worldwide spandex fiber market is expected to grow at approximately 9% over the next three years. Since 1993, demand for fine denier spandex has increased faster than the overall market due to its growing use in lightweight and high quality apparel applications and this trend is expected to continue. The Company operates three manufacturing facilities, which are located in Fall River, Massachusetts, Tuscaloosa, Alabama and Gastonia, North Carolina. Since 1993, Globe has invested $97.5 million to increase manufacturing capacity, enhance productivity and shift its product mix to the faster growing, higher margin fine denier spandex fiber. During this period, the Company's annual fine denier spandex fiber production capacity increased from 2.6 million to 10.6 million pounds. As a result of the Company's capital investment program and continuous improvement initiatives in its manufacturing facilities, Globe's fine denier spandex fiber production yields have improved by 35%, and sales per employee have increased by 43% since 1993. TUSCALOOSA PLANT EXPANSION Globe is expanding production capacity at its Tuscaloosa, Alabama fine denier spandex fiber manufacturing facility in response to existing demand from current customers. Through June 30, 1998, Globe had spent approximately $16.1 million of the estimated $22.1 million project cost. The Tuscaloosa facility, built in 1994, has undergone three prior capacity expansions. The Tuscaloosa Plant Expansion will increase the Company's fine denier manufacturing capacity by 3.6 million pounds per annum, or 34%, with approximately half of this increased capacity expected to be on line in the fourth quarter of 1998 and the balance expected to be on line in the first quarter of 1999. As of June 30, 1998, Globe's list price for 40 denier spandex fiber, the primary product produced at the Company's Tuscaloosa facility, was $11.50 per pound. COMPETITIVE STRENGTHS The Company's exclusive focus on elastomeric fibers for over 50 years has enabled it to develop the following competitive strengths: Long-Term Customer Relationships and Superior Customer Service. Globe has established long-term relationships with its principal customers by focusing on superior technical and customer service. The Company 38 has been a supplier to Fruit of the Loom, Inc., Kimberly-Clark Corporation, Minnesota Mining and Manufacturing Company, Sara Lee Hosiery, Unifi, Inc. and Worldtex, Inc. for over ten years. Seven of the Company's ten largest customers have selected Globe as their preferred supplier of spandex fiber. Globe provides analytical laboratory services and on-site technical assistance to improve customers' manufacturing and engineering processes. As a result, a number of the Company's major customers have selected it as a technology partner to assist in the development of new spandex applications. Broad Product Line. The Company believes that it offers the broadest line of spandex and latex elastomeric fibers in the world. The Company produces a full line of spandex fibers in deniers ranging from 15 to 5040. These products feature an assortment of stretch, strength and other performance characteristics that may be customized for specific applications and manufacturing processes. Globe also manufactures a wide variety of latex threads in multiple gauges and formulations. This broad range of product offerings differentiates the Company in the industry and represents a competitive advantage, as many customers purchase multiple deniers of spandex fiber, as well as various gauges of latex thread, and prefer to utilize one vendor for their elastomeric fiber requirements. The proprietary technologies and customized equipment used by Globe in its multiple manufacturing processes enable the Company to cost-effectively produce this broad product line. Strong Positions in Growing Markets. The Company has established a strong market position in each of its principal product lines. The Company has an estimated 16% share of the domestic spandex fiber market and an estimated 7% share of the worldwide spandex fiber market (based on pounds produced). Management estimates that worldwide sales of spandex fiber will increase at a compound annual growth rate of approximately 9% over the next three years and that fine denier spandex sales will exceed the overall market growth rate during this period. Fine denier spandex demand has been driven by strong consumer demand for lightweight and high quality apparel and technological advances allowing for the use of spandex fibers in the manufacture of such apparel. Cost-Efficient Manufacturing. Management believes that the Company's manufacturing operations are among the most efficient in the industry, allowing the Company to become one of the world's lowest cost producers of high quality spandex fiber. Globe has developed proprietary chemical formulations and highly efficient manufacturing processes that utilize sophisticated process control systems and custom fabricated manufacturing equipment designed and built by the Company's engineers. Management believes that Globe's in-house capability to design, engineer and build its own manufacturing equipment distinguishes the Company from many of its competitors and provides it with an important competitive advantage in maintaining product quality as well as controlling design, development and maintenance costs. In addition, increased production volume at the Company's facilities has enabled the Company to achieve significant economies of scale and raw material purchasing power. Experienced Management Team. The Company is led by an experienced management team with a track record of achieving profitable growth, developing new manufacturing processes and expanding the Company's customer base. Between 1993 and the twelve months ended June 30, 1998, the Company's net sales increased from $107.6 million to $179.1 million and EBITDA increased from $23.7 million to $46.3 million. The Company's executive officers average approximately 20 years with the Company. The Company's senior management team has a substantial financial interest in the Company's continued success through their direct investment in the Company. BUSINESS STRATEGY The Company's business objective is to become the leading global supplier of elastomeric fiber for use in selected apparel and non-apparel markets. The Company seeks to achieve this objective by pursuing the following strategies: Continue Shift in Product Mix to Higher Growth, More Profitable Fine Denier Products. Since 1993, Globe has expanded its annual production capacity of higher growth fine denier spandex fiber from 2.6 million to 10.6 million pounds. Fine denier spandex fiber is used in applications requiring lightweight or high quality fabric, and has been generally more profitable than heavy denier spandex fiber due to the complexity of the manufacturing 39 process required and strong market demand. Fine denier spandex fiber sales accounted for approximately 49% of Globe's 1997 total sales, up from 25% in 1993. The Tuscaloosa Plant Expansion, which will increase the Company's annual production capacity for fine denier spandex fiber to 14.2 million pounds, will enable the Company to further address the increase in demand for fine denier spandex fiber. Develop Innovative Spandex Fiber Applications. Globe's product managers and research and development engineers work closely with existing and prospective customers to develop innovative applications for spandex fiber. For example, the Company worked with a fleece manufacturer for over two years to develop a new four-way stretch fleece product for outerwear that incorporates Globe's spandex fiber. Cooperative efforts such as this have enabled Globe to enhance its relationships with existing customers and attract new customers. Improve Manufacturing Productivity; Reduce Production Costs. The Company seeks to continually improve manufacturing efficiency and reduce production costs in order to maintain its position as one of the world's lowest cost producers of high quality spandex fiber. The Company seeks to improve manufacturing yields, increase equipment utilization, and reduce production costs by upgrading process monitoring equipment, enhancing production processes and increasing throughput. Each of the Company's manufacturing facilities is certified under ISO 9001, and the Company actively incorporates the principles of continuous improvement. Increase International Sales. Globe estimates that the international market accounts for two-thirds of the worldwide spandex fiber market. International spandex fiber markets are growing rapidly due to increasing consumerism of the world's population, coupled with increases in personal disposable income. From 1993 to 1997, Globe's international sales increased from 19% of sales to 28% of sales (primarily in western Europe and Latin America) as the Company expanded the size and geographic scope of its international sales to 46 countries. The Company seeks to further expand its international sales by leveraging its existing sales and marketing infrastructure and capitalizing on Globe's expanded manufacturing capacity. INDUSTRY OVERVIEW The Company competes primarily in the worldwide market for spandex fiber and the domestic market for latex thread. Spandex Fiber The worldwide spandex fiber industry has experienced significant growth in recent years. First developed in the early 1960s, spandex fiber has repeatable stretch and recovery capabilities, end-to-end uniformity, and unlike most other elastomeric fibers, is resistant to breakdown from exposure to oxidation, ozone, light, solvents, body oils, and perspiration. In addition, advances in polymer chemistry and manufacturing technology have allowed manufacturers to produce increasingly finer elastomeric fibers. These production advances and the physical characteristics of spandex fiber have made spandex fiber a highly desirable component of an increasing number of applications. As the production capabilities of spandex fiber suppliers have improved, fabric manufacturers have also developed new processes that have allowed them to integrate spandex fiber into a number of new applications. Traditionally, manufacturers of circular knit fabrics were unable to use spandex fiber in the manufacturing process unless the spandex fiber had been covered with another fiber, such as cotton or nylon. Recently, new technologies enabling manufacturers to knit uncovered spandex fibers have spurred an increased use of spandex fiber in sheer, lightweight circular knit products. Suppliers of spandex fiber such as the Company generally target six end-use markets for their fibers: circular knits (which includes product applications such as active wear, swimwear and casual wear); hosiery; nonwovens (personal care products such as diapers); narrow fabrics (waistbands and straps); warp knits (intimate apparel and body shaping garments); and stretch wovens. Stretch wovens include fabrics that are used in men's suits and pants, as well as other new applications, and this segment represents a growth opportunity for industry participants such as Globe. 40 Management estimates that in 1997 the worldwide market for spandex fiber was approximately 240 million pounds, representing approximately $2.0 billion in sales. From 1993 to 1997, worldwide sales of spandex fiber increased at an estimated 11% compound annual growth rate, and the worldwide spandex fiber market is projected to grow at a compound annual growth rate of approximately 9% over the next three years. Since 1993, demand for fine denier spandex fiber has increased faster than the overall market due to its growing use in lightweight and high quality apparel applications and this trend is expected to continue. Currently, approximately 61% of spandex fiber consumption occurs in the major industrialized regions, including the U.S., Japan, and western Europe. International spandex fiber markets are growing rapidly due to increasing consumerism of the world's population, coupled with increases in personal disposable income. Spandex fiber is currently produced throughout the world. Management estimates that there are approximately 16 spandex fiber manufacturers in the world, with the top 5 manufacturers accounting for approximately 77% of the worldwide market. These manufacturers are expected to increase capacity to meet anticipated demand and maintain their respective market shares. Latex Thread The Company estimates that in 1997 the U.S. market for extruded latex thread was approximately 35 million pounds. The primary markets include men's hosiery, narrow fabrics and fused tapes. Fine gauges of latex thread are typically used in men's hosiery. Medium and heavy gauges are used in narrow fabrics and fused tapes. Fused tapes are used for face masks and insert elastics. The Company produces a heat resistant latex thread which resists degradation caused by repeated household laundry drying cycles. PRODUCTS AND CUSTOMERS Products The Company develops, manufactures and sells spandex and latex elastomeric fibers. The Company's products include fine denier spandex fiber (15 to 140 denier), heavier denier spandex fiber (184 to 5040 denier), and latex thread in a variety of gauges. Spandex fiber accounted for 80% of the Company's sales in 1997, and latex thread accounted for the remaining 20%. Spandex Fiber. The unique chemical and physical properties of spandex fiber make it a desirable component of fabrics designed for performance, durability, comfort, control and resilience. Spandex fiber, produced from polyether or polyester, has repeatable stretch and recovery capabilities, end-to-end uniformity, and unlike most other elastomeric fibers, is resistant to breakdown from exposure to oxidation, ozone, light, solvents, body oils and perspiration. Such properties, together with the wide range of available deniers, make spandex fiber suitable for a broad range of applications, including men's and women's hosiery, waistbands, intimate apparel, performance athletic wear, swimwear, casual wear, suiting fabrics, body shaping (or foundation) garments, personal care products (including diapers and adult incontinence products) and footwear. Spandex fiber can be made in deniers much finer than alternative elastomeric fibers while retaining uniform physical properties, and can be heat set in finishing, thereby allowing manufacturers to create ultra sheer and lightweight, yet highly elastic fabrics. Although spandex fiber typically accounts for a small percentage of the total fiber in an application (ranging from 2% in men's suits to 40% in women's foundation garments), it can be used to enhance the performance of an increasing number of apparel and non-apparel products. Latex Thread. The Company's first product was latex thread. Extruded latex thread, which is round, was developed in the 1940's to replace cut rubber thread, which was square and limited in size and usage. Finer gauge latex thread is used in men's hosiery and athletic socks. Mid-range gauges are typically used for narrow fabrics, such as waistbands, straps and insert elastics, and for specialty products and medical garments. Coarse gauge latex thread is also used for narrow fabrics and in specialty products. The Company has engineered various latex thread compound formulations in response to market needs for high-strength, chemical and heat resistance, and durability, and the Company believes opportunities exist for additional uses for latex thread. 41 The Company's products have historically been sold to a variety of customers in five end-markets: circular knits, hosiery, nonwovens, narrow fabrics and warp knits. In addition, the Company has recently begun selling products to the stretch woven market for use in suiting fabrics and outerwear linings. The following table lists the Company's principal product lines, applications for these products, the fiber utilized in the products, and representative customers.
PRODUCT LINE AND PERCENTAGE REPRESENTATIVE OF 1997 SALES PRODUCT APPLICATIONS FIBER UTILIZED CUSTOMERS -------------- ------------------------------ ----------------- -------------- Hosiery Women's sheer hosiery 10-560 denier Unifi, Inc. 36% of sales Men's hosiery spandex fiber; Sara Lee Ho- Athletic socks fine gauge latex siery thread Kayser Roth Hosiery, Inc. McMichael Mills, Inc. Worldtex, Inc. Tanofil A.G. Golden Lady S.P.A. Americal Cor- poration Pennaco Ho- siery, Inc. Circular Knits Active wear 20-105 denier C.K.M. Indus- 35% of sales Swimwear spandex fiber tries, Inc. Casual wear Textivision, Dress wear SA de CV Cotton athletic wear Tanofil, A.G./Karl Na- gele GmbH & Co. K.G. Texere 2000 Inc. Elatex--D&S International Taiwan Narrow Fabrics Waistband elastics 280-5040 denier Fruit of the 16% of sales Straps spandex fiber; Loom, Inc. Insert elastics 22-50 gauge Asheboro Elas- Accent laces latex thread tic Corp. Hanes Mens- wear, Inc. Beech Island Knitting Co. North East Knitting, Inc. Sun Hing Elastics & Lace Flat A.C. Nonwovens Diapers 280-1400 denier Kimberly-Clark 8% of sales Adult incontinence products spandex fiber; Corporation Feminine hygiene products 30-50 gauge latex Minnesota Min- Medical bandages thread ing & Manufac- Industrial protective clothing turing Com- pany Paragon Trade Brands, Inc. Warp Knits Intimate apparel 20-560 denier Guilford Mills 5% of sales Body shaping garments spandex fiber Inc. Swimwear The Moore Com- Footwear pany, Inc.-- Darlington Fabrics Divi- sion Liberty Fab- rics, Inc. Charbert Divi- sion of NFA Corp.-- Alton Operating Corp.
The Company has historically maintained a strong position in the hosiery and narrow fabrics markets. Management estimates that Globe's spandex fibers are utilized in the waistband of over 90% of the pantyhose sold in the United States. In addition, the Company believes it is the leading domestic supplier of latex thread for men's dress hosiery and men's underwear waistbands. Fine denier spandex fiber accounted for approximately 49% of the Company's total 1997 sales, up from 25% in 1993. Based on current market demand for products which utilize lightweight or high quality fabrics, the Company believes that fine denier products manufactured for the circular knit, warp knit and stretch woven markets will represent an increasing percentage of Globe's sales. Customers The Company sells its products to a diverse customer base of intermediate and end-use manufacturers. Intermediate users of the Company's products, which include Unifi, Inc., C.K.M. Industries, Inc. and Worldtex, Inc., cover the elastomeric fibers with other materials, and then either sell them to another manufacturer or knit or weave them. The Company's end-use customers, which include Fruit of the Loom, Inc., Sara Lee Hosiery, 42 Hanes Menswear, Inc., and Kayser-Roth Corporation (manufacturer of No Nonsense pantyhose), produce finished goods from the elastomeric fibers supplied by the Company. Most of the Company's customers rely on sophisticated technologies and production techniques to manufacture products of which the Company's fibers are a significant value-added component. These customers typically operate high speed, high volume production lines. In order to run their production lines efficiently and avoid costly line stoppages, customers rely on the Company's ability to provide reliable, on time delivery of high quality products. A number of the Company's customers have selected Globe as a preferred supplier of elastomeric fiber. Globe markets its products to over 500 customers. The Company's top ten customers accounted for approximately 48% of 1997 sales, with sales to Unifi, Inc., a manufacturer of covered yarns for men's and women's hosiery and for narrow fabrics, accounting for approximately 9% of 1997 sales. Export sales represented approximately 28% of the Company's total sales in 1997. As is customary in the industry, the Company generally does not have long-term supply agreements with its customers. SALES AND MARKETING Globe's sales and marketing functions are organized into three product lines: hosiery/narrow fabrics; wide fabrics (including circular knits, warp knits, stretch wovens); and nonwovens. Each product line requires different technical expertise and is the responsibility of one of the Company's product managers. Management believes that organizing its sales and marketing team by product line is the most efficient and effective way to develop and maintain customer relationships, to stay abreast of technical and other developments that may result in changing customer or consumer preferences and to take advantage of new business opportunities. The Company markets and sells its products under the direction of three product managers who are supported by an extensive organization comprised of 26 individuals, including key account managers, inside sales staff, field sales personnel, and technical service and customer service personnel. By providing dedicated support to key customers, the Company believes it can better support these larger customers, who, in many cases, have a variety of different product application or production requirements. Domestic sales are handled primarily by the Company's internal sales organization. International sales activity is coordinated by a senior manager and supported by a dedicated customer service staff. The Company sells its products internationally through 35 commissioned agents or authorized distributors, covering 46 countries. Technical service is an integral part of Globe's sales and marketing efforts and includes providing product testing analysis of fabric composition at the Company's laboratories, assisting customers with the integration of Globe's products into the customer's production process and the development of methods to enhance a customer's products through the incorporation of the Company's elastomeric fibers. The Company's sales and marketing organization regularly provides market feedback to Globe's research and development teams. The Company believes this high level of service has been instrumental in retaining and attracting customers. Globe sells spandex fiber under its GLOSPAN(R) and CLEERSPAN(R) brand names. The Company does not require customers to co-brand their fabrics or products with its brand name. The Company believes that this marketing strategy is attractive for customers who seek to build their own brand identity and desire flexibility in sourcing their spandex fiber requirements. COMPETITION Spandex Fiber. The Company competes in the spandex fiber markets primarily on the basis of product quality, service, price and product innovation. The Company competes in the spandex fiber market primarily with DuPont and Bayer, both of which have domestic facilities, and with a number of foreign competitors. Some of the Company's competitors have substantially greater financial, marketing, manufacturing, distribution, sales and support resources, market share and brand awareness than the Company. The Company seeks to differentiate its product offerings by providing a high level of technical and customer service, and believes that DuPont and Bayer are the only other major spandex fiber suppliers that provide similar levels of technical and customer service. 43 Despite significant growth in demand for spandex fiber since 1990, the number of spandex fiber manufacturers has remained relatively constant primarily due to the technological expertise required to produce spandex fiber and the substantial capital requirements to establish a spandex fiber manufacturing facility. Because spandex fiber production is not labor- intensive, the Company believes that the availability of low-cost unskilled labor does not provide foreign manufacturers with a significant competitive advantage. Latex Thread. The Company competes in the latex thread market on the basis of product quality, product variety and price. The Company focuses its latex thread product marketing efforts on high quality and specialty latex thread, which requires high levels of customer support. The Company believes that its customer service and product quality, and its ability to respond to the just- in-time inventory needs of domestic customers, permit it to compete effectively with foreign latex thread manufacturers. The Company's primary competitors in the latex thread markets are foreign producers. See "Risk Factors--Competition." SUPPLIERS During 1997, raw materials represented 42% of the Company's total cost of sales and 28% of net sales. The primary raw materials used by the Company are polytetramethylene ether glycol, which the Company purchases from BASF, and polyester resin, which the Company purchases from two suppliers. These materials are used in a wide variety of products, and based on its experience, management believes that adequate quantities of these materials will be available from existing or alternative suppliers in the foreseeable future. The Company's ten largest suppliers accounted for approximately 93% of its total raw material purchases and 31% of its total cost of sales in 1997, with BASF, Polyurethane Specialties Corp. and Ennar Latex, Inc. accounting for 39%, 24% and 16% of such raw material purchases, respectively. The prices for the Company's raw materials have generally been stable over the past five years, although there can be no assurance that they will not fluctuate in the future. See "Risk Factors--Dependence on Suppliers." INTELLECTUAL PROPERTY The Company utilizes a variety of proprietary technology in its manufacturing processes. In addition to its proprietary technology, management believes that the Company's research, development and engineering skills, as well as its technical know-how, are significant to the Company's business. Much of the Company's technology is not patented. The Company relies primarily on intellectual property laws, confidentiality procedures and contractual provisions to protect its intellectual property. The Company seeks to protect the majority of its technology under trade secret laws, which afford only limited protection. See "Risk Factors--Protection of Intellectual Property." The Company owns certain brand names and trademarks used in its business, including GLOSPAN(R) and CLEERSPAN(R). MANUFACTURING General. The Company utilizes multiple manufacturing processes that allow it to cost-effectively produce a broad range of elastomeric fibers. The Company utilizes real-time control and monitoring systems that continuously monitor key process variables using a sophisticated closed loop system of computers, sensors and custom software. Spandex Fiber. The Company produces spandex fiber in a wide variety of deniers, using dry-spin and reaction spin processes. Typically, spandex fiber of heavier deniers is produced by the reaction spin process, while fine denier threads are produced by the dry-spin process. In 1985, the Company began commercial production of fine denier spandex fiber using a dry-spin, polyether-based process at its Fall River facility. Fine denier fiber production is a continuous process accomplished by vertical spinning of the polymer from the top of a production cell to the bottom, where the chamber is heated and filled with nitrogen in order to strip the solvent from the fiber. The solvent is removed from the cell chamber as a gas, recovered and recycled in a separate process. The process is monitored and 44 controlled by a state-of-the-art computer system developed specifically for the Company. The Company produces fine denier spandex fiber using the dry-spin process at its facilities in Fall River, Massachusetts and Tuscaloosa, Alabama, and currently has the capacity to produce 10.6 million pounds of fine denier spandex fiber annually using the dry-spin process. The Company's dry- spin operations run 24 hours a day, 7 days a week, 52 weeks a year. The Company believes that it is the only manufacturer of spandex fiber using the reaction spin process, which is based on technology proprietary to the Company. The process begins with the preparation of the prepolymer which is transported to an extruder, where it is processed through pumps and filters. The resulting pressure forces the prepolymer through a series of tubes and spinerettes, which distribute the prepolymer into a spinning tank where the chemical reaction which gives the fiber its elasticity occurs and the fibers are formed. The fibers are heated, cured and dried in ovens and then cooled, lubricated and spooled for shipment. In some cases, the Company uses a proprietary process which permits the Company to deliver the fiber in "knit- tape" form, which facilitates its use for certain customers. The Company conducts reaction spin production at its Fall River, Massachusetts, and Gastonia, North Carolina facilities. It currently has the capacity to produce 13.4 million pounds of heavy denier spandex fiber annually using the reaction spin process. Latex Thread. The Company manufactures latex thread through a batch process which begins with the combination of latex (a natural rubber material) and various base chemicals. This compound is matured, heated and fed to extruders, where it is pumped through a series of filters and distributed separately out of a group of capillaries. These capillaries produce latex thread which is then moved through an acid bath reservoir before being washed, dried and cured. At the end of the extruder, the fibers are combined into ribbons of various counts depending on customer needs. The Company produces latex thread at its Fall River, Massachusetts facility, and currently has the capacity to produce 11.0 million pounds of latex thread annually. FACILITIES The following table sets forth certain information with respect to the Company's principal facilities.
SQUARE LOCATION FOOTAGE OWNED/LEASED PRINCIPAL FUNCTION -------- ------- ------------ -------------------------- Fall River, Massachusetts... 375,000 Owned Headquarters Fine denier spandex fiber Heavy denier spandex fiber Latex thread Gastonia, North Carolina.... 180,000 Owned Heavy denier spandex fiber 80,000 Owned Distribution center 10,000 Leased Warehouse Tuscaloosa, Alabama......... 157,000 Owned Fine denier spandex fiber Rancho Dominguez, 15,000 Leased Warehouse California.................
The Company believes that its facilities are adequate and suitable for the purposes for which they are utilized by the Company. The Company is currently expanding production capacity at its Tuscaloosa, Alabama fine denier spandex fiber manufacturing facility in response to existing demand from current customers. See "--Tuscaloosa Plant Expansion." EMPLOYEES As of June 30, 1998, the Company had approximately 902 employees. Of these, approximately 174 are salaried employees and 728 are hourly workers. Of the approximately 174 salaried employees, 57 perform manufacturing functions, 48 are technical employees, 25 perform sales and marketing functions and 44 perform administrative functions. None of the Company's employees are covered by a collective bargaining agreement. The Company believes its relationships with its employees are good. 45 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS The Company is subject to stringent environmental, health and safety requirements, including laws and regulations relating to air emissions, wastewater management, the handling and disposal of waste and the cleanup of properties affected by hazardous substances. The Company's management believes that its operations have been and are in substantial compliance with environmental, health and safety requirements, and that it has no liabilities arising under such requirements, except as would not be expected to have a material adverse effect on the Company's operations, financial condition or competitive position. During 1996 and 1997, respectively, the Company spent approximately $0.3 million and $0.9 million on environmental, health and safety compliance activities at its three operating locations. The Company estimates that approximately $1.0 million will be spent in 1998 on such activities, including efforts to resolve pending compliance issues relating to air emissions and wastewater discharges from the Company's Fall River, Massachusetts facility. Although the Company's management believes its estimate of 1998 costs to be reasonable, there can be no assurances that actual expenditures will not exceed the estimated amount. Since 1986, the Company has received requests for information and related correspondence from the U.S. EPA and other third parties indicating that the Company might be responsible under CERCLA or Superfund laws for costs associated with the investigation and cleanup of ten contaminated sites. The Company's management believes that the Company has resolved its involvement with respect to eight of these sites (five of which were inter-related) since 1988 and that the Company's involvement in matters arising under the Superfund laws will not have a material adverse effect on the Company's operations, liquidity or financial condition. In December 1996, the Company's management learned that the U.S. EPA and the U.S. Attorney's Office were conducting an investigation into whether the Company had engaged in criminal violations of environmental laws with respect to its Fall River, Massachusetts facility. The investigators have not informed the Company of the scope of their inquiry. The Company has provided certain information regarding its Fall River operations to the federal investigators and believes it has cooperated fully with their inquiry. The Company does not know whether the investigation is currently active. If the Company is charged with violations of environmental laws, it may be subject to substantial fines and other penalties. Based on the Company's discussions with the investigators and the results of the Company's internal investigation of this matter, the Company's management does not believe that the investigation will result in any monetary or other penalties that would have a material adverse effect on the Company's financial condition, results of operations and its ability to meet its obligations under the Notes. The Merger Agreement provides that the Indemnification Escrow Fund will be available to indemnify the Company from, among other items, any liabilities arising out of this investigation to the extent related to the activities of the Company prior to the Merger. This indemnity expires on December 31, 2001. See "Certain Relationships and Related Transactions--Recapitalization" and "Risk Factors--Environmental Compliance." LEGAL PROCEEDINGS In April 1997 two domestic purchasers of extruded latex thread filed a complaint against a number of foreign manufacturers and distributors of such thread, including an Indonesian limited liability company in which Globe Holdings then owned a 40% interest (the "Joint Venture"). The complaint alleges an international conspiracy to restrain trade in, and fix prices of, the thread in the U.S. Neither the Company nor Globe Manufacturing has been named as a defendant in the case. The Joint Venture has alleged in its motion to dismiss that not all parties to the conspiracy have been joined. There can be no assurance that the Company will not be named in the future. The Merger Agreement provides that the Indemnification Escrow Fund will be available to indemnify the Company from, among other items, any liabilities arising out of any criminal or civil antitrust claims or investigations resulting from the above-described proceedings to the extent related to the Company's activities prior to the Merger. This indemnity expires on December 31, 2001. 46 On March 31, 1998 a petition was filed with the U.S. Department of Commerce alleging subsidization and dumping of Indonesian extruded latex thread. The Department of Commerce is currently conducting an investigation into the allegations. The proceedings could result in additional duties being levied on extruded latex thread imported from Indonesia. During 1996 and 1997, the Company purchased approximately $5.9 million and $9.9 million of latex thread from the Joint Venture for resale in the North American market. From time to time, the Company has been and is involved in various legal proceedings, all of which management believes are routine in nature and generally incidental to the conduct of its business. The ultimate legal and financial liability of the Company with respect to such proceedings cannot be estimated with certainty, but the Company believes, based on its examination of such matters, that none of such proceedings, if determined adversely to the Company, would have a material adverse effect on the Company's results of operations, financial condition and its ability to meet its obligations under the Notes. 47 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company and Globe Manufacturing, and their ages as of July 14, 1998 are set forth below:
NAME AGE POSITION ---- --- -------- Thomas A. Rodgers, Jr... 84 Chairman Thomas A. Rodgers, III.. 53 President and Chief Executive Officer, Director Lawrence R. Walsh....... 46 Vice President, Finance and Administration Americo Reis............ 64 Vice President, Operations Robert L. Bailey........ 60 Vice President, Sales and Marketing William J. Girrier...... 42 Director of Marketing and Business Development Kevin T. Cardullo....... 38 Director of Finance and Accounting Andrew W. Code.......... 39 Director Peter M. Gotsch......... 34 Director Edward M. Lhee.......... 28 Director
The present principal occupations and recent employment history of each of the executive officers and directors of the Company listed above are set forth below. Thomas A. Rodgers, Jr., co-founded Globe Holdings in 1945. He has served as Chairman since 1945, and served as President from 1945 to 1992. Thomas A. Rodgers, III, is the son of Thomas A. Rodgers, Jr., and has served as President of the Company since 1992. He served as the Executive Vice President and Chief Operating Officer of the Company from 1985 to 1992. Mr. Rodgers joined the Company in 1968. Mr. Rodgers has been a Director of the Company since 1972. Lawrence R. Walsh has served as Vice President, Finance and Administration of the Company since 1982. From 1976 to 1982, he was employed by Smith Precious Metals Co. Americo Reis joined the Company in 1959, and has served as the Company's Vice President, Operations since 1982. From 1957 to 1959, he served in the U.S. Army and from 1954 to 1957, he was employed by Goodyear Tire & Rubber Co. Robert L. Bailey has served as the Company's Vice President, Sales and Marketing since he joined the Company in 1979. From 1972 to 1979, he served as Vice President of Sales for the Yarn Division of Texfi Industries, Inc., and from 1967 to 1972 was Vice President of Sales for Intercontinental Fibers. William J. Girrier has been with the Company since 1990, first as Marketing Manager and then as Director of Marketing and Business Development. From 1987 to 1990, he was an Associate Manager of The Robbins Group, a commercial real estate development company. From 1978 to 1987, he served as a Naval Officer in various command and staff positions at the Pentagon and onboard warships. Kevin T. Cardullo has served as the Company's Director of Finance and Accounting since 1992. He is a Certified Public Accountant, and worked as a Senior Manager with Ernst & Young from 1986 to 1992. Mr. Cardullo was with Coopers & Lybrand from 1983 to 1986. Andrew W. Code is a Partner of Code Hennessy & Simmons LLC ("CHS"), which manages three private equity funds, including Code, Hennessy & Simmons III, L.P. Since founding the first such fund in 1988, Mr. Code has been actively involved in the investment organization and investment management activities of CHS. Mr. Code was a Vice President with Citicorp's Leveraged Capital Group from 1986 to 1988, and prior to 1986 he was employed by American National Bank. He is a director of SCP Pool Corporation, a distributor of swimming pool supplies. 48 Peter M. Gotsch has been a Partner of CHS since 1997, and has been employed by CHS and its affiliates since 1989. From 1987 to 1989, Mr. Gotsch was a Corporate Banking Officer at The First National Bank of Chicago, N.A. He is a director of SCP Pool Corporation. Edward M. Lhee has been an associate of CHS since 1997. From 1995 to 1997, he attended the Kellogg Graduate School of Management. From 1992 to 1995, Mr. Lhee was employed by Morgan Stanley & Co., where he worked as a financial analyst in the mergers and acquisitions and corporate finance departments. The following table summarizes the compensation paid by Globe Holdings and its subsidiaries to the Company's Chief Executive Officer and four other most highly compensated executive officers at December 31, 1997 (collectively, the "Named Executive Officers") for services rendered to the Company in 1997. SUMMARY COMPENSATION TABLE
LONG TERM ANNUAL COMPENSATION COMPENSATION ---------------------------- ------------ OTHER ANNUAL SECURITIES ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION POSITION YEAR ($) ($) (1) OPTIONS/SARS ($) (2) - ------------------ ---- ------- ------- ------------ ------------ ------------ Thomas A. Rodgers, Jr... 1997 759,668 5,000 -- -- 198,796 Chairman Thomas A. Rodgers, III.. 1997 549,042 197,500 -- 11,250 1,900 President Americo Reis............ 1997 211,982 72,500 -- 3,750 1,900 Vice President, Operations Lawrence R. Walsh....... 1997 218,889 72,500 -- 3,750 3,166 Vice President, Finance and Administration Robert L. Bailey........ 1997 176,828 72,500 -- 3,750 1,900 Vice President, Sales and Marketing
- ---------------------- (1) Other Annual Compensation was not reportable. (2) Reflects reimbursement of premiums for life insurance for Thomas A. Rodgers, Jr. and Company contributions under a 401(k) plan for the other Named Executive Officers. The following table sets forth information with respect to all options granted in fiscal 1997 to the Named Executive Officers. OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE VALUE - ------------------------------------------------------------------------- ---------------- PERCENT OF NUMBER OF TOTAL SECURITIES OPTIONS/SARS UNDERLYING GRANTED TO EXERCISE OR GRANT DATE OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE NAME GRANTED (1) FISCAL YEAR ($/SH) DATE (2) ($) - ---- ------------ ------------ ----------- ---------- ---------------- Thomas A. Rodgers, Jr... -- -- -- -- -- Thomas A. Rodgers, III.. 11,250 50.0% 30.00 12/31/07 2,468,700 Americo Reis............ 3,750 16.7% 30.00 12/31/07 822,900 Lawrence R. Walsh....... 3,750 16.7% 30.00 12/31/07 822,900 Robert L. Bailey........ 3,750 16.7% 30.00 12/31/07 822,900
- ---------------------- (1) The options vested upon consummation of the Recapitalization and the Merger, and are exercisable for common stock and preferred stock of Globe Holdings pursuant to the Recapitalization. See "Certain Relationships and Related Transactions--Recapitalization." The Company expects to implement a new stock option plan. (2) The Black-Scholes option pricing model was used to determine the grant date present value of the options. The grant date present value of the options was calculated to be $219.44 per share, based on an expected life of 5 years and an assumed risk-free interest rate of 5.7%. 49 The following table sets forth information with respect to all options exercised in fiscal 1997 and the year-end value of unexercised options held by the Named Executive Officers. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF OPTIONS/SARS UNEXERCISED IN-THE- AT FISCAL MONEY OPTIONS/SAR'S YEAR END AT FISCAL YEAR-END ------------- ------------------- SHARES ACQUIRED VALUE EXERCISABLE/ ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/ NAME (#) ($) (#) UNEXERCISABLE ($) - ---- --------------- -------- ------------- ------------------- Thomas A. Rodgers, Jr... -- -- -- -- Thomas A. Rodgers, III.. -- -- 11,250/11,250 2,385,000/2,385,000 Americo Reis............ -- -- 3,750/ 3,750 795,000/ 795,000 Lawrence R. Walsh....... -- -- 3,750/ 3,750 795,000/ 795,000 Robert L. Bailey........ -- -- 3,750/ 3,750 795,000/ 795,000
PENSION PLANS Globe maintains a Non-Qualified Pension Plan and a Deferred Compensation Plan, pursuant to which each of Thomas A. Rodgers, III, Americo Reis, Lawrence R. Walsh and Robert L. Bailey (the "Participating Executives") will be entitled to receive certain payments upon retirement. Under the Non-Qualified Pension Plan, each of the Participating Executives will receive a lump sum distribution upon retirement at age 65. The amounts payable under the Non- Qualified Pension Plan were determined by the Company and its consultants to approximate 50% of estimated final compensation. Pursuant to the Deferred Compensation Plan, each Participating Executive is entitled to receive, beginning at his retirement at age 65, an annual distribution payable for the following 15 years. The following table shows the estimated annual benefits payable under the Non-Qualified Pension Plan and the Deferred Compensation Plan for each of the Participating Executives.
ESTIMATED ANNUAL BENEFIT UPON RETIREMENT AT AGE 65 ------------------------------- NON-QUALIFIED DEFERRED NAME PENSION PLAN COMPENSATION PLAN ---- ------------- ----------------- Thomas A. Rodgers, Jr. (1)................ $ -- $ -- Thomas A. Rodgers, III.................... $206,400 $90,000 Americo Reis.............................. $ 86,400 $25,000 Lawrence R. Walsh......................... $104,000 $15,000 Robert L. Bailey.......................... $ 96,000 $20,000
- ---------------------- (1) Thomas A. Rodgers, Jr. does not participate in the Non-Qualified Pension Plan or the Deferred Compensation Plan. EMPLOYMENT AGREEMENTS Each of Messrs. Thomas A. Rodgers, III, Americo Reis, Lawrence R. Walsh and Robert L. Bailey are parties to an Employment Agreement with Globe Holdings dated as of December 31, 1997 (the "Employment Agreements"). The Employment Agreements were transferred to Globe Manufacturing pursuant to the Asset Drop Down. The Employment Agreements provide for annual base salaries for Messrs. Rodgers, Reis, Walsh and Bailey of at least $549,000, $212,000, $219,000 and $200,000, respectively, and provide that such executives shall generally be entitled to participate in all bonus and benefit plans made available to executives. The Employment Agreements have a term of three years, but may be terminated earlier by the Company or the executive. If an executive's employment is terminated by the Company without Cause or by the executive with Good Reason (each as defined in the Employment Agreements), then the Company will be required to pay the executive his base salary through December 2000 and the maximum amount he would have been entitled to under the Company's incentive plans for the year in which the termination occurred, and will also be required to provide insurance benefits for three years from the date of termination, except to the extent the executive obtains comparable benefits from a subsequent employer. 50 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The following summaries of the material terms of certain agreements to which the Company is a party do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of such agreements, including the definitions of certain terms therein and the exhibits and schedules thereto. Copies of such agreements may be obtained from the Company or the Initial Purchaser. RECAPITALIZATION The consummation of the Initial Offering occurred shortly after, and was conditioned upon, the effectiveness of the Recapitalization. The Recapitalization was effected pursuant to the Merger Agreement between the Company and MergerCo, a newly formed affiliate of Code Hennessy & Simmons. In connection with the Merger and the Recapitalization: (i) the Company transferred substantially all of its assets and liabilities to Globe Manufacturing pursuant to the Asset Drop Down; (ii) Code Hennessy & Simmons and certain other investors invested approximately $42.8 million in common stock and preferred stock of MergerCo; (iii) CHS made the CHS Loan in the amount of $25.0 million; and (iv) Globe Manufacturing consummated the Initial Senior Subordinated Note Offering. Pursuant to the Merger Agreement: (i) MergerCo merged with and into the Company, with the Company being the surviving corporation; (ii) the common stock of MergerCo was converted into common stock of the surviving corporation (the "New Common Stock") and the preferred stock of MergerCo became preferred stock of the surviving corporation (the "New Preferred Stock"); (iii) the CHS Loan became the obligation of the surviving corporation; (iv) certain stock and all stock options of the Company outstanding prior to the Merger converted into or became exercisable for New Common Stock and New Preferred Stock; (v) holders of the remaining stock of the Company outstanding prior to the Merger received the Cash Merger Consideration (including the payment by the Company of fees and expenses on their behalf) in an aggregate amount equal to $315.0 million less (x) the amount of the Company's outstanding indebtedness as of the date of the Merger and (y) the amount of the Retained Investment; and (vi) $15.0 million was deposited into escrow as the Escrow Amount. The proceeds to the Company from the Initial Offering were used to repay the CHS Loan. Under the Merger Agreement, the Cash Merger Consideration is subject to adjustment based on consolidated net asset value as of the date of the Merger. The Escrow Amount consists of (a) $5.0 million to secure the obligations of the Pre-Merger Shareholders with respect to the post-closing adjustment of the Cash Merger Consideration and (b) $10.0 million to satisfy any indemnification obligations of the Pre-Merger Shareholders under the Merger Agreement. The Adjustment Escrow Fund is required to be applied and/or released upon the determination of the final closing date consolidated net asset value of the Company and the balance of the Indemnification Escrow Fund is required to be released promptly after December 31, 2001. Pursuant to the Merger Agreement, the Pre-Merger Shareholders have agreed to indemnify the Company and certain of its related parties for all liabilities and other losses arising from, among other things, (i) any breach of representations, warranties or pre-closing covenants of the Company contained in or contemplated by the Merger Agreement, (ii) the failure of any Pre-Merger Shareholders to have good, valid and marketable title to the shares of common stock held by such Pre-Merger Shareholder, (iii) the environmental investigation relating to the Company's facility in Fall River, Massachusetts to the extent related to activities prior to the effective time of the Merger, (iv) the antitrust claims and investigations relating to the alleged conspiracy by the Joint Venture to restrain trade in, and fix prices of, latex thread in the United States to the extent related to activities prior to the effective time of the Merger and (v) certain other matters. With respect to claims based on any misrepresentation or breach of any representation or warranty made by the Company, the Pre-Merger Shareholders are not required to indemnify the Company unless the aggregate of all amounts for which indemnity would otherwise be payable exceeds $1.0 million and, in such event, the Pre- Merger Shareholders will only be responsible for the amount in excess of $1.0 million. In addition, the indemnification obligations of the Pre-Merger Shareholders are generally limited to the amount held in the Indemnification Escrow Fund, other than with respect to claims based on fraud or on the failure of a Pre-Merger Shareholder to have good, valid and marketable title to his shares of common stock. 51 The Merger Agreement contains representations and warranties typical of agreements of like nature, including, without limitation, those relating to corporate organization and capitalization, the valid authorization, execution, delivery and enforceability of all transaction documents, the Company's financial statements, the absence of material adverse changes in the business, assets, financial condition and results of operations, the absence of material undisclosed liabilities, tax matters, the quality and title of personal and real property, material contracts, intellectual property, employee benefits plans, environmental matters, compliance with laws, governmental authorizations, permits and licenses and insurance matters. Generally, the representations and warranties of the Company expire 18 months after the closing date of the Merger except that (i) those relating to environmental matters remain in full force and effect until the second anniversary of the closing date of the Merger and (ii) those relating to tax matters survive until the expiration of the applicable statute of limitations. Prior to the Merger, Thomas A. Rodgers, Jr. and Thomas A. Rodgers, III beneficially owned, directly or indirectly, an aggregate of approximately 39% of the common stock of the Company on a fully-diluted basis. In addition, Messrs. Bailey, Reis and Walsh beneficially owned, in the aggregate, approximately 2% of the common stock of the Company on a fully-diluted basis. In connection with the Merger, these individuals received a pro rata portion of the aggregate merger consideration. MANAGEMENT AGREEMENT In connection with the Recapitalization, Globe Manufacturing entered into a Management Agreement with CHS Management III, L.P. ("CHS Management"), an affiliate of Code Hennessy & Simmons LLC, pursuant to which CHS Management will provide financial and management consulting services to Globe Manufacturing and receive a monthly fee of $83,333. In addition, pursuant to the Management Agreement Globe Manufacturing paid to CHS Management $3.0 million at the closing of the Transactions as compensation for services rendered by CHS Management to Globe Manufacturing in connection with the Transactions. The Management Agreement also provides that when and as Globe Manufacturing consummates the acquisition of other businesses, Globe Manufacturing will pay to CHS Management a fee equal to the greater of $250,000 and one percent of the acquisition price of each such business as compensation for services rendered by CHS Management to Globe Manufacturing in connection with the consummation of such acquisition. The Indenture provides that no payments shall be made to CHS pursuant to the Management Agreement or otherwise in respect of management, advisory or similar services if an Event of Default exists under the Indenture. The term of the Management Agreement is five years, subject to automatic renewal unless either CHS Management or Globe Manufacturing elects to terminate. Globe Manufacturing believes that the fees to be paid to CHS Management for the professional services to be rendered are at least as favorable to Globe Manufacturing as those which could be negotiated with an unrelated third party. Globe Manufacturing reimbursed CHS Management for expenses related to the Transactions and will reimburse CHS Management for expenses incurred in rendering services to the Company and Globe Manufacturing under the Management Agreement. SECURITYHOLDERS AGREEMENT In connection with the Recapitalization, the Company's shareholders entered into a Securityholders Agreement. This agreement provides, among other things, for the nomination of and voting for at least five directors of the Company by the Company's shareholders. The Securityholders Agreement also provides that Code Hennessy & Simmons will be entitled to appoint all of the directors of the Company. The following individuals have been initially designated by Code Hennessy & Simmons to serve as directors: Thomas A. Rodgers, Jr., Thomas A. Rodgers, III, Andrew W. Code, Peter M. Gotsch and Edward M. Lhee. See "Management." EXECUTIVE SECURITIES AGREEMENTS In connection with the Recapitalization, each of Lawrence R. Walsh, Americo Reis and Robert L. Bailey entered into an Executive Securities Agreement with the Company and Code Hennessy & Simmons which provides for, among other things, repurchase rights with respect to the the Company securities held by them upon termination of employment (other than retirement) and restrictions on transfer of such securities. 52 REGISTRATION AGREEMENT In connection with the Recapitalization, the Company's shareholders entered into a Registration Agreement. The Registration Agreement grants certain demand registration rights to Code Hennessy & Simmons. An unlimited number of such demand registrations may be requested by Code Hennessy & Simmons. In the event that Code Hennessy & Simmons makes such a demand registration request, all other shareholders of the Company will be entitled to participate in such registration on a pro rata basis (based on shares held). Code Hennessy & Simmons may request, pursuant to its demand registration rights, and each other shareholder may request, pursuant to his or its participation rights, that up to all of such shareholder's shares of common stock be registered by the Company. The Company is entitled to postpone such a demand registration for up to 180 days under certain circumstances. In addition, the parties to the Registration Agreement are granted certain rights to have shares included in registrations initiated by the Company or its shareholders ("piggyback registration rights"). Expenses incurred in connection with the exercise of such demand or piggyback registration rights shall, subject to limited exceptions, be borne by the Company. EXECUTIVE LOAN In December 1992, the Company made a loan to Thomas A. Rodgers, III to assist him in paying taxes incurred in a previous recapitalization of the Company. As of June 30, 1998, the balance of such loan, including accrued interest, was $285,397. The loan was repaid prior to the Merger. NON-COMPETITION AGREEMENT In connection with the Merger and the Recapitalization, each of the Named Executive Officers entered into a Non-Competition Agreement with the Company pursuant to which the Named Executive Officers agreed not to engage anywhere in the U.S. in any business that manufactures, distributes or sells polyester or polyester spandex fiber, latex thread or other elastomeric fiber for a period of three years (or, in the case of Mr. Bailey, until December 31, 2000). The Named Executive Officers also agreed not to solicit employees or customers of the Company or its subsidiaries, or to hire any person who was an employee of the Company or any of its subsidiaries within twelve months after such person's employment with the Company or any subsidiary is terminated. The Named Executive Officers also agreed to maintain the confidentiality of information regarding the business and affairs of the Company and its subsidiaries. SALE BONUS In February 1998, the Company instituted a management reward program pursuant to which each of the Named Executive Officers was entitled to receive a cash bonus upon consummation of the Merger. The amount of the bonus paid was based on a percentage of the consideration paid in connection with the Merger. Pursuant to the program, Thomas A. Rodgers, Jr. and Thomas A. Rodgers, III received an aggregate of $825,000; and Messrs. Reis, Walsh and Bailey each received $412,500. In addition, Messrs. Cardullo and Girrier each received a bonus of $50,000 upon consummation of the Merger. INVESTMENT BANKING FEES Prior to the Merger, certain affiliates of Goldman, Sachs & Co. owned an aggregate of approximately 46% of the common stock of the Company on a fully- diluted basis prior to the consummation of the Merger, and three members of the Board of Directors of the Company prior to the Merger were affiliates of Goldman, Sachs & Co. Goldman, Sachs & Co. acted as financial advisor to the Company in connection with the Transactions, for which it received a fee. TAX SHARING AGREEMENT The operations of Globe Manufacturing are included in the Federal income tax returns filed by the Company. Prior to the closing of the Initial Offering, Globe Manufacturing and the Company entered into a Tax 53 Sharing Agreement ("Tax Sharing Agreement") pursuant to which the Company agreed to advance to the Company so long as the Company files consolidated income tax returns that include Globe Manufacturing (i) payments for Globe Manufacturing's share of income taxes assuming Globe Manufacturing is a stand- alone entity, which in no event may exceed the group's consolidated tax liabilities for such year, and (ii) payments to or on behalf of the Company in respect of franchise or similar taxes and governmental charges incurred by it relating to the business, operations or finances of Globe Manufacturing. CONSULTING AGREEMENT In connection with the Merger and the Recapitalization, Thomas A. Rodgers, Jr. entered into a consulting agreement with Globe Manufacturing, pursuant to which he will be compensated at a rate of $100,000 per annum, and agreed to perform special projects for Globe Manufacturing and such other matters as Globe Manufacturing's Board of Directors or officers reasonably request. CHS LOAN In connection with the Recapitalization, Code Hennessy & Simmons extended the CHS Loan to Globe Holdings in the principal amount of $25.0 million. The CHS Loan was repaid with the proceeds to Globe Holdings from the Initial Offering. The CHS Loan bore interest at a rate of 14% per annum and would have matured on July 31, 2009. 54 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of September 15, 1998 regarding the beneficial ownership of the Company's capital stock by (i) each shareholder who beneficially owns more than 5% of the common stock of Globe Holdings, (ii) each director and Named Executive Officer of the Company and (iii) all directors and executive officers of the Company as a group. Except as otherwise indicated below, each of the persons named in the table has sole voting and investment power with respect to the securities beneficially owned by it or him as set forth opposite its or his name. Unless otherwise noted, the address for each director and executive officer of the Company is c/o the Company, 456 Bedford Street, Fall River, Massachusetts 02720.
COMMON STOCK PREFERRED STOCK --------------------- --------------------- NAME OF BENEFICIAL OWNER NUMBER (1) PERCENT(1) NUMBER (1) PERCENT(1) ------------------------ ---------- ---------- ---------- ---------- Code, Hennessy & Simmons III, L.P. (2).................... 1,647,437 75.6 21,999.6 75.6 Thomas A. Rodgers, Jr (3).... 166,244 7.6 2,220 7.6 Thomas A. Rodgers, III....... 89,862 4.1 1,200 4.1 Americo Reis (4)............. 22,465 1.0 300 1.0 Lawrence R. Walsh (4)........ 22,465 1.0 300 1.0 Robert L. Bailey (4)......... 22,465 1.0 300 1.0 William J. Girrier........... -- -- -- -- Kevin T. Cardullo............ -- -- -- -- Andrew W. Code (5)........... 1,647,437 75.6 21,999.6 75.6 Peter M. Gotsch (5).......... 1,647,437 75.6 21,999.6 75.6 Edward M. Lhee............... 1,977 * 26.4 * Brinson Partners, Inc. (6)(7)...................... 224,655 10.3 3,000 10.3 Virginia Retirement System (7)......................... 179,724 8.2 2,400 8.2 All executive officers and directors as a group (9 persons).................... 1,806,671 80.4 24,126 80.4
- -------- * Less than 1% (1) Includes shares of Common Stock and Preferred Stock subject to options which are exercisable within 60 days of September 15, 1998. (2) The business address of Code, Hennessy & Simmons III, L.P. is 10 South Wacker Drive, Suite 3175, Chicago, Illinois 60606. (3) All of such shares are held of record by the Thomas A. Rodgers, Jr. Grantor Retained Annuity Trust, of which Thomas A. Rodgers, Jr. is the sole beneficiary. (4) All of the shares shown are issuable upon exercise of outstanding options. (5) All of such shares are held of record by Code, Hennessy & Simmons III, L.P. Messrs. Code and Gotsch are officers, directors and shareholders of the sole general partner of Code, Hennessy & Simmons III, L.P. and share investment and voting power with respect to the securities owned by Code, Hennessy & Simmons III, L.P. Each of Messrs. Code and Gotsch disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. The business address of Messrs. Code and Gotsch is c/o Code, Hennessy & Simmons III, L.P., 10 South Wacker Drive, Suite 3175, Chicago, Illinois 60606. (6) Brinson Partners, Inc. ("BPI") has advised the Company that it is an Investment Adviser registered under Section 203 of the Investment Advisers Act of 1940. Of the shares shown: (i) 38,631 shares of Common Stock and 515.87 shares of Preferred Stock are held of record by Brinson Venture Capital Fund III, L.P., of which BPI is the general partner and (ii) 6,300 shares of Common Stock and 84.13 shares of Preferred Stock are held of record by Brinson MAP Venture Capital Fund III, a trust of which a wholly owned subsidiary of BPI is the sole trustee. As a result, BPI has sole voting and dispositive power with respect to such shares. The address of BPI is 209 South LaSalle Street, Chicago, Illinois 60604-1295. (7) BPI serves as an Investment Adviser to Virginia Retirement System and shares voting and dispositive power with respect to the shares held of record by Virginia Retirement System. The address of Virginia Retirement System is 1200 East Main Street, Richmond, Virginia 23219. 55 DESCRIPTION OF SENIOR CREDIT FACILITY General. As part of the Transactions, Globe Manufacturing entered into the Senior Credit Facility with Bank of America National Trust and Savings Association, as a lender and as administrative agent, BancAmerica Robertson Stephens, as arranger, Merrill, Lynch, Pierce, Fenner & Smith, Inc. as syndication agent, and certain other financial institutions (the "Lenders"). The Senior Credit Facility provides for two term loans to Globe Manufacturing for $60.0 million and $55.0 million ("Term Loan A" and "Term Loan B," respectively, and collectively, the "Term Loans") and revolving loans to Globe Manufacturing for up to $50.0 million (including letters of credit) (the "Revolving Loan" and, together with the Term Loans, the "Loans"). Subject to certain restrictions, the Senior Credit Facility may be used to finance the Transactions and for working capital and general corporate purposes of Globe Manufacturing and its subsidiaries. Repayment. Term Loan A and the Revolving Loan must be repaid six and one- half years following the date of the closing of the Senior Credit Facility. Term Loan B must be repaid eight years following the date of the closing of the Senior Credit Facility. Loans made pursuant to the Senior Credit Facility may be borrowed, repaid and, in the case of the Revolving Loans, reborrowed, without premium or penalty (other than prepayments of Eurodollar Loans (as defined in the Senior Credit Facility) which may be subject to customary breakage costs), from time to time until maturity, subject to the satisfaction of certain conditions on the date of any such borrowing. In addition, the Senior Credit Facility provides for mandatory repayments (with corresponding permanent reductions on Revolving Loan commitments) of any outstanding borrowings out of any proceeds received from a sale of assets (other than sales of inventory in the ordinary course of business, sales of certain obsolete assets, and certain other exceptions), net cash proceeds of permitted debt and equity issuances (subject to certain exceptions), net cash proceeds from insurance recovery and condemnation events (subject to certain reinvestment rights) and 75% of annual excess cash flow, reducing to 50% when the ratio of total debt to EBITDA is less than 3.75:1. Security; Guaranty. The obligations of Globe Manufacturing under the Senior Credit Facility are guaranteed by Globe Holdings and will be guaranteed by each of Globe Manufacturing's future direct and indirect domestic subsidiaries and, so long as there are no adverse tax consequences, foreign subsidiaries. The obligations of Globe Manufacturing under the Senior Credit Facility and each of the guarantors under its guarantee is or will be secured by substantially all of the assets of such person and the capital stock of subsidiaries owned by Globe Manufacturing and the guarantors. Interest. At Globe Manufacturing's option, the interest rates per annum applicable to the loans under the Senior Credit Facility will be a fluctuating rate of interest measured by reference to one or a combination (at Globe Manufacturing's election) of the following: (i) the Base Rate (as defined in the Senior Credit Facility), plus the applicable borrowing margin, or (ii) the relevant Eurodollar Rate (as defined in the Senior Credit Facility), plus the applicable borrowing margin. The applicable borrowing margin under the Senior Credit Facility for Base Rate-based borrowings is 1.25% for the Term Loan A and the Revolving Loan and 1.75% for the Term Loan B; the applicable borrowing margin under the Senior Credit Facility for Eurodollar Rate-based borrowings is 2.25% for the Term Loan A and the Revolving Loan and 2.75% for the Term Loan B, subject to adjustment in each case based on the Company's Leverage Ratio (defined in the Senior Credit Facility as the ratio of Total Debt (as defined in the Senior Credit Facility) to EBITDA (as defined in the Senior Credit Facility)). Fees. Globe Manufacturing has agreed to pay certain fees in connection with the Senior Credit Facility, including: (i) letter of credit fees; (ii) agency fees; and (iii) commitment fees. Commitment fees are payable at a rate per annum of 0.5% on the undrawn amounts of the Senior Credit Facility, subject to adjustment based on the Company's Leverage Ratio. 56 Covenants. The Senior Credit Facility requires Globe Manufacturing to meet certain financial tests, including a maximum leverage ratio, a minimum interest coverage ratio and a minimum fixed charge coverage ratio. The Senior Credit Facility also contains covenants which, among other things, restrict the ability of Globe Manufacturing and its subsidiaries (subject to certain exceptions) to incur liens, transact with affiliates, incur indebtedness, declare dividends or redeem or repurchase capital stock, make loans and investments, engage in mergers, acquisitions and asset sales, acquire assets, stock, or debt securities of any person, have additional subsidiaries, amend its articles of incorporation and bylaws, and make capital expenditures. The Senior Credit Facility also requires Globe Manufacturing and its restricted subsidiaries to satisfy certain customary affirmative covenants and to make certain customary indemnifications to the Lenders and the administrative agent under the Senior Credit Facility. Events of Default. The Senior Credit Facility contains customary events of default, including payment defaults, breach of representations and warranties, covenant defaults, certain events of bankruptcy and insolvency, ERISA violations, judgment defaults, cross-default to certain other indebtedness, and a change in control of Globe Holdings or Globe Manufacturing. 57 DESCRIPTION OF SENIOR SUBORDINATED NOTES The Senior Subordinated Notes are limited in aggregate principal amount to $300.0 million, of which $150.0 million was issued in the Initial Senior Subordinated Note Offering, and will mature on August 1, 2008. The Senior Subordinated Notes were issued pursuant to the Senior Subordinated Note Indenture, and are general unsecured obligations of Globe Manufacturing, subordinated in right of payment to all present and future Senior Debt (as defined in the Senior Subordinated Note Indenture) of Globe Manufacturing. The Senior Subordinated Notes are unconditionally guaranteed on a senior subordinated basis by each of Globe Manufacturing's future Restricted Domestic Subsidiaries (as defined in the Senior Subordinated Note Indenture). Interest on the Senior Subordinated Notes accrues at the rate of 10% per annum from the Issue Date and will be payable semi-annually in arrears on each February 1 and August 1, commencing February 1, 1999, to the holders of record on the immediately preceding January 15 and July 15, respectively. Additional Senior Subordinated Notes may be issued from time to time after the Initial Senior Subordinated Note Offering, subject to the provisions of the Senior Subordinated Note Indenture. The Senior Subordinated Notes are not redeemable at Globe Manufacturing's option prior to August 1, 2003. Thereafter, the Senior Subordinated Notes are subject to redemption at any time at the option of Globe Manufacturing, in whole or in part, upon not less than 30 nor more than 60 days notice, at the redemption prices (expressed as percentages of principal amount) set forth in the Senior Subordinated Note Indenture plus accrued and unpaid interest thereon to the applicable redemption date. Notwithstanding the foregoing, at any time prior to August 1, 2001, Globe Manufacturing may on any one or more occasions redeem from the net proceeds of one or more Equity Offerings (as defined in the Senior Subordinated Note Indenture) up to an aggregate of 35% of the aggregate principal amount of the Senior Subordinated Notes at a redemption price of 110.0% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date; provided that at least $97.5 million in aggregate principal amount of the Senior Subordinated Notes issued remain outstanding immediately after the occurrence of such redemption. Upon the occurrence of a Change of Control (as defined in the Senior Subordinated Note Indenture), each holder of Senior Subordinated Notes will have the right to require Globe Manufacturing to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's Senior Subordinated Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the date of repurchase. In addition, upon the occurrence of certain asset sales, holders of Senior Subordinated Notes may have the right to require Globe Manufacturing to repurchase their Senior Subordinated Notes at an offer price in cash equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the date of repurchase. The Senior Subordinated Note Indenture contains certain covenants that limit, among other things, the ability of Globe Manufacturing and its Restricted Subsidiaries to: (i) incur additional indebtedness; (ii) issue Disqualified Stock; (iii) make certain restricted payments; (iv) grant liens on assets; (v) merge, consolidate or transfer substantially all of their assets; (vi) enter into transactions with Related Persons; (vii) impose restrictions on any Restricted Subsidiary's ability to pay dividends or make certain other payments to Globe Manufacturing and its Restricted Subsidiaries; (viii) enter into certain guarantees; (ix) sell assets; and (x) issue capital stock of Restricted Subsidiaries. The Senior Subordinated Note Indenture contains certain customary events of default, which include the failure to pay interest and principal, the failure to comply with certain covenants in the Senior Subordinated Notes or the Senior Subordinated Note Indenture, a default under certain indebtedness, the imposition of certain final judgements and certain events occurring under bankruptcy laws. Globe Manufacturing has agreed to file within 60 days after July 31 and to cause to become effective within 150 days of July 31 (or later under certain circumstances) a registration statement under the Securities Act with respect to an offer to holders to exchange the Senior Subordinated Notes (and any related guarantees) for registered notes (and any related guarantees). In the event the registration requirements are not met, a registration default shall be deemed to have occurred and additional interest (as defined in the Senior Subordinated Note Indenture) will become payable with respect to the Senior Subordinated Notes until such registration default has been cured. Concurrent with this Exchange Offer, Globe Manufacturing is offering to exchange $1,000 principal amount at maturity of its New Senior Subordinated Notes for each $1,000 principal amount at maturity of its Old Senior Subordinated Notes. 58 DESCRIPTION OF THE NEW NOTES The New Notes offered hereby are to be issued as a separate series under an Indenture dated as of August 6, 1998 (the "Indenture") between the Company and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). 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 and a different CUSIP number than the Old Notes, (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 Liquidated Damages in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. The Old Notes issued in the Initial Offering and the New Notes offered hereby are referred to collectively as the "Notes." The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all provisions of the Indenture, a copy of which can be obtained from the Trustee upon request. Upon the issuance of the New Notes, if any, or the effectiveness of the Shelf Registration Statement, the Indenture will be subject to and governed by the provisions of the Trust Indenture Act of 1939 (the "Trust Indenture Act" ). The definitions of certain terms used in the following summary are set forth below under "--Certain Definitions." Wherever particular sections or defined terms of the Indenture not otherwise defined herein are referred to, such Sections or defined terms shall be incorporated herein by reference, and those terms made a part of the Indenture by the Trust Indenture Act also are incorporated herein by reference. GENERAL The Notes, which mature on August 1, 2009, will be limited to $49,086,000 in aggregate principal amount at maturity, all of which will be issued on the Issue Date. The Notes will not be entitled to any sinking fund. The Notes will be redeemable at the option of the Company as described below under "-- Optional Redemption." The Notes will be issued at a discount to their aggregate principal amount at maturity. The Notes will accrete in value until August 1, 2003 at a rate of 14% per annum, compounded semi-annually on August 1 and February 1 of each year to an aggregate principal amount of $49,086,000. Cash interest on the Notes will not accrue prior to August 1, 2003. Thereafter, the Notes will bear interest at a rate of 14% per annum payable semiannually in arrears on February 1 and August 1 of each year commencing on February 1, 2004 until the principal thereof is paid or made available for payment to the Holders of record at the close of business on the immediately preceding January 15 or July 15, respectively. Interest (and accretion in value prior to August 1, 2003) will be computed on the basis of a 360-day year comprised of twelve 30- day months. Under certain circumstances, Liquidated Damages (as defined) may be payable with respect to the Notes as described under "--Exchange Offer; Registration Rights." Principal, premium, if any, and interest on the Notes will be payable at the office or agency of the Trustee maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, if any, and interest with respect to Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. All references herein to payments of principal, premium, if any, and interest on the Notes shall be deemed to include any applicable Liquidated Damages (as defined) that may become payable in respect of the Notes. See "-- Exchange Offer; Registration Rights." 59 ORIGINAL ISSUE DISCOUNT The Notes are being issued at a substantial discount from their principal amount. Consequently, holders generally will be required to include amounts in gross income for U.S. Federal income tax purposes in advance of receipt of any cash payment on the Notes to which the income is attributable. In addition, the Notes will be subject to the "applicable high yield discount obligation" rules under the Internal Revenue Code of 1986, as amended, which will defer and, in part, eliminate the Company's ability to deduct original issue discount that accrues with respect to the Notes. Prospective investors should consult their own tax advisors with respect to the application of the original discount rules and the "applicable high yield discount obligation" rules (including the limited availability of a dividends received deduction for a corporate holder). See "Certain United States Federal Tax Considerations" for a more detailed discussion of the U.S. Federal income tax considerations relevant to holders with respect to the purchase, ownership and disposition of the Notes. If a bankruptcy case is commenced by or against the Company under the United States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the Notes, the claim of a holder of Notes with respect to the principal amount thereof will likely be limited to an amount equal to the sum of (i) the issue price of the Notes and (ii) the original issue discount that is not deemed to constitute "unmatured interest" for the purposes of the Bankruptcy Code. Any original issue discount that was not amortized as of any such bankruptcy filing would likely constitute "unmatured interest." RANKING The indebtedness evidenced by the Notes will represent general unsecured obligations of the Company. The Notes will rank pari passu in right of payment with all existing and future Senior Debt of the Company and will be senior in right of payment to all existing and future Subordinated Debt of the Company. The Notes will be effectively subordinated to any secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness. The Company's only material asset is the capital stock of Globe Manufacturing, all of which is pledged to secure obligations under the Senior Credit Facility. All of the operations of the Company are conducted through its Subsidiaries. Claims of creditors of such Subsidiaries, including trade creditors, and claims of preferred shareholders (if any) of such Subsidiaries generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of creditors of the Company, including the Holders of the Notes. The Notes, therefore, will be effectively subordinated to creditors (including trade creditors) and preferred shareholders (if any) of Subsidiaries of the Company. As of June 30, 1998, on a pro forma basis after giving effect to the Transactions, the Company's Subsidiaries would have had Debt and other liabilities of $286.6 million (excluding unused commitments of $43.2 million under the Senior Credit Facility). The Indenture permits the Company and its Subsidiaries to incur additional debt, subject to certain limitations. As of June 30, 1998, on a pro forma basis after giving effect to the Transactions, the Company would have had no outstanding Senior Debt (other than the Notes and its guarantee under the Senior Credit Facility). Although the Indenture contains limitations on the amount of additional indebtedness that the Company may incur, under certain circumstances the amount of such indebtedness could be substantial and, in any case, such indebtedness may constitute Senior Debt. See "--Certain Covenants--Incurrence of Debt and Issuance of Preferred Stock." OPTIONAL REDEMPTION The Notes will be redeemable at the option of the Company, in whole or in part, at any time and from time to time on or after August 1, 2003 upon not less than 30 nor more than 60 days notice, at the redemption prices 60 (expressed as percentages of principal amount at final maturity) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on August 1 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2003.......................................................... 107.000% 2004.......................................................... 104.667% 2005.......................................................... 102.333% 2006 and thereafter........................................... 100.000%
The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Optional Redemption with Net Proceeds of Equity Offerings At any time prior to August 1, 2001, the Company may redeem up to 35% in aggregate principal amount at maturity of the Notes at a redemption price of 114% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date with the net cash proceeds of one or more Equity Offerings, provided that not less than 65% of the aggregate principal amount at maturity of the Notes remains outstanding immediately after the occurrence of any such redemption. Optional Redemption Following a Change of Control At any time prior to August 1, 2003, the Notes may be redeemed, in whole but not in part, at the option of the Company at any time within 180 days after a Change of Control, at a redemption price equal to the sum of (i) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date, plus (ii) the Applicable Premium. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. Notices 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. Notices of redemption may not be conditional. 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 principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash, on or prior to August 1, 2003, equal to 101% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of repurchase and thereafter at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will not be required to make a Change of Control Offer if all of the Notes have been called for redemption pursuant to the provisions described under "-- Optional Redemption." 61 On the Change of Control Payment Date, the Company will, to the extent lawful, (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Trustee an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Trustee will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Indenture provides that, prior to complying with the provisions of this covenant (including the mailing of the notice referred to above), but in any event within 90 days following a Change of Control, the Company will either repay in full in cash all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant and the Company's failure to comply with this covenant shall constitute an Event of Default under the Indenture. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Senior Credit Facility restricts the ability of the Company to purchase any Notes and certain other indebtedness of the Company, and also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event any such restrictions would prohibit the Company from purchasing Notes upon a Change of Control, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such restrictions. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under the Senior Credit Facility. The Senior Subordinated Note Indenture also requires Globe Manufacturing to repurchase the Senior Subordinated Notes upon the occurrence of certain change of control events. See "Description of Senior Credit Facility" and "Description of the Senior Subordinated Notes." The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Change of Control provision of the Notes may in certain circumstances make it more difficult or discourage a takeover of the Company and, as a result, may make removal of incumbent management more difficult. The Change of Control provision is a result of negotiations between the Company and the Initial Purchaser. The provisions of the Indenture would not necessarily afford Holders of the Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect Holders of the Notes. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Company and its Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another person or group may be uncertain. 62 The Company will comply with the applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act, and all other applicable securities laws and regulations in connection with any Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the Indenture by virtue thereof. CERTAIN COVENANTS Incurrence of Debt and Issuance of Preferred Stock. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Debt (including Acquired Debt) and that the Company will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time or as a consequence thereof, the Company may incur Debt (including Acquired Debt) or issue shares of Disqualified Stock and any Restricted Subsidiary may incur Debt (including Acquired Debt) or issue preferred stock if the Consolidated Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which financial statements are available immediately preceding the date on which such additional Debt is incurred or such Disqualified Stock or preferred stock is issued would have been at least 1.75 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Debt had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following items of Debt (collectively, "Permitted Debt"): (i) the incurrence by the Company or any of the Restricted Subsidiaries of Debt under the Senior Credit Facility (or if the Senior Credit Facility has matured or been terminated or repaid in whole or in part, any other Credit Facility) in an aggregate principal amount at any time outstanding not to exceed $165.0 million, which amount shall be reduced by (A) any required permanent repayments pursuant to the provisions of the covenant described under the caption "--Asset Sales" (which are accompanied by a corresponding permanent commitment reduction thereunder), (B) the aggregate amount of any Debt constituting Limited Originator Recourse outstanding pursuant to clause (xi) below and (C) the principal amount of Debt outstanding pursuant to clause (x) below; (ii) (A) the incurrence by the Company and its Restricted Subsidiaries of Existing Debt and (B) the incurrence by Globe Manufacturing of Debt represented by the Senior Subordinated Notes outstanding on the Issue Date (and any notes issued in exchange therefor) and any Guarantee by any Restricted Subsidiary of such notes; (iii) the incurrence by the Company of Debt represented by the Notes; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Debt in exchange for, or the net proceeds of which are used to refund, refinance or replace, Debt that was permitted by the Indenture to be incurred; (v) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Debt between or among the Company and any of its Restricted Subsidiaries; provided, however, that (A) if the Company is the obligor on such Debt, such Debt is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, and (B) (1) any subsequent issuance or transfer (other than any bona fide pledge under the Senior Credit Facility) of Equity Interests that results in any such Debt being held by a Person other than the Company or a Restricted Subsidiary and (2) any sale or other transfer (other than any bona fide pledge under the Senior Credit Facility) of any such Debt to a Person that is not either the 63 Company or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Debt by the Company or such Subsidiary, as the case may be; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Debt that is permitted by the terms of the Indenture to be outstanding or for the purpose of fixing or hedging currency exchange risk with respect to any currency exchanges; (vii) Capitalized Lease Obligations and Purchase Money Obligations of the Company and its Restricted Subsidiaries not to exceed $5.0 million in aggregate principal amount (or accrued value, as applicable) at any time outstanding; (viii) guarantees by the Company of Debt of any Restricted Subsidiaries otherwise permitted by this covenant and guarantees by any of the Company's Restricted Subsidiaries of Debt of the Company or any of the Company's Restricted Subsidiaries; (ix) Debt of the Company or any Restricted Subsidiary in respect of performance bonds, bankers' acceptances, trade letters of credit, workers' compensation or self-insurance, surety bonds and guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; (x) Debt of Foreign Restricted Subsidiaries incurred for working capital purposes in an aggregate principal amount outstanding at any one time not to exceed the sum of 85% of the net book value of such Subsidiaries' accounts receivable determined in accordance with GAAP and 60% of the net book value of their inventory determined in accordance with GAAP and guarantees by Foreign Restricted Subsidiaries of such Debt (which Debt shall reduce the aggregate Debt permitted pursuant to clause (i) above in the manner contemplated thereby); (xi) the incurrence by (A) a Securitization Entity of Debt in a Qualified Securitization Transaction that is Non-Recourse Debt with respect to the Company and its other Restricted Subsidiaries (except for Standard Securitization Undertakings and Limited Originator Recourse) or (B) the Company or any Restricted Subsidiary of Debt constituting Limited Originator Recourse (which Debt shall reduce the aggregate Debt permitted pursuant to clause (i) above in the manner contemplated thereby); (xii) Debt arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn-out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Company, other than guarantees of Debt incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; (xiii) the incurrence by the Company of Subordinated Debt to repurchase Equity Interests in the Company from Persons who have ceased to be bona fide officers or employees of the Company or one or more of its Restricted Subsidiaries ("Employee Notes"), provided that the instrument governing any such Employee Note shall expressly provide that any payments in respect of such note may be made only to the extent permitted in accordance with the covenant described under "--Restricted Payments"; and (xiv) the incurrence by the Company or any of its Restricted Subsidiaries of additional Debt in an aggregate principal amount (or accrued value, as applicable) at any time outstanding, including all Permitted Refinancing Debt incurred to refund, refinance or replace any other Debt incurred pursuant to this clause (xiv), not to exceed $40.0 million (which amount may, but need not, be incurred in whole or in part under the Senior Credit Facility). For purposes of determining compliance with this covenant, in the event that an item of Debt meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xiv) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify such item of Debt in any manner that complies with this covenant and such item of Debt will be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Accrual of interest, the accretion of accrued value and the payment of interest in the form of additional Debt will not be deemed to be an incurrence of Debt for purposes of this covenant. 64 Restricted Payments. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment, unless, at the time of and after giving effect to such Restricted Payment: (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Debt and Issuance of Preferred Stock"; and (iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (including Restricted Payments permitted by clauses (i) and (v) of the next succeeding paragraph and excluding the Restricted Payments permitted by the other clauses therein), is less than or equal to the sum of (A) 50% of the Consolidated Net Income of the Company (or if Consolidated Net Income shall be a loss, minus 100% of such loss) earned during the period beginning on the first day of the first fiscal quarter immediately following the Issue Date and ending on the last day of the fiscal quarter immediately preceding the date the Restricted Payment is made (the "Reference Date") (treating such period as a single accounting period) plus (B) 100% of the aggregate net proceeds (including the fair market value of property other than cash (determined in good faith by the Board of Directors as evidenced by an Officers' Certificate filed with the Trustee, except that in the event the value of any non-cash consideration shall be $10.0 million or more, the value shall be as determined based on an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing)) received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company); plus (C) without duplication of any amounts included in clause (B) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding, in the case of clauses (B) and (C), any net cash proceeds from an Equity Offering to the extent used to redeem the Notes and any net cash proceeds received by the Company from the sale of Equity Interests of the Company or equity contribution which has been financed, directly or indirectly using funds (1) borrowed from the Company or any of its Subsidiaries, unless and until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the Company or by any of its Subsidiaries), plus (D) to the extent that any Restricted Investment that was made after the Issue Date is sold by Company or any Restricted Subsidiary for cash or otherwise liquidated or repaid for cash, the lesser of (1) the fair market value of such Restricted Investment as of the date of such Restricted Investment or (2) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any), to the extent any such amount was not otherwise included in Consolidated Net Income, plus (E) 50% of any dividends received by the Company or a Restricted Subsidiary after the Issue Date from an Unrestricted Subsidiary of the Company, to the extent that such dividends were not otherwise included in Consolidated Net Income of the Company for such period, plus (F) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the fair market value of the Investment made by the Company or any of its Restricted Subsidiaries in such Subsidiary as of the date of such redesignation, plus (G) $2.0 million. For purposes of this paragraph, the fair market value of property other than cash shall be determined in good faith by the Board of Directors and evidenced by an Officers' Certificate filed with the Trustee, except that in the event the value of any non-cash consideration shall be $10.0 million or more, the value shall be determined based on an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing. 65 The foregoing provisions will not prohibit (i) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration thereof or giving of irrevocable redemption notice, if at said date of declaration or giving of notice such payment or redemption would have complied with the provisions of the Indenture; (ii) if no Default or Event of Default shall have occurred and be continuing, the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company or any Restricted Subsidiary of the Company or any Subordinated Debt of the Company or any Restricted Subsidiary, in each case in exchange for, or out of the net proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); provided, however, that the amount of any such net proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clauses (iii) (B) and (iii) (C) of the preceding paragraph; (iii) the redemption, repurchase, refinancing or defeasance of Subordinated Debt in exchange for, or with the net cash proceeds from, an incurrence of Permitted Refinancing Debt; (iv) if no Default or Event of Default shall have occurred and be continuing, the payment in an amount up to $1.0 million in any period of four consecutive quarters to fund repurchases of Equity Interests therein or Debt of the Company issued in connection with such Equity Interests (including, without limitation, any payments of principal, premium or interest in respect of Employee Notes) held by Persons who have ceased to be bona fide officers or employees of the Company or one of its Restricted Subsidiaries, provided that any unused amount thereof may be carried forward to subsequent periods so long as the total amount of such Restricted Payments shall not exceed $5.0 million in the aggregate (and shall be increased by the amount of any net cash proceeds (after deducting any premiums) to the Company from (A) sales of Equity Interests of the Company to management employees subsequent to the Issue Date and (B) any "key-man" life insurance policies which are used to make such redemptions and repurchases); (v) repurchases of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price thereof; and (vi) payments by the Company to fund the Transactions (as described under "Use of Proceeds"). The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default or an Event of Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greater of (i) the net book value of such Investments at the time of such designation and (ii) the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Liens. The Indenture provides that the Company will not directly or indirectly create, incur, assume or suffer to exist any Lien (other than Permitted Liens) that secures Debt or trade payables unless (i) in the case of Liens securing Subordinated Debt, the Notes are secured on a senior basis to the obligations so secured until such time as such obligations are no longer secured by a Lien and (ii) in the case of Liens securing obligations under Pari Passu Debt, the Notes are equally and ratably secured with the obligations so secured until such time as such obligations are no longer secured by a Lien. Merger, Consolidation or Sale of Assets. The Indenture provides that the Company may not consolidate or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless: (i) the Company is the surviving corporation or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease substantially all of the properties and assets of the 66 Company (the "Surviving Entity") shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; (ii) if the Company is not the surviving corporation, the Surviving Entity assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction, no Default or Event of Default exists; (iv) except in the case of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the Company or a merger entered into solely for the purpose of reincorporating the Company in another jurisdiction, the Company or the Surviving Entity, as the case may be, (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Debt and Issuance of Preferred Stock"; and (v) the Company or the Surviving Entity, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied. Transactions with Related Persons. The Company will not, nor will it permit any of its Restricted Subsidiaries to, directly or indirectly (i) sell, lease, transfer or otherwise dispose of any of its property to, (ii) purchase any property from, (iii) make any Investment in, or (iv) enter into or amend any contract, agreement or understanding with, or for the benefit of, any of its Related Persons (each a "Related Person Transaction"), other than Related Person Transactions that are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained in a comparable arm's length transaction by the Company or such Restricted Subsidiary from an unrelated party; provided that the Company delivers to the Trustee (A) with respect to any Related Person Transaction (or series of Related Person Transactions which are similar or part of a common plan) involving aggregate payments in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Related Person Transaction complies with the preceding sentence and such Related Person Transaction was approved by a majority of the disinterested members of the Board of Directors of the Company and (B) with respect to any Related Person Transaction (or series of Related Person Transactions which are similar or part of a common plan) involving aggregate payments in excess of $10.0 million, an affirmative opinion as to the fairness to the Company or such Restricted Subsidiary, as the case may be, from a financial point of view issued by a nationally recognized accounting, appraisal, investment banking or consulting firm that is, in the judgment of the Board of Directors of the Company, independent and qualified to render such opinion. The foregoing restrictions shall not apply to: (i) any transactions between Wholly Owned Restricted Subsidiaries of the Company, or between the Company and any Wholly Owned Restricted Subsidiary of the Company, if such transaction is not otherwise prohibited by the terms of the Indenture; (ii) Restricted Payments permitted under the covenant described above under the caption "--Restricted Payments"; (iii) customary directors' fees, indemnification and similar arrangements, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of the Company or any Restricted Subsidiary entered into in the ordinary course of business (including customary benefits thereunder); (iv) transactions undertaken pursuant to the Executive Securities Agreement, Registration Agreement, Securityholders Agreement or any similar agreement entered into after the date of the Indenture to the extent the terms of any such new agreement are not disadvantageous to the Holders of the Notes in any material respect; (v) the issue and sale by the Company to its shareholders of Equity Interests other than Disqualified Stock; (vi) the incurrence of intercompany Debt permitted pursuant to "--Incurrence of Debt and Issuance of Preferred Stock" above; (vii) the pledge of Equity Interests of Unrestricted Subsidiaries to support the Debt thereof; (viii) transactions that are permitted by the provisions of the Indenture described above under the caption "--Merger, Consolidation and Sale of Assets;" (ix) transactions effected as a part of a Qualified 67 Securitization Transaction; (x) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of the Indenture which are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; (xi) payments made pursuant to the Consulting Agreement and the Tax Sharing Agreement; (xii) subject to the limitation set forth in the following sentence, payments made pursuant to the Management Agreement; and (xiii) transactions undertaken pursuant to the Asset Drop Down. Without limiting the foregoing, after the occurrence and during the continuance of an Event of Default, the Company will not, nor will it permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to any Related Person in respect of management, advisory or similar services, including without limitation, any payment pursuant to the Management Agreement; provided, that the foregoing shall not limit the ability of the Company or any Restricted Subsidiary to enter into transactions described in clauses (iii), (iv) and (xi) above. Payment Restrictions Affecting Restricted Subsidiaries. The Indenture provides that 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 (i) (A) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (B) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) 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 (A) Existing Debt, (B) the Senior Credit Facility as in effect on the date of the Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive taken as a whole with respect to such dividend and other payment restrictions than those contained in the Senior Credit Facility as in effect on the date of the Indenture (as determined by the Board of Directors of the Company in its reasonable and good faith judgment), (C) (1) the Indenture and the Notes and (2) the Senior Subordinated Note Indenture and the Senior Subordinated Notes, (D) applicable law, (E) any instrument governing Debt or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Debt was incurred or such encumbrance or restriction was established in connection with or in contemplation of such acquisition), 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, so acquired, provided that, in the case of Debt, such Debt was permitted by the terms of the Indenture to be incurred, (F) customary non-assignment provisions in leases and other agreements entered into in the ordinary course of business and consistent with past practices, restricting assignment or restricting transfers of non-cash assets, (G) Purchase Money Obligations for property acquired in the ordinary course of business and other Liens permitted by the Indenture, in each case that impose restrictions of the nature described in clause (iii) above on the property so acquired (or subject to such Liens), (H) Debt permitted under clause (x) of the second paragraph under the covenant described above under the caption "--Incurrence of Debt and Issuance of Preferred Stock," (I) Permitted Refinancing Debt, provided that the restrictions contained in the agreements governing such Permitted Refinancing Debt are not materially more restrictive taken as a whole than those contained in the agreements governing the Debt being refinanced (as determined by the Board of Directors of the Company in its reasonable and good faith judgment), (J) contracts for the sale of assets or Equity Interests to the extent that any such contract imposes restrictions of the nature described in clause (iii) above on the property to be sold, (K) any pledge by the Company or a Restricted Subsidiary of the Equity Interests of an Unrestricted Subsidiary to support the Debt thereof, (L) secured Debt otherwise permitted to be incurred, or not otherwise restricted, pursuant to the provisions of the covenant described above under the caption "--Liens" that limits the right of the debtor to dispose of the assets securing such Debt, (M) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered 68 into in the ordinary course of business, (N) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, (O) any Debt or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided that such restrictions apply only to such Securitization Entity, (P) other Debt of a Restricted Subsidiary that is permitted to be incurred subsequent to the date of the Indenture pursuant to the provisions of the covenants described above under the caption "--Incurrence of Debt and Issuance of Preferred Stock"; provided that any such restrictions are ordinary and customary with respect to the type of Debt or preferred stock being incurred or issued (under the relevant circumstances), or (Q) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (A) through (P) above, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Board of Directors, not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. Asset Sales. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash, Cash Equivalents or properties and assets to be used in the Company's business or Equity Interests in a Person that becomes a Restricted Subsidiary and is received at the time of such disposition; provided that the amount of any Senior Debt (as shown on the most recent consolidated balance sheet of the Company) of the Company or any Restricted Subsidiary that is assumed by the transferee of any such assets pursuant to a customary novation agreement or other agreement that releases or indemnifies the Company or such Restricted Subsidiary from further liability shall be deemed to be cash for purposes of this provision. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may apply such Net Proceeds at its option, (i) to permanently repay, reduce, or secure letters of credit in respect of, indebtedness under the Senior Credit Facility or Senior Debt of the Company or any Wholly Owned Restricted Subsidiary (and to correspondingly reduce commitments with respect thereto in the case of revolving borrowings), and/or (ii) to the acquisition of a controlling interest in another business, the making of a capital expenditure or Permitted Investment or the acquisition of other assets, in each case, for use in the same or a similar line of business as the Company or any Restricted Subsidiary was engaged in on the date of such Asset Sale or reasonable extensions thereof. Pending the final application of any such Net Proceeds, the Company or such Restricted Subsidiary may temporarily reduce indebtedness under the Senior Credit Facility (or any alternative or subsequent revolving credit agreement where borrowings thereunder constitute Senior Debt) or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be required to make an offer (an "Asset Sale Offer") to all Holders of Notes and holders of any other Pari Passu Debt outstanding with provisions requiring the Company to make an offer to purchase or redeem such indebtedness with the proceeds from any Asset Sale as follows: (i) the Company will make an offer to purchase from all holders of the Notes in accordance with the procedures set forth in the Indenture in the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased out of an amount (the "Note Amount") equal to the product of such Excess Proceeds multiplied by a fraction, the numerator of which is the 69 outstanding principal amount of the Notes, and the denominator of which is the sum of the outstanding principal amount of the Notes and such Pari Passu Debt (subject to proration in the event such amount is less than the aggregate Asset Sale Offered Price (as defined herein) of all Notes tendered), and (ii) to the extent required by such Pari Passu Debt to permanently reduce the principal amount of such Pari Passu Debt, the Company will make an offer to purchase or otherwise repurchase or redeem Pari Passu Debt (an "Asset Sale Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the excess of the Excess Proceeds over the Note Amount; provided that in no event will the Company be required to make an Asset Sale Pari Passu Offer in a Pari Passu Debt Amount exceeding the principal amount of such Pari Passu Debt plus the amount of any premium required to be paid to repurchase such Pari Passu Debt. The offer price for the Notes will be payable in cash in an amount equal to (a) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, at the date such Asset Sale is consummated, if consummated on or prior to August 1, 2003 and (b) 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the date such Asset Sale Offer is consummated, if consummated after August 1, 2003, in each case, in accordance with the procedures set forth in the Indenture. The date on which any Asset Sale Offer is consummated is herein referred to as the "Asset Sale Offer Date" and the offer price applicable to any Asset Sale Offer is herein referred to as the "Asset Sale Offer Price." To the extent that the aggregate Asset Sale Offered Price of the Notes tendered pursuant to the Asset Sale Offer is less than the Note Amount relating thereto or the aggregate amount of Pari Passu Debt that is purchased in an Asset Sale Pari Passu Offer is less than the Pari Passu Debt Amount, the Company may use any remaining Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and Pari Passu Debt surrendered by holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon the completion of the purchase of all the Notes tendered pursuant to an Asset Sale Offer and the completion of a Pari Passu Offer, the amount of Excess Proceeds, if any, shall be reset at zero. The Indenture provides that, if the Company becomes obligated to make an Asset Sale Offer pursuant to the immediately preceding paragraph, the Notes and the Pari Passu Debt shall be purchased by the Company, at the option of the holders thereof, in whole or in part in integral multiples of $1,000, on a date that is not earlier than 30 days and not later than 60 days from the date the notice of the Asset Sale Offer is given to holders, or such later date as may be necessary for the Company to comply with the requirements under the Exchange Act. The Indenture provides that the Company will comply with the applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws or regulations in connection with an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under such provisions of the Indenture by virtue thereof. Issuance and Sale of Capital Stock of Restricted Subsidiaries. The Indenture provides that the Company (i) will not, and will not permit any Restricted Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than to the Company or a Wholly Owned Restricted Subsidiary) and (ii) will not permit any Restricted Subsidiary to issue any of its Capital Stock to any Person other than to the Company or a Wholly Owned Restricted Subsidiary, in each case unless the Net Proceeds from such transfer, sale or other disposition are applied in accordance with "--Asset Sales." Conduct of Business. The Company and its Restricted Subsidiaries will not engage in any businesses which are not the same, similar or related to the businesses in which the Company and its Restricted Subsidiaries are engaged as of the Issue Date (or any reasonable extension or expansion thereof), except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. 70 Limitation on Sale and Lease-Back Transactions. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Lease-Back Transaction; provided that the Company or any Restricted Subsidiary may enter into a Sale and Lease-Back Transaction if: (i) the Company, or such Restricted Subsidiary, if applicable, could have (A) incurred Debt in an amount equal to the Attributable Debt relating to such Sale and Lease-Back Transaction pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "-- Incurrence of Debt and Issuance of Preferred Stock" and (B) incurred a Lien to secure such Debt pursuant to the covenant described above under the caption "--Liens;" (ii) the gross cash proceeds of such Sale and Lease-Back Transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors pursuant to a Board Resolution) of the property that is the subject of such Sale and Lease-Back Transaction; and (iii) the transfer of assets in such Sale and Lease-Back Transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption "--Asset Sales." Rule 144A Information Requirement. The Company will furnish to the Holders or beneficial holders of the Notes and prospective purchasers of Notes designated by the Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act for so long as is required for an offer or sale of the Notes to qualify for an exemption under Rule 144A. Reports. The Company will deliver to the Trustee within 15 days after the filing of the same with the Commission, copies of the quarterly and annual reports and of the information, documents and other reports, if any, which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the Commission, to the extent permitted, and provide the Trustee and the Holders with such quarterly and annual reports and such information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will also comply with the other provisions of Section 314(a) of the Trust Indenture Act. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Accounts Receivable Subsidiary" means any Subsidiary of the Company that is, directly or indirectly, wholly owned by the Company (other than director qualifying shares) and organized solely for the purpose of and engaged in (i) purchasing, financing and collecting accounts receivable obligations of customers of the Company or its Subsidiaries, (ii) the sale or financing or such accounts receivable or interest therein and (iii) other activities incident thereto. "Accreted Value" means for each $1,000 face amount of Notes, as of any date of determination prior to August 1, 2003, the sum of (i) the initial offering price of each Note ($509.31) and (ii) that portion of the excess of the principal amount at maturity of each Note over such initial offering price which shall have been accreted thereon through such date, such amount to be so accreted on a daily basis and compounded semi-annually on each August 1 and February 1 at the rate of 14% per annum from the date of issuance of the Notes through the date of determination. "Acquired Debt" means, with respect to any specified Person, (i) Debt of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, 71 including, without limitation, Debt incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and (ii) Debt secured by a Lien encumbering any asset acquired by such specified Person which, in each case, is not repaid at or within five days following the date of such acquisition. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, shall mean 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. Notwithstanding the foregoing, no Person (other than the Company or any Subsidiary of the Company) in whom a Securitization Entity makes an Investment in connection with a Qualified Securitization Transaction shall be deemed to be an Affiliate of the Company or any of its Subsidiaries solely by reason of such Investment. "Applicable Premium" means, with respect to a Note at any redemption date, the greater of (i) 1.0% of the Accreted Value of such Note to the date of redemption and (ii) the excess of (A) the present value at such time of the redemption price of such Note at August 1, 2003 (such redemption price being set forth in the table set forth under "--Optional Redemption") computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the Accreted Value of such Note as of the date of redemption. "Asset Sale" means (i) the sale, lease (other than operating leases entered into in the ordinary course of business), conveyance or other disposition of any assets or rights (including, without limitation, by way of a Sale and Lease-Back Transaction) other than in the ordinary course of business (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "Repurchase at the Option of Holders Upon Change of Control" and/or the provisions described above under the caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries (to the extent such Equity Interests are held by the Company or another Restricted Subsidiary of the Company), in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions that (x) have a fair market value in excess of $1.0 million or (y) generate net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following shall not be deemed to constitute Asset Sales: (i) sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof as determined in accordance with GAAP; (ii) transfers of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" (or a fractional undivided interest therein) by a Securitization Entity in a Qualified Securitization Transaction (for the purposes of this clause (ii), Purchase Money Notes shall be deemed to be cash); (iii) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (iv) a disposition of inventory held for sale in the ordinary course of business or obsolete, worn out or damaged property or equipment in the ordinary course of business; (v) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (vi) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption "--Certain Covenants-- Restricted Payments"; (vii) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (viii) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property and (ix) sales of accounts receivable for cash at fair market value, and any sale, conveyance or transfer of accounts receivable in the ordinary course of business to an Accounts Receivable Subsidiary or to third parties that are not Affiliates of the Company or any Subsidiary of the Company. 72 "Asset Sale Offer" shall have the definition set forth under "--Certain Covenants--Asset Sales." "Asset Sale Offer Date" shall have the definition set forth under "--Certain Covenants--Asset Sales." "Asset Sale Offered Price" shall have the definition set forth under "-- Certain Covenants--Asset Sales." "Asset Sale Pari Passu Offer" shall have the definition set forth under "-- Certain Covenants--Asset Sales." "Attributable Debt" in respect of a Sale and Lease-Back Transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net 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 or may, at the option of the lessor, be extended). "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 or a Restricted Subsidiary of the Company, as appropriate, and to be in full force and effect, and delivered to the Trustee. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and Eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any lender party to the Senior Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within one year after the date of acquisition, (vi) marketable direct obligations issued by any state of the United States or any political subdivision, or public instrumentality of such state, in each case having maturities of not more than one year from the date of acquisition and, at the time of acquisition thereof, having one of the two highest ratings obtainable from either Moody's Investors Service, Inc. or Standard & Poor's Corporation, and (vii) money market, mutual or similar funds which invest substantially all of their assets in securities of the type described in clauses (i) through (vi) above. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), or group of related persons, together with any Affiliates thereof (other than Permitted Holders); (ii) the adoption by the Company of a plan relating to the liquidation or dissolution of the Company; (iii) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or (iv) the consummation of any transaction (including, 73 without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) or group of related persons, together with any Affiliates thereof (other than Permitted Holders) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% (measured by voting power rather than number of shares) of the Voting Stock of the Company. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, without duplication, (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income and without regard to the $1.0 million threshold in the definition thereof), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) the consolidated net interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (v) depreciation, amortization (including amortization of goodwill and other intangibles) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (vi) other non- recurring non-cash items increasing such Consolidated Net Income for such period (which will be added back to Consolidated Cash Flow in any subsequent period to the extent cash is received in respect of such item in such subsequent period), in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, "Consolidated Cash Flow" shall be calculated without giving effect to amortization or depreciation of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with any acquisition permitted under the Indenture) and 17 (including non-cash charges relating to intangibles and goodwill arising in connection with any such acquisition). "Consolidated Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Consolidated Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays or redeems any Debt (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Consolidated Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Consolidated Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Consolidated Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment or redemption of Debt, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions or Asset Sales that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, 74 shall be excluded, and (iii) the Consolidated Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Consolidated Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. In calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i) interest on Debt determined on a fluctuating basis as of the Calculation Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Debt in effect on the Calculation Date, (ii) if interest on any Debt actually incurred on the Calculation Date may be optionally determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate or other rates, then the interest rate in effect on the Calculation Date will be deemed to have been in effect during the relevant four-quarter period reference and (iii) notwithstanding the foregoing, interest on Debt determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs (other than those debt issuance costs incurred on the Issue Date in connection with the Transactions) and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Debt of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries (whether or not such guarantee or Lien is called upon), and (iv) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries (other than dividend payments on Equity Interests payable solely in Equity Interests (other than Disqualified Stock) of the Company) paid or accrued during such period. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its shareholders, provided that such Net Income shall not be so excluded in calculating Consolidated Net Income (A) as a component of Consolidated Cash Flow for purposes of calculating the Consolidated Fixed Charge Coverage Ratio in determining whether (1) a Restricted Subsidiary can incur additional Debt or issue preferred stock pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described under the caption "--Incurrence of Debt and Issuance of Preferred Stock" or (2) the Company can incur $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described under the caption "--Incurrence of Debt and Issuance of Preferred Stock" for purposes of (x) clause (ii) of the first paragraph of the covenant described under the caption "Restricted Payments", (y) clause (iv) of the covenant described under the caption "--Merger, Consolidation and Sale of Assets" or (z) the definition of "Unrestricted Subsidiary" or (B) for purposes of clause (iii) of the first paragraph of the covenant described under the caption "Restricted Payments" in determining whether a Restricted Subsidiary may make a Restricted Investment, (iii) the Net Income (or loss) of any Person acquired in a pooling of interests transaction for any 75 period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles adopted after the Issue Date shall be excluded, (v) any restoration to Net Income of any contingency reserve of an extraordinary, nonrecurring or unusual nature, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, shall be excluded, (vi) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets shall be excluded, (vii) non-cash compensation charges arising upon the issuance or exercise of employee stock options or Capital Stock (other than Disqualified Stock) shall be excluded and (viii) all extraordinary gains and extraordinary losses and any unusual or non-recurring charges recorded or accrued in connection with the Transactions shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the ordinary shareholders of such Person and its consolidated Subsidiaries as of such date and (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (A) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (B) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments) and (C) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Consulting Agreement" means the Consulting Agreement between the Company and Thomas Rodgers, Jr. as in effect on the date of the Indenture or as thereafter amended in a manner that is not adverse to the Company or the Holders of Notes. "Continuing Director" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture, (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election or (iii) was nominated for election or elected to such Board of Directors by or with the approval of the Permitted Holders. "Credit Facilities" means, with respect to the Company or any Subsidiary, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities with banks or other lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), bankers acceptance or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. Debt under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under the Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (i) of the definition of Permitted Debt. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Debt" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a 76 liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Debt of others secured by a Lien on any asset of such Person (whether or not such Debt is assumed by such Person) and, to the extent not otherwise included, the guarantee by such Person of any Debt of any other Person (but excluding, with respect to Debt of a Securitization Entity, any Standard Securitization Undertakings that might be deemed to constitute guarantees). The amount of any Debt outstanding as of any date shall be (i) the accrued or accreted value thereof, in the case of any Debt that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Debt. For purposes of calculating the amount of Debt of a Securitization Entity outstanding as of any date, the face or notional amount of any interest in receivables or equipment that is outstanding as of such date shall be deemed to be Debt but any such interests held by Affiliates of such Securitization Entity shall be excluded for purposes of such calculation. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Notes; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "--Certain Covenants-- Restricted Payments." "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means a bona fide underwritten sale to the public of Equity Interests (other than Disqualified Stock) of the Company pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of the Company) that is declared effective by the Commission. "Executive Securities Agreement" means each of the Executive Securities Agreements between the Company and the other signatory thereto as in effect on the date of the Indenture or as thereafter amended in a manner that is not adverse to the Holders of Notes in any material respect. "Existing Debt" means up to $500,000 in aggregate principal amount of Debt of the Company and its Restricted Subsidiaries (other than Debt under the Senior Credit Facility or Debt evidenced by the Senior Subordinated Notes) in existence on the date of the Indenture, until such amounts are repaid. "Foreign Subsidiary" means any Subsidiary not organized or validly existing under the laws of the United States or any state thereof or the District of Columbia. "Foreign Restricted Subsidiary" means any Foreign Subsidiary that is a Restricted Subsidiary. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. "Globe Manufacturing" means Globe Manufacturing Corp., an Alabama corporation, and its successors and assigns. 77 "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Debt. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under Interest Swap Agreements and Currency Agreements. "Interest Swap Agreements" means any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate collar agreement, treasury rate-lock agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company from fluctuations in interest rates. "Interest Swap Obligations" means the obligations of any Person pursuant to any Interest Swap Agreement with any other Person. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Debt or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees and extensions of trade credit made in the ordinary course of business), purchases or other acquisitions for consideration of Debt, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Issue Date" means August 6, 1998, the date of original issuance of the Notes. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Limited Originator Recourse" means a reimbursement obligation of the Company or a Restricted Subsidiary in connection with a drawing on a letter of credit, revolving loan commitment, cash collateral account or other such credit enhancement issue to support Debt of a Securitization Entity under a facility for the financing of trade receivables and the warehousing of equipment loans and leases; provided that the available amount of any such form of credit enhancement at any time shall not exceed 10.0% of the principal amount of such Debt at such time. "Management Agreement" means the Management Agreement between Globe Manufacturing and CHS Management III, L.P., dated as of July 31, 1998, as in effect on the date of the Indenture or as thereafter amended in a manner that is not adverse to the Company or the Holders of the Notes. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to Sale and Lease-Back Transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Debt of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash and Cash Equivalents received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, 78 and sales commissions) and any relocation expenses incurred as a result thereof, (ii) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP, or against any liabilities associated with the Asset Sale, or the assets subject thereto, and retained by the Company or any Restricted Subsidiary, and (iv) amounts required to be applied to the repayment of Debt secured by a Lien on the asset or assets that were the subject of such Asset Sale, or to the satisfaction of contractual obligations either existing at the date of the Indenture, or entered into after the date of the Indenture in connection with the payment of deferred purchase price of the properties or assets that were the subject of such Asset Sale. "Non-Recourse Debt" means Debt (i) as to which neither the Company nor any of its Restricted Subsidiaries (A) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Debt), (B) is directly or indirectly liable (as guarantor or otherwise), or (C) constitutes the lender and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Debt (other than the Notes being offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Obligations" means any principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Debt. "Officers' Certificate" means with respect to any Person, a certificate signed by the Chairman, Vice Chairman, Chief Executive Officer, the President or any Vice President and the Chief Financial Officer, Controller or the Treasurer of such Person that shall comply with applicable provisions of the Indenture. "Pari Passu Debt" shall mean any Debt of the Company that is pari passu in right of payment to the Notes. "Pari Passu Debt Amount" shall have the definition set forth under "-- Certain Covenants--Asset Sales." "Permitted Holders" means (i) Code, Hennessy & Simmons, Inc., (ii) Code Hennessy & Simmons LLC, (iii) Code, Hennessy & Simmons III, L.P. and (iv) their respective affiliates. "Permitted Investments" means: (i) any Investment in the Company or in a Restricted Subsidiary of the Company that is engaged in the same or a similar line of business as the Company and its Restricted Subsidiaries (or reasonable extensions or expansions thereof); (ii) any Investment in Cash Equivalents; (iii) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (A) such Person becomes a Restricted Subsidiary of the Company that is engaged in the same or a similar line of business as the Company and its Restricted Subsidiaries (or reasonable extensions or expansions thereof) 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 of the Company that is engaged in the same or a similar line of business as the Company and its Restricted Subsidiaries (or reasonable extensions or expansions thereof); (iv) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "-- Certain Covenants--Asset Sales"; (v) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (vi) Investments made in exchange for accounts receivable arising in the ordinary course of business which have not been collected for 180 days and which are, in the good faith of the Company, substantially uncollectible; provided that any such Investments in excess of $500,000 shall be approved by the Board of Directors (evidenced by a Board Resolution set forth in an Officers' Certificate delivered to the Trustee); (vii) loans and advances to employees of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not to exceed $1.0 million in the aggregate at any one time outstanding; (viii) Investments in Permitted Joint Ventures and Investments in suppliers to the Company and its Restricted Subsidiaries in an aggregate amount when taken together with all other Investments pursuant to this clause (viii) does not exceed the greater of $10.0 million or 10% of Total 79 Assets at any one time outstanding; (ix) Hedging Obligations entered into in the ordinary course of business and otherwise in compliance with the Indenture; (x) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (x) that are at the time outstanding, not to exceed $10.0 million; (xi) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (xii) guarantees by the Company or any Restricted Subsidiary of Debt otherwise permitted to be incurred under the Indenture; (xiii) any Investment by the Company or a Wholly Owned Subsidiary of the Company in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a Purchase Money Note or an Equity Interest; and (xiv) Investments received by the Company or its Restricted Subsidiaries as consideration for asset sales, including Asset Sales; provided that in the case of an Asset Sale, such Asset Sale is effected in compliance with the "Limitations on Asset Sales" covenant; and (xv) Investments by Foreign Subsidiaries of the Company in currencies of countries in which such subsidiaries conduct business, provided that such currencies are freely convertible into United States dollars. For purposes of calculating the aggregate amount of Permitted Investments permitted to be outstanding at any one time pursuant to clauses (viii) and (x) of the preceding sentence, (i) to the extent the consideration for any such Investment consists of Equity Interests (other than Disqualified Stock) of the Company, the value of the Equity Interests so issued will be ignored in determining the amount of such Investment and (ii) the aggregate amount of such Investments made by the Company and its Restricted Subsidiaries on or after the date of the Indenture will be decreased (but not below zero) by an amount equal to the lesser of (A) the cash return of capital to the Company or a Restricted Subsidiary with respect to such Investment that is sold for cash or otherwise liquidated or repaid for cash (less the cost of disposition, including applicable taxes, if any) and (B) the initial amount of such Investment. "Permitted Joint Venture" means any Person which is, directly or indirectly through its Subsidiaries or otherwise, engaged principally in the principal business of the Company, or a reasonably related business, and the Capital Stock of which is owned by the Company and one or more Persons other than the Company or any Affiliate of the Company. "Permitted Liens" means (i) Liens to secure obligations in respect of workers compensation, unemployment, social security, statutory obligations, surety or appeal bonds or other obligations of a like nature incurred in the ordinary course of business, (ii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, (iii) Liens in favor of the Company, (iv) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations not overdue for a period in excess of 30 days or which are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted; provided that any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor, (v) Liens securing the Senior Credit Facility, (vi) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company (vii) Liens on property existing at the time of acquisition thereof by the Company; provided that such liens were in existence prior to the contemplation of such acquisition, (viii) purchase money Liens to finance property or assets of the Company acquired in the ordinary course of business; provided, however, that (A) the related Purchase Money Obligations shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company other than the property or assets so acquired and (B) the Lien securing such Debt shall be created within 90 days of such acquisition, (ix) Liens existing on the date of the Indenture, (x) judgment Liens not giving rise to an Event of Default, (xi) easements, rights- of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred or imposed, as applicable, in the ordinary course of business and consistent with industry practices which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the 80 property subject thereto (as such property is used by the Company) or interfere with the ordinary conduct of business of the Company; provided, however, that any such Liens are not incurred in connection with any borrowing of money or commitment to loan any money to or to extend any credit, (xii) Liens on assets transferred to a Securitization Entity or on assets of a Securitization Entity, in either case incurred in connection with a Qualified Securitization Transaction, (xiii) Liens incurred in the ordinary course of business of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding and that (A) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (B) do not in the aggregate materially detract from the value of property or materially impair the use thereof in the operation of business by the Company, (xiv) any interest or title of a lessor under any Capital Lease Obligation, (xv) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods, (xvi) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof, (xvii) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company, including rights of offset and set-off, (xviii) Liens securing Hedging Obligations, (xix) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company, (xx) Liens arising from filing Uniform Commercial Code financing statements regarding operating leases entered into in the ordinary course of business and (xxi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customer duties in connection with the importation of goods. "Permitted Refinancing Debt" means any Debt of the Company or any of its Restricted Subsidiaries or any Disqualified Stock issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Debt of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount (or accrued value, if applicable) of such Permitted Refinancing Debt does not exceed the principal amount of (or accrued value, if applicable), plus accrued interest on, the Debt so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable fees and expenses incurred in connection therewith); (ii) such Permitted Refinancing Debt has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Debt being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Debt being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Debt has a final maturity date later than the final maturity date of, and is subordinated in right of payment to the Notes on terms at least as favorable to the Holders of Notes, as applicable, as those contained in the documentation governing the Debt being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Debt is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Debt being extended, refinanced, renewed, replaced, defeased or refunded or is Disqualified Stock. "Purchase Money Notes" means a promissory note of a Securitization Entity evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company in connection with a Qualified Securitization Transaction to a Securitization Entity which note shall be repaid from cash available to the Securitization Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables or newly acquired equipment. "Purchase Money Obligations" of a Person means Debt of such Person incurred in connection with the purchase, construction or improvement of property, plant or equipment used in the business of such Person (whether through the direct purchase of the assets or the Equity Interests of any Person owning such assets). "Qualified Securitization Transaction" means any transaction or series of transactions pursuant to which the Company or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization Entity (in the case of a transfer by the Company or any of its Restricted Subsidiaries) and (ii) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in, any receivables or 81 equipment loans (whether now existing or arising or acquired in the future) of the Company or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such receivables and equipment loans, all contracts and contract rights and all guarantees or other obligations in respect of such receivables and equipment loans, proceeds of such receivables and equipment loans and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transaction involving receivables and equipment (collectively, "transferred assets"); provided that in the case of any such transfer by the Company or any of its Restricted Subsidiaries, the transferor receives cash or Purchase Money Notes in an amount which (when aggregated with the cash and Purchase Money Notes received by the Company and its Restricted Subsidiaries upon all other such transfers of transferred assets during the ninety days preceding such transfer) is at least equal to 75.0% of the aggregate face amount of all receivables so transferred during such day and the ninety preceding days. "Registration Agreement" means the Registration Agreement among the Company and the other signatories thereto as in effect on the date of the Indenture or as thereafter amended in a manner that is not disadvantageous to the Holders of Notes in any material respect. "Related Person" means with respect to any Person (i) any Affiliate of such Person, (ii) any individual or other Person who directly or indirectly is the registered or beneficial owner of 5% or more of any class of Capital Stock of such Person or warrants, rights, options or other rights to acquire more than 5% of any class of Capital Stock of such Person, (iii) any relative of such individual by blood, marriage or adoption not more remote than first cousin and (iv) any officer or director of such Person. "Restricted Domestic Subsidiary" means a Restricted Subsidiary organized and validly existing under the laws of the United States or any state thereof or the District of Columbia. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payment" means: (i) any dividend or any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than (A) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or such Restricted Subsidiary or (B) dividends or distributions payable to the Company or any Wholly Owned Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company, any direct or indirect parent of the Company or any Restricted Subsidiary of the Company (other than any Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary); (iii) any payment to purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Debt of the Company or a Restricted Subsidiary, except a payment of interest or principal at Stated Maturity; (iv) any payment in respect of Employee Notes other than payments in the form of additional Employee Notes or Equity Interests (other than Disqualified Stock) of the Company; and (v) any Restricted Investment. "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "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. "Securitization Entity" means a Wholly Owned Subsidiary of the Company (or another Person in which the Company or any Restricted Subsidiary of the Company makes an Investment and to which the Company or any Restricted Subsidiary of the Company transfers receivables or equipment and related assets) that engages in no activities other than in connection with the financing of receivables or equipment and that is designated by 82 the Board of Directors of the Company (as provided below) as a Securitization Entity (i) no portion of the Debt or any other Obligations (contingent or otherwise) of which (A) is guaranteed by the Company or any Restricted Subsidiary of the Company (other than the Securitization Entity) in any way other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse, (B) is recourse to or obligates the Company or any Restricted Subsidiary of the Company (other than the Securitization Entity) in any way other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse or (C) subjects any property or asset of the Company or any Restricted Subsidiary of the Company (other than the Securitization Entity), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse, (ii) with which neither the Company nor any Restricted Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity and (iii) to which neither the Company nor any Restricted Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced by the filing with the Trustee a Board Resolution of the Company giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions. "Securityholders Agreement" means the Securityholders Agreement among the Company and the other signatories thereto as in effect on the date of the Indenture or as thereafter amended in a manner that is not disadvantageous to the Holders of Notes in a material respect. "Senior Credit Facility" means, the Credit Agreement dated as of July 31, 1998, among the Company, Globe Manufacturing, the lenders party thereto in their capacity as such, Bank of America National Trust and Savings Association, as administrative agent, Merrill Lynch, Pierce, Fenner & Smith, Inc., as syndication agent, and BancAmerica Robertson Stephens, as arranger, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including, without limitation, increasing the amount of available borrowings thereunder or adding Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the indebtedness under such agreement or any successor or replacement agreement, whether by the same or any other agent, lender or group of lenders, whether contained in one or more agreements. "Senior Debt" means, with respect to any Person, the principal of, premium (if any) and accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of such Person, regardless of whether or not a claim for post-filing interest is allowed in such proceedings) on, and fees and other amounts owning in respect of, Debt of such Person, whether outstanding on the Issue Date or thereafter incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are subordinated in right of payment to the Notes; provided, however, that Senior Debt shall not include (i) any obligation of the Company to any Subsidiary, (ii) any liability for Federal, state, local or other taxes owed or owing by the Company, (iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (iv) any Debt or obligation of the Company (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate or junior in any respect to any other Debt or obligation of the Company, including any Subordinated Debt, (v) any payment obligations with respect to any Equity Interests, or (vi) any Debt incurred in violation of the Indenture. "Significant Subsidiary" means any Restricted Subsidiary of the Company that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the Issue Date. 83 "Standard Securitization Undertakings" means representations, warranties, covenants and indemnitees entered into by the Company or any Subsidiary of the Company that are reasonably customary in receivables or equipment loan transactions. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Debt, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Debt, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Debt" means any Debt of the Company (whether outstanding on the Issue Date or thereafter incurred) which is by its terms subordinated in right of payment to the Notes. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (A) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (B) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Tax Sharing Agreement" means the Tax Sharing Agreement between the Company and Globe Manufacturing as in effect on the date of the Indenture or as thereafter amended in a manner that is not adverse to the Company or the Holders of Notes. "Total Assets" means, with respect to any date of determination, the total assets of the Company and its Restricted Subsidiaries shown on the Company's consolidated balance sheet prepared in accordance with GAAP on the last day of the fiscal quarter prior to the date of determination. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled by, and published in, the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the date fixed for redemption of the Notes following a Change of Control (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to August 1, 2003; provided, however, that if the period from the redemption date to August 1, 2003 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the redemption date to August 1, 2003 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such Person that as of the time of determination shall be or continue to be designated an Unrestricted Subsidiary in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of the Company or any Restricted Subsidiary or holds any Lien on any property of the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (i) the Company certifies to the Trustee that such designation complies with the provisions of the covenant described under the caption "--Certain Covenants-- Restricted Payments" and (ii) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to, any indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (i) immediately after giving effect to such designation, the Company is able to incur at least 84 $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio set forth in the first paragraph of the covenant described under the caption "--Incurrence of Debt and Issuance of Preferred Stock" and (ii) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors, managers, trustees or other governing body, as applicable, of such Person. "Weighted Average Life to Maturity" means, when applied to any Debt at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Debt. "Wholly Owned Restricted Subsidiary" of any Person means any Restricted Subsidiary of such Person that is a Wholly Owned Subsidiary of such Person. "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person, by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice from either the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes to comply with the provisions described under the captions "--Repurchase at the Option of Holders Upon Change of Control", "--Certain Covenants--Asset Sales", or "-- Certain Covenants--Merger, Consolidation or Sale of Assets"; (iv) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice from either the Trustee or the Holders of at least 25% in principal amount at maturity of the then-outstanding Notes to comply with any of its other agreements or covenants in the Indenture or the Notes; (v) a default under any mortgage, indenture, agreement or instrument under which there may be issued or by which there may be secured or evidenced any Debt for money borrowed by the Company or any of its Restricted Subsidiaries (other than a Securitization Entity) (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries (other than a Securitization Entity)) whether such Debt or guarantee now exists, or is created after the date of the Indenture, which default (A) is caused by a failure to pay at final Stated Maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of such Debt (a "Payment Default") or (B) results in the acceleration of such Debt prior to its final Stated Maturity and, in the case of either clause (A) or (B), the principal amount of any such Debt, together with the principal amount of any other such Debt under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $7.5 million or more; (vi) failure by the Company or any of its Significant Subsidiaries to pay final judgments aggregating in excess of $7.5 million (to the extent not covered by third party insurance as to which the insurance company has acknowledged coverage), which judgments are not paid, discharged or stayed for a period of 60 days; and (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount at maturity of the then outstanding Notes may declare (a) the Accreted Value of all the Notes, together 85 with Liquidated Damages, if any, if on or prior to August 1, 2003 or (b) the principal of and accrued but unpaid interest on all the Notes if after August 1, 2003, to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice") and the same shall become immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (v) of the preceding paragraph has occurred and is continuing, such declaration of acceleration shall be automatically annulled if (i) the missed payments in respect of the applicable Debt have been paid or if the holders of the Debt that is subject to acceleration have rescinded their declaration of acceleration, in each case within 30 days thereof and (ii) all existing Events of Default, except non- payment of principal or interest which have become due solely because of the acceleration of the Notes, have been cured or waived. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, (a) the Accreted Value of all the Notes, together with Liquidated Damages, if any, if on or prior to August 1, 2003 or (b) the principal of and accrued but unpaid interest on all the Notes if after August 1, 2003, will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. 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. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to August 1, 2003, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then the amount payable for purposes of this paragraph shall be the amount that would otherwise be due but for the provisions of this sentence, plus the Applicable Premium determined as of the date of payment. The Holders of a majority in aggregate principal amount at maturity of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. All references herein to payments of principal, premium, if any, and interest on the Notes shall be deemed to include any applicable Liquidated Damages that may become payable in respect of the Notes. MODIFICATION OF THE INDENTURE Except as provided in the two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at maturity of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount at maturity of Notes whose Holders must 86 consent to an amendment, supplement or waiver, (ii) reduce the principal or Accreted Value of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes, (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal, premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by the covenant described above under the caption "--Change of Control"), (viii) modify or change any provision of the Indenture or the related definitions, affecting the subordination or ranking of the Notes in any manner that adversely affects the Holders, or (ix) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 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, 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 that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement, which solicitation documents must be mailed to all Holders of the Notes a reasonable length of time prior to the expiration of the solicitation. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS No director, officer, employee, incorporator or shareholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes, the Indenture or for any 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 issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal, premium, if any, and interest on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. 87 In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal, premium, if any, and interest on the outstanding Notes at their Stated Maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (viii) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. GOVERNING LAW The Indenture, the Notes and the Registration Rights Agreement are governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflicts of law principles thereof. 88 CONCERNING THE TRUSTEE Norwest Bank Minnesota, National Association is the Trustee under the Indenture. Its address is Norwest Center, 6th and Marquette, Minneapolis, Minnesota. The Company has also approved the Trustee as the initial Registrar, Transfer Agent and Paying Agent under the Indenture. The Trustee is also the trustee under the Senior Subordinated Note Indenture. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. EXCHANGE OFFER; REGISTRATION RIGHTS The Company and the Initial Purchaser entered into a registration rights agreement (the "Registration Rights Agreement") on August 6, 1998 pursuant to which the Company agreed, for the benefit of Holders of the Notes, that it will, at its expense for the benefit of the Holders, (i) within 60 days after the Issue Date, file the Exchange Offer Registration Statement with the Commission with respect to the Exchange Offer and (ii) use its best effort to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 150 days after the Issue Date. Upon the Exchange Offer Registration Statement being declared effective, the Company will offer to all holders of the Notes an opportunity to exchange their securities for a like principal amount of the New Notes. The Company will keep the Exchange Offer open for acceptance for not less than 20 business days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the Holders. For each Note surrendered to the Company for exchange pursuant to the Exchange Offer, the Holder of such Note will receive a New Note having a principal amount at maturity equal to that of the surrendered Note. Interest on each New Note will accrue (i) from the last interest payment date on which interest was paid on the Note surrendered in exchange therefor or (ii) if no interest has been paid on such Note, from the Issue Date. Under existing interpretations of the Commission contained in several no- action letters to third parties, the New Notes will be freely transferable by holders thereof (other than affiliates of the Company) after the Exchange Offer without further registration under the Securities Act; provided, however, that each Holder that wishes to exchange its Notes for New Notes will be required to represent (i) that any New Notes to be received by it will be acquired in the ordinary course of its business, (ii) that at the time of the consummation of the Exchange Offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of Securities Act) of the New Notes in violation of the Securities Act, (iii) that it is not an "affiliate" (as defined in Rule 405 promulgated under the Securities Act) of the Company, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of New Notes and (v) if such Holder is a broker-dealer (a "Participating Broker-Dealer") that will receive New Notes for its own account in exchange for Notes that were acquired as a result of market-making or other trading activities, that it will deliver a prospectus in connection with any resale of such New Notes. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the New Notes (other than a resale of an unsold allotment from the original sale of the Notes) with the prospectus contained in the Exchange Offer Registration Statement. The Company will agree to make available, during the 89 period required by the Securities Act, a prospectus meeting the requirements of the Securities Act for use by Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements for use in connection with any resale of New Notes. If, (i) because of any change in law or in currently prevailing interpretations of the staff of the Commission, the Company is not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days of the Issue Date, (iii) in certain circumstances, certain holders of unregistered New Notes so request, or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive New Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of the Company within the meaning of the Securities Act), then in each case, the Company will (x) promptly deliver to the Holders and the Trustee written notice thereof and (y) at their sole expense, (1) as promptly as practicable, file a shelf registration statement covering resales of the Notes (the "Shelf Registration Statement"), (2) use their best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (3) use their best efforts to keep effective the Shelf Registration Statement until the earlier of two years after the date such Shelf Registration Statement is declared effective or such time as all of the applicable Notes have been sold thereunder. The Company will, in the event that a Shelf Registration Statement is filed, provide to each Holder copies of the prospectus that is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement for the Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Notes. A Holder that sells Old Notes pursuant to the Shelf Registration Statement will 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 that are applicable to such Holder (including certain indemnification rights and obligations). If the Company fails to comply with the above provision or if the Exchange Offer Registration Statement or the Shelf Registration Statement fails to become effective, then liquidated damages ("Liquidated Damages") shall become payable in respect of the Notes as follows: (i) if the Exchange Offer Registration Statement or any Shelf Registration Statement is not filed with the Commission on or prior to the applicable Filing Date, Liquidated Damages shall accrue on the principal amount at maturity of the Notes at a rate of .50% per annum for the first 90 days immediately following such Filing Date, such Liquidated Damages increasing by an additional .25% per annum at the beginning of each subsequent 90-day period; or (ii) if the Exchange Offer Registration Statement is not declared effective by the Commission within 150 days following the Issue Date or, whether or not the Company and the Guarantors have consummated or will consummate an Exchange Offer, the Company and the Guarantors are required to file a Shelf Registration Statement and such Shelf Registration Statement is not declared effective by the Commission on or prior to the 90th day following the applicable Filing Date with respect to such Shelf Registration Statement, then, commencing on the day after either such required effective date, Liquidated Damages shall accrue on the principal amount at maturity of the Notes at a rate of .50% per annum for the first 90 days immediately following such date, such Liquidated Damages increasing by an additional .25% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) the Company has not exchanged New Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 180th day after the Issue Date, (B) the Exchange Offer Registration Statement ceases to be effective 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 or (C) if applicable, the Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time prior to the second anniversary of the date such Shelf Registration Statement was declared effective (other than after such time as all Notes have been disposed of thereunder), the Liquidated Damages shall accrue on the principal amount at maturity of the Notes at a rate of .50% per annum for the 90 first 90 days commencing on (x) the 181st day after the Issue Date, in the case of (A) above, (y) the day the Exchange Offer Registration Statement ceases to be effective in the case of (B) above or (z) the day such Shelf Registration Statement ceases to be effective in the case of (C) above, such Liquidated Damages increasing by an additional .25% at the beginning of each subsequent 90-day period; provided, however, that the Liquidated Damages as a result of the provisions of clauses (i), (ii) and (iii) above may not exceed in the aggregate 2.0% per annum; provided, further, however, that (x) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (i) above), (y) upon the effectiveness of the Exchange Offer Registration or a Shelf Registration Statement (in the case of clause (ii) above), or (z) upon the exchange of New Notes for all Notes tendered (in the case of clause (iii) (A) above), upon the effectiveness of the Exchange Offer Registration Statement which had ceased to remain effective (in the case of clause (iii) (B) above) or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (iii) (C) above), Liquidated Damages on the Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. As used herein, "Filing Date" means (i) in the case of an Exchange Offer Registration Statement, the 60th day after the Issue Date; or (ii) in the case of a Shelf Registration Statement (which may be applicable notwithstanding the consummation of the Exchange Offer), the 60th day after a notice regarding the obligation to file a Shelf Registration Statement is required to be delivered. Any amounts of Liquidated Damages due pursuant to clauses (i), (ii) or (iii) above will be payable in cash, on February 1 and August 1 in each year. The amount of Liquidated Damages will be determined by multiplying the applicable rate of Liquidated Damages by the principal amount at maturity of the Notes, multiplied by a fraction, the numerator of which is the number of days such 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. 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 will be available upon request to the Company. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture and the Registration Rights Agreement without charge by writing to the Trustee. THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Old Notes were originally sold by the Company on August 6, 1998 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, the Company and the Initial Purchaser entered into the Registration Rights Agreement on the date of the Initial Offering (the "Issue Date"). 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. 91 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 at maturity of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in integral multiples of $1,000. 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 liquidated damages in certain circumstances relating to the timing of the Exchange Offer, all of which rights will terminate when the Exchange Offer is consummated. 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, $49,086,000 aggregate principal amount at maturity of Old Notes were outstanding. The Company has fixed the close of business on , 1998 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 Massachusetts, 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." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on 1998, 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, (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 92 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 Old Notes will continue to accrete at the rate of 14% per annum to, but excluding the date of issuance of the New Notes and will cease to accrete upon cancellation of the Old Notes and issuance of the New Notes. Any Old Notes not tendered or accepted for exchange will continue to accrete at the rate of 14% per annum in accordance with their terms. From and after the date of issuance of the New Notes, the New Notes shall accrete at the rate of 14% per annum, but no cash interest will be payable in respect of the New Notes prior to August 1, 2003. Thereafter, cash interest on the New Notes will accrue at a rate of 14% per annum and will be payable semi-annually in arrears on February 1 and August 1 of each year, commencing February 1, 2004. 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 or submit an Agent's Message (as defined below) in connection with a book-entry transfer, and mail or otherwise deliver such Letter of Transmittal or such facsimile, or Agent's Message, 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 Agent's Message 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, which states that such book-entry transfer facility has received an express acknowledgment from the participant in such book-entry transfer facility tendering the Old Notes that such participant has received and agrees: (i) to participate in the Automated Tender Option Program ("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and (iii) that the Company may enforce such agreement against such participant. By executing the Letter of Transmittal (or transmitting an Agent's Message in lieu thereof), each holder will make to the Company 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 or Agent's Message. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S MESSAGE 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 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, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. 93 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 below) 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 the book-entry transfer facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Old Notes by causing such Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account with respect to the Old Notes in accordance with the Book-Entry Transfer Facility'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 the Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee (or, in the case of book-entry transfer, an Agent's Message in lieu thereof) 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 the Book-Entry Transfer Facility 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 properly 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 their 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 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. 94 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, in the case of book-entry transfer, an Agent's Message) 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 properly 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 certificate(s) representing the Old Notes (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility), and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal or facsimile thereof (or, in the case of book-entry transfer, an Agent's Message), as well as the certificate(s) 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 the Book-Entry Transfer Facility), 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 the Book-Entry Transfer Facility 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. 95 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 before the acceptance of such Old Notes, 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 sole 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 sole 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 sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its sole discretion that any of the 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 properly tendered Old Notes which have not been withdrawn. EXCHANGE AGENT Norwest Bank Minnesota, National Association 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: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION By Registered or Certified Mail: Overnight Courier: Norwest Bank Minnesota, National Norwest Bank Minnesota, National Association Association P.O. Box 1517 Norwest Center Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113 Attention: Corporate Trust Services By Hand: Facsimile Transmission: Norwest Bank Minnesota, National (For Eligible Institutions Only) Association (612) 667-4927 NorthStar East, 12th Floor Confirm by Telephone: 608 Second Avenue South, North Star (612) 667-9764 East Minneapolis, Minnesota 55479-0113 DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 96 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, 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, 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), (iii) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement 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 enunciated 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. 97 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 broker-dealer 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 New Notes 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 WARRANTS On August 6, 1998 the Company issued the Warrants pursuant to the Warrant Agreement between the Company and Norwest Bank Minnesota, National Association, as warrant agent (the "Warrant Agent"), in a private transaction that is not subject to the registration requirements of the Securities Act. The following summary of certain provisions of the Warrant Agreement and the Warrant Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Warrant Agreement, the Warrants and the Warrant Registration Rights Agreement, including the definitions therein of certain terms. GENERAL The Warrants will become separately transferable from the Notes on the earliest to occur of (i) the date that is six months following the Issue Date, (ii) the commencement of the Exchange Offer, (iii) the date a Shelf Registration Statement with respect to the Notes is declared effective, (iv) a Change of Control and (v) such date as the Initial Purchaser may in its sole discretion deem appropriate. See "Description of the Notes--Exchange Offer; Registration Rights." The date on which the Notes and the Warrants become separable is the "Separation Date." Prior to the Separation Date, the Notes and the Warrants will bear legends restricting the separate transfer thereof. On and after the Separation Date, the Notes and Warrants will be separably transferrable and the registered holders thereof may exchange such securities for separate certificates evidencing the Notes and the Warrants without such legends. Each Warrant, when exercised, will entitle the holder thereof to purchase 1.4155 shares of Common Stock of the Company at an Exercise Price of $0.01 per share. The Exercise Price and the number of Warrant Shares issuable on exercise of a Warrant are both subject to adjustment in certain cases referred to below. The Warrants are exercisable at any time on or after the Separation Date. Unless exercised, the Warrants will automatically expire on August 1, 2009 (the "Expiration Date"). The Warrants will entitle the holders thereof to purchase in the aggregate approximately 3.0% of the outstanding Common Stock of the Company on a fully diluted basis as of the Issue Date after giving effect to the (i) consummation of the Transactions and (ii) exercise as of the Issue Date of all outstanding options issued by the Company. The Company will give notice of expiration not less than 90 nor more than 120 days prior to the Expiration Date to the registered holders of the then outstanding Warrants. If the Company fails to give this notice, the Warrants will not expire until 90 days after the Company gives such notice. In no event will holders be entitled to any damages or other remedy for the Company's failure to give such notice other than any such extension. The Warrants may be exercised by surrendering to the Company the Warrant certificates evidencing such Warrants, if any, with the accompanying form of election to purchase, properly completed and executed together with payment of the Exercise Price. Payment of the Exercise Price may be made in the form of cash or a certified 98 or official bank check, payable to the order of the Company, or by surrender of additional Warrants. Upon surrender of the Warrant certificate and payment of the Exercise Price, the Warrant Agent will deliver or cause to be delivered, to or upon the written order of such holder, stock certificates representing the number of whole Warrant Shares or other securities or property to which such holder is entitled under the Warrants and Warrant Agreement, including without limitation any cash payment to adjust for fractional interests in Warrant Shares issuable upon such exercise. If less than all of the Warrants evidenced by a Warrant certificate are exercised, a new Warrant certificate will be issued for the remaining number of Warrants. No fractional Warrant Share will be issued upon exercise of the Warrants. If any fraction of a Warrant Share would, except for the foregoing provision, be issuable on the exercise of any Warrants (or specified portion thereof), the Company must pay to the holder an amount in cash equal to the current market price per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent. Certificates for Warrants will be issued in registered form only, and no service charge will be made for registration or transfer or exchange upon surrender of any Warrant certificate at the office of the Warrant Agent maintained for that purpose. The Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of Warrant certificates. The holders of the Warrants have no right to vote on matters submitted to the shareholders of the Company and have no right to receive dividends, except as provided below. The holders of the Warrants are not entitled to share in the assets of the Company in the event of the liquidation, dissolution or winding up of the Company's affairs. ADJUSTMENTS Both the number of Warrant Shares purchasable upon the exercise of the Warrants and the Exercise Price will be subject to adjustment in certain events including (i) the payment by the Company of dividends (or other distributions) on Common Stock payable in Common Stock or other shares of the Company's capital stock, (ii) subdivisions, combinations and reclassifications of Common Stock, (iii) the issuance to all holders of Common Stock of rights, options or warrants entitling them to subscribe for Common Stock, or for securities convertible into or exchangeable for shares of Common Stock, in either case for a consideration per share of Common Stock which is less than the current market price per share (as defined in the Warrant Agreement) of Common Stock, and (iv) the distribution to all holders of Common Stock of any of the Company's assets, debt securities or any rights or warrants to purchase securities (excluding those rights and warrants referred to in clause (iii) above and excluding cash dividends or other cash distributions). No adjustment in the Exercise Price will be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Exercise Price; provided, however, that any adjustment which is not made will be carried forward and taken into account in any subsequent adjustment. In case of certain consolidations or mergers of the Company, or the sale of all or substantially all of the assets of the Company to another corporation, each Warrant shall thereafter be exercisable for the right to receive the kind and amount of shares of stock or other securities or property to which such holder would have been entitled as a result of such consolidation, merger or sale had the Warrant been exercised immediately prior thereto. RESERVATION OF SHARES The Company has authorized and reserved for issuance such number of shares of Common Stock as will be issuable upon the exercise of all outstanding Warrants. Such shares of Common Stock, when paid for and issued, 99 will be duly and validly issued, fully paid and non-assessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. AMENDMENT From time to time, the Company and the Warrant Agent, without consent of the holders of the Warrants, may amend or supplement the Warrant Agreement for certain purposes, including curing defects or inconsistencies or making changes that do not materially and adversely affect the rights of any holder. Any amendment or supplement to the Warrant Agreement that has a material adverse effect on the interests of the holders of the Warrants requires the written consent of the holders of a majority of the then outstanding Warrants. The consent of each holder of the Warrants affected is required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares purchasable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided for in the Warrant Agreement as generally described above). REPORTS Whether or not required by the rules and regulations of the Commission, so long as any of the Warrants remain outstanding, the Company shall cause copies of the annual and quarterly reports and the other information, documents and reports filed with the Commission, as described under "Description of the Notes--Certain Covenants--Reports," to be filed with the Warrant Agent and mailed to the holders at their addresses appearing in the register of Warrants maintained by the Warrant Agent. REGISTRATION RIGHTS Under the terms of the Warrant Registration Rights Agreement, the holders of the Warrants will be entitled to piggy-back registration rights for the Common Stock (or other securities) issuable upon exercise of the Warrants in connection with (i) an initial public offering of the Common Stock (or other securities) issuable upon exercise of the Warrants, if any shareholder of the issuer participates in such public offering, or (ii) certain public offerings of shares of Common Stock (or other securities) issuable upon exercise of the Warrants conducted subsequent to the initial public offering of such stock. If only the Company sells shares in the initial public offering or all of the Warrant Shares (or other securities issuable upon exercise of the Warrants) are not sold in the initial public offering or any subsequent offering, the Company will be required to use its best efforts to cause to be declared effective, no later than 180 days after the closing date of the initial public offering (but in no event prior to the first anniversary of the Issue Date), the Warrant Registration Statement with respect to the issuance of the Common Stock (or other securities) issuable upon exercise of the Warrants. The Company is required to use reasonable efforts to maintain the effectiveness of the Warrant Registration Statement until the Expiration Date, or if earlier, such time as all Warrants have been exercised. During any consecutive 365-day period while the Warrants are exercisable, the Company will have the ability to suspend the availability of such registration statement for (a) up to two 30-consecutive-day periods (except during the 30 days immediately prior to the expiration of the Warrants) if the Company's Board of Directors determines in good faith that there is a valid purpose for the suspension and provides notice of such determination to the holders at their addresses appearing in the register of Warrants maintained by the Warrant Agent and (b) five additional, non-consecutive three-day periods, except during the 30-day period immediately prior to the Expiration Date, if the Company's Board of Directors determines in good faith that the Company cannot provide adequate disclosure during such period due to circumstances beyond its control. Holders of Warrants will not be named as selling securityholders in the Warrant Registration Statement. The Warrant Agreement requires the Company to pay the expenses associated with such registration. 100 DESCRIPTION OF CAPITAL STOCK The following summary of the terms of the Company's capital stock does not purport to be complete and it is qualified in its entirety by reference to the actual terms of the capital stock contained in the Company's Articles of Organization and Bylaws and by the provisions of applicable law. The Company's authorized capital stock consists of 5,000,000 shares of Class A Common Stock, par value $0.01 per share (the "Class A Common"), 35,000 shares of Class B Common, par value $0.01 per share (the "Class B Common"), 600,000 shares of Class C Common, par value $0.01 per share (the "Class C Common") and 40,000 shares of Class A Preferred Stock, par value $0.01 per share (the "Preferred Stock"). The Class A Common, Class B Common and Class C Common are collectively referred to in this "Description of Capital Stock" as the "Company Common Stock." On June 30, 1998, on a pro forma basis after giving effect to the Transactions, there were 2,179,150 shares of Class A Common and 29,100 shares of Preferred Stock outstanding, and options outstanding exercisable for 67,395 shares of Class A Common and 900 shares of Preferred Stock. COMMON STOCK The issued and outstanding shares of Class A Common are validly issued, fully paid and nonassessable. Subject to the prior rights of the holders of Preferred Stock, the holders of outstanding shares of Company Common Stock are entitled to receive dividends out of assets legally available therefor at such time and in such amounts as the Board of Directors may from time to time determine. The Indenture restricts the ability of the Company to pay dividends on the Company Common Stock. The shares of Company Common Stock are not subject to mandatory redemption, and the holders thereof have no preemptive or subscription rights to purchase any securities of the Company. Each holder of Class A Common is entitled at any time to convert any or all of such shares into an equal number of shares of Class C Common. Each share of Class B Common converts automatically into a share of Class A Common upon any public offering of Common Stock registered under the Securities Act. Each share of Class C Common may be converted into Class A Common upon the occurrence of certain events. Upon liquidation, dissolution or winding up of the Company, the holders of Company Common Stock are entitled to receive pro rata the assets of the Company which are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of Preferred Stock then outstanding. Each outstanding share of Class A Common is entitled to vote on all matters submitted to a vote of shareholders. The Class B Common and Class C Common have no voting rights; except that the holders of Class C Common have a right to vote as a separate class if they would be treated differently from Class A Common shareholders in any merger, consolidation, recapitalization or reorganization. At present, there is no established trading market for the Company Common Stock. PREFERRED STOCK Upon any liquidation, dissolution or winding up of the Company (whether voluntary or involuntary), each holder of Preferred Stock is entitled to be paid before any distribution or payment is made with respect to any other class of the Company's capital stock, an amount in cash equal to the aggregate Liquidation Value of all shares held by such holder. "Liquidation Value" of any share of Preferred Stock is $1,000, subject to adjustment for stock splits, stock dividends and similar transactions. The Preferred Stock accrues dividends at a rate of 14% per annum, compounded annually, on the sum of the Liquidation Value plus accumulated and unpaid dividends, is not currently subject to mandatory or optional redemption, and is not convertible into any other class of capital stock of the Company. LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS The Company's Articles of Organization will limit the liability of directors to the fullest extent permitted by Massachusetts law. This provision of the Company's Articles of Organization has no effect on the availability of equitable remedies such as injunction or rescission. Additionally, this provision will not limit liability under state or federal securities laws. The Articles of Organization also provide that the Company shall indemnify directors and officers of the Company unless finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interests of the Company. The Company believes that the indemnification provisions in the Company's Articles of Organization will assist the Company in attracting and retaining qualified individuals to serve as directors. 101 CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS The following is a discussion of certain material U.S. Federal income and estate tax consequences of an exchange of Old Notes for New Notes and the ownership and disposition of the New Notes. Unless otherwise stated, this discussion is limited to the tax consequences to those persons who are original owners of the Notes, who acquired such Notes at their issue price (as described below) and who hold such Notes as capital assets ("Holders"). The discussion does not purport to address specific tax consequences that may be relevant to particular persons (including, for example, financial institutions, broker-dealers, insurance companies, tax-exempt organizations, and persons in special situations, such as those who hold Notes as part of a straddle, hedge, conversion transaction, or other integrated investment). In addition, this discussion does not address U.S. Federal alternative minimum tax consequences or any aspect of state, local or foreign taxation. This discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Department regulations promulgated thereunder (the "Treasury Regulations"), and administrative and judicial interpretations thereof, all of which are subject to change, possibly with retroactive effect. The Company will treat the Notes as indebtedness for Federal income tax purposes, and the following discussion assumes that such treatment is correct. For purposes of this discussion, a "U.S. Holder" is a Holder of a Note or Warrant who is a United States citizen or resident, a corporation or partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate the income of which is subject to U.S. Federal income taxation regardless of its source, or a trust if a United States court exercises primary jurisdiction over its administration and one or more United States persons have the authority to control all of its substantial decisions. A "Non-U.S. Holder" is a Holder of a Note or Warrant who is not a U.S. Holder. EXCHANGE OF NOTES 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. PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE NOTES, AS WELL AS THE APPLICATION OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS. ALLOCATION OF PURCHASE PRICE BETWEEN OLD NOTES AND WARRANTS For U.S. federal income tax purposes, an Old Note and the accompanying Warrant will be treated as an investment unit. The issue price of a Unit for U.S. federal income tax purposes will be the first price at which a substantial amount of Units is sold for money (excluding sales to bond holders, brokers or similar persons acting as underwriters, placement agents or wholesalers). The issue price of a Unit must be allocated between the Old Note and the Warrant based on the relative fair market values of each such component of the Unit on the issue date. For this purpose, the Company intends to allocate $496.72 to each Old Note and $12.59 to each Warrant. Pursuant to Treasury Regulations issued under provisions of the Code relating to original issued discount (the "OID Regulations"), each holder will be bound by such allocation for U.S. federal income tax purposes unless such holder discloses, on a statement attached to its tax return for the taxable year that includes the acquisition date of such Unit, that its allocation differs from that of the Company. No assurance can be given that the Internal Revenue Service (the "Service") will accept the Company's allocation. If the Company's allocation were 102 successfully challenged by the Service, the issue price, original issue discount accrual on the Old Note and gain or loss on the sale or disposition of an Old Note or Warrant would be different from that resulting under the allocation determined by the Company. TAX CONSEQUENCES TO U.S. HOLDERS THE NOTES Original Issue Discount The Old Notes and New Notes (which for tax purposes are treated as a continuation of the Old Notes) will have original issue discount ("OID") for U.S. Federal income tax purposes. A U.S. Holder will be required to include OID in income as it accrues, regardless of such Holder's regular method of accounting for Federal income tax purposes, and in advance of the receipt of cash to which such income is attributable. OID generally will be treated as interest income to the U.S. Holder and will accrue on a yield-to-maturity basis over the life of the Note, as discussed below. The amount of OID with respect to a New Note will be equal to the excess of the "stated redemption price at maturity" of such New Note over its "issue price." The stated redemption price at maturity of each New Note will include all cash payments required to be made under the New Note through maturity, whether denominated as principal or interest. The issue price of a New Note will be as described for an Old Note above under "--Allocation of Purchase Price between Old Notes and Warrants." The New Notes will be issued at a substantial discount. The amount of OID accruing to a Holder with respect to a Note will be the sum of the "daily portions" of OID with respect to such Note for each day during the taxable year (or portion thereof) on which such Holder owns such Note ("accrued OID"). A daily portion is determined by allocating to each day in an "accrual period" a pro rata portion of the OID allocable to that accrual period. An accrual period of a Note may be of any length and may vary in length over the term of a Note, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs either on the final day or on the first day of an accrual period. The amount of OID accruing during any full accrual period with respect to a Note will be equal to (i) the "adjusted issue price" of such Note at the beginning of that accrual period, multiplied by (ii) the "yield- to-maturity" of such Note (taking into account the length of the accrual period). The adjusted issue price of a Note at the beginning of its first accrual period will be equal to its issue price. The adjusted issue price at the beginning of any subsequent accrual period will be equal to (i) the adjusted issue price at the beginning of the preceding accrual period, plus (ii) the amount of OID accrued during the preceding accrual period, minus (iii) any payments on the Note during the preceding accrual period and on the first day of such subsequent accrual period. Under these rules, a Holder generally will have to include in income increasingly greater amounts of OID in successive accrual periods. The yield- to-maturity of a Note is the discount rate that, when used in computing the present value of all payments to be made on a Note, produces an amount equal to the issue price of the Note. The Company does not intend to treat the possibility of an optional redemption or repurchase of the Notes as giving rise to any additional accrual of OID or recognition of ordinary income upon the redemption, sale or exchange of a Note, and intends to report OID consistent with such treatment. Holders may wish to consult their tax advisors with respect to Treasury Regulations regarding the treatment of certain contingencies. In certain cases, in the event the Company does not comply with certain covenants set forth in the Registration Rights Agreement, the Company will be obligated to pay specified Liquidated Damages to the Holders of the Notes. The Company believes the contingency that the Company will pay such additional amounts is "remote" or "incidental" within the meaning of applicable Treasury Regulations. On that basis, the Company believes that the possibility that such additional amounts may be paid should not be taken into account in computing OID and intends to report OID consistent with such belief. 103 The Company will report to Holders and to the Service each year the amount of OID that accrued on the Notes for that year. Applicable High Yield Discount Obligations The Notes will be "applicable high yield discount obligations" ("AHYDOs") for U.S. Federal income tax purposes. An AHYDO is a debt instrument that has a yield-to-maturity, computed as of its issue date, that equals or exceeds the sum of (i) the "applicable federal rate" (the "AFR") in effect for the month in which the Notes are issued (for August 1998, the AFR is 5.64%, assuming semi-annual compounding) and (ii) five percentage points, and that bears "significant" OID (as determined under a formula prescribed in the Code). Because the Notes are AHYDOs, the Company will not be entitled to claim a deduction for OID that accrues with respect to such Notes, until amounts attributable to such OID are actually paid. In addition, to the extent that the yield-to-maturity of the Notes exceeds the sum of the AFR plus six percentage points (the "non-deductible portion"), any deduction that is attributable to the non-deductible portion will be permanently disallowed. To the extent the non-deductible portion of OID would have been treated as a dividend if it had been distributed with respect to stock of the Company, it will be treated as a dividend for purposes of the rules relating to the dividends received deduction for corporate Holders. U.S. Holders that are corporations should consult their own tax advisors as to the applicability of the dividends received deduction. Sale, Exchange or Retirement of the Notes Upon the sale, exchange or retirement of a Note, a U.S. Holder will recognize gain or loss equal to the difference between the amount realized upon such sale, exchange or retirement (except to the extent such amount is attributable to accrued but unpaid interest which will be taxable as ordinary income) and the U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a Note generally will be the U.S. Holder's cost therefor, increased by the amount of OID previously included in income with respect to such Note and decreased by all prior payments received on the Note. In general, gain or loss recognized by a U.S. Holder on the sale, exchange or retirement of the Notes will be capital gain or loss. The gain or loss will be long-term capital gain or loss if the Notes have been held by the U.S. Holder for more than 12 months. The deductibility of capital losses by U.S. Holders is subject to limitation. Liquidated Damages The Company intends to take the position that any Liquidated Damages described above under "Description of the Notes--Exchange Offer; Registration Rights" will be taxable to a Holder of a Note as ordinary income at the time such amounts are received or accrued in accordance with the Holder's usual method of accounting for U.S. Federal income tax purposes. The Service may take a different position, however, which could affect the timing of the Holder's income with respect to Liquidated Damages. TAX CONSEQUENCES TO NON-U.S. HOLDERS Taxation of Interest A Non-U.S. Holder generally will not be subject to U.S. Federal income or withholding tax on interest (including OID) paid on the Notes so long as such interest is not effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States, and the Non-U.S. Holder (i) does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company, (ii) is not a "controlled foreign corporation" with respect to which the Company is a "related person" within the meaning of the Code, and (iii) satisfies the requirements of Sections 871(h) or 881(c) of the Code, as set forth below under "Owner Statement Requirement." If the foregoing conditions are not satisfied, then interest paid on the Notes will be subject to U.S. withholding tax at a rate of 30%, unless such rate is reduced or eliminated pursuant to an applicable tax treaty. 104 Sale, Exchange or Retirement of the Notes Any capital gain a Non-U.S. Holder realizes on the sale, exchange, retirement or other taxable disposition of a Note generally will be exempt from U.S. Federal income and withholding tax, provided that (i) the gain is not effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States or (ii) in the case of a Non-U.S. Holder that is an individual, the Non-U.S. Holder is not present in the United States for 183 days or more during the taxable year. Effectively Connected Income If the interest, gain or other income a Non-U.S. Holder recognizes on a Note is effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States, the Non-U.S. Holder (although exempt from the withholding tax previously discussed if an appropriate statement is furnished) generally will be subject to U.S. Federal income tax on the interest, gain or other income at regular Federal income tax rates. In addition, if the Non-U.S. Holder is a corporation, it may be subject to a branch profits tax equal to 30% of its "effectively connected earnings and profits," as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty. Federal Estate Taxes A Note held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to United States Federal estate tax as a result of such individual's death, provided that the individual does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote and that the interest accrued on such Note was not effectively connected with a United States trade or business. Owner Statement Requirement Sections 871(h) and 881(c) of the Code require that either the beneficial owner of a Note or a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution") and that holds a Note on behalf of such owner files a statement with the Company or its agent to the effect that the beneficial owner is not a United States person in order to avoid withholding of United States Federal income tax. Under current regulations, this requirement will be satisfied if the Company or its agent receives (i) a statement (an "Owner Statement") from the beneficial owner of a Note in which such owner certifies, under penalties of perjury, that such owner is not a United States person and provides such owner's name and address, or (ii) a statement from the Financial Institution holding the Note on behalf of the beneficial owner in which the Financial Institution certifies, under penalties of perjury, that it has received the Owner Statement together with a copy of the Owner Statement. The beneficial owner must inform the Company or its agent (or, in the case of a statement described in clause (ii) of the immediately preceding sentence, the Financial Institution) within 30 days of any change in information on the Owner Statement. The Service has amended the transition period relating to recently issued Treasury Regulations governing backup withholding and information reporting requirements. Withholding certificates or statements that are valid on December 31, 1999, may be treated as valid until the earlier of its expiration or December 31, 2000. All existing certificates or statements will fail to be effective after December 31, 2000. INFORMATION REPORTING AND BACKUP WITHHOLDING The Company will, where required, report to the Holders of Notes and to the Service the amount of certain payments made in respect of the Notes in each calendar year and the amounts of tax withheld, if any, with respect to such payments. A non-corporate U.S. Holder may be subject to information reporting and to backup withholding at a rate of 31% with respect to payments of principal and interest made on a Note, or on proceeds of the disposition of a Note before maturity, unless such U.S. Holder provides a correct taxpayer identification number or proof of an applicable exemption, and otherwise complies with applicable requirements of the information reporting and backup withholding rules. 105 In the case of payments of interest to Non-U.S. Holders, current Treasury Regulations provide that the 31% backup withholding tax and certain information reporting requirements will not apply to such payments with respect to which either the requisite certification, as described above, has been received or an exemption has otherwise been established, provided that neither the Company nor its payment agent has actual knowledge that the Holder is a United States person or that the conditions of any other exemption are not in fact satisfied. Under current Treasury Regulations, these information reporting and backup withholding requirements will apply, however, to the gross proceeds paid to a Non-U.S. Holder on the disposition of the Notes by or through a United States office of a United States or foreign broker, unless the Non-U.S. Holder otherwise establishes an exemption. Information reporting requirements, but not backup withholding, will also apply to payment of the proceeds of a disposition of the Notes by or through a foreign office of a United States broker or foreign brokers with certain types of relationships to the United States unless such broker has documentary evidence in its file that the Holder of the Notes is not a United States person and such broker has no actual knowledge to the contrary, or the Holder establishes an exception. Neither information reporting nor backup withholding generally will apply to payment of the proceeds of a disposition of the Notes by or through a foreign office of a foreign broker not subject to the preceding sentence. The Treasury Department has released new Treasury Regulations governing the backup withholding and information reporting requirements. The new regulations would not generally alter the treatment of a Non-U.S. Holder who furnishes an Owner Statement to the payor. The new regulations may change certain procedures applicable to the foreign office of a United States broker or foreign brokers with certain types of relationships to the United States. The new regulations are generally effective for payments made after December 31, 1999. Non-U.S. Holders should consult their own tax advisors with respect to the impact, if any, of the new final regulations. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the Holder's United States Federal income tax liability, provided that the required information is furnished to the Service. 106 BOOK-ENTRY PROCEDURES AND TRANSFER GENERAL Except as set forth in the next paragraph, the Notes to be resold as set forth herein will each be issued in the form of one or more Global Notes (each, a "Global Note"). The Global Note will be deposited on the Issue Date with, or on behalf of, The Depository Trust Company, New York, New York, as depositary (the "Depository"), and registered in the name of Cede & Co., as nominee of the Depository (such nominee being referred to herein as the "Global Note Holder"). Notes that are issued as described below under "--Certificated Securities" will be issued in the form of registered definitive certificates (the "Certificated Securities"). Upon the transfer of Certificated Securities, such Certificated Securities may, unless the Global Note has previously been exchanged for Certificated Securities, be exchanged for an interest in the Global Note representing the Notes being transferred. The Depository is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants" or the "Depository's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depository's Participants include securities brokers and dealers (including the Initial Purchaser), banks and trust companies, clearing corporations and certain other organizations. Access to the Depository's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "Depository's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depository only through the Depository's Participants or the Depository's Indirect Participants. The Company expects that pursuant to procedures established by the Depository ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depository or its nominee (with respect to interests of Participants) and the records of Participants (with respect to interests of persons other than Participants). So long as the Depository, or its nominee, is the registered owner or holder of the Notes, the Depository or such nominee will be considered the sole owner or holder of the Notes represented by the Global Note for all purposes under the Indenture. No beneficial owner of an interest in the Global Note will be able to transfer such interest except in accordance with the Depository's applicable procedures, in addition to those provided for under the Indenture. Payments of the principal of, and interest on the Global Note will be made to the Depository or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee nor any Paying Agent (as defined) will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that the Depository or its nominee, upon receipt of any payment of the principal and interest on the Global Note will credit Participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of the Depository or its nominee. The Company also expects that payments by Participants to owners of beneficial interests in any such Global Notes held through such Participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered to the names of nominees for such customers. Such payments will be the responsibility of such Participants. Transfers between Participants in the Depository will be effected in the ordinary way in accordance with Depository rules. If a holder requires physical delivery of a Certificated Security for any reason, including to sell Notes to persons in jurisdictions that require physical delivery of such securities or to pledge such securities, 107 such holder must transfer its interest in the applicable Global Note in accordance with the normal procedures of the Depository and the provisions of the Indenture. The Depository 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 interests in the applicable Global Note is credited and only in respect of such portion of the Global Note as to which such Participant or Participants has or have given such direction. Although the Depository has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among Participants of the Depository, it is under no obligation to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by the Depository or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. Certificated Securities. Subject to certain conditions, any person having a beneficial interest in a Global Security may, upon request to the Trustee exchange such beneficial interest for Notes in the form of Certificated Securities. Upon any such issuance, the Trustee is required to register such Certificated Securities in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). In addition, if (i) the Company notifies the Trustee in writing that the Depository is no longer willing or able to act as a depository and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in the form of Certificated Securities, then, upon surrender by the Global Note Holder of its Global Note, Notes in such form will be issued to each person that the Global Note Holder and the Depository identify as being the beneficial owner of the related Notes. Neither the Company nor the Trustee will be liable for any delay by the Global Note Holder or the Depository 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 the Global Note Holder or the Depository for all purposes. Next Day Settlement and Payment. The Indenture will require that payments in respect of the Notes represented by the Global Note (including principal and interest) be made by wire transfer of immediately available next day funds to the accounts specified by the Global Note Holder. With respect to Certificated Securities, the Company will make all payments of principal and interest, by wire transfer of immediately available next day funds to the accounts specified by the holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. The Company expects that secondary trading in the Certificated Securities will also be settled in immediately available funds. 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 , 1998 (90 days after the commencement of the Exchange Offer), all dealers effecting transactions in the New Notes may be required to deliver a prospectus. 108 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 Broker-Dealer 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. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. LEGAL MATTERS The validity of the New Notes offered hereby and certain other legal matters will be passed upon on behalf of the Company by Kirkland & Ellis, Chicago, Illinois. EXPERTS The consolidated financial statements of the Company at December 31, 1996 and 1997 and for each of the three years in the period ended December 31, 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 are included in reliance upon such report given upon the authority of such firms as experts in accounting and auditing. AVAILABLE INFORMATION The Company is not currently subject to the periodic reporting and other informational requirements of the Exchange Act. 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, copies of the financial and other information that would be contained in the annual reports and quarterly reports that the Company would be required to file with the Commission if it were subject to such requirements of the Exchange Act. The Company will also make such reports available to prospective purchasers of the Old Notes and the New Notes, as applicable, and to securities analysts and broker-dealers upon their request. In addition, the Company has agreed to furnish to holders of the Notes, and prospective purchasers of the Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Company has exchanged the Notes for the New Notes and which have been registered under the Securities Act or the Shelf Registration Statement has been declared effective by the Commission. 109 GLOBE MANUFACTURING CO. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors............................................. F-2 Consolidated Balance Sheets at December 31, 1996 and 1997 and Unaudited June 30, 1998............................................................. F-3 Consolidated Statements of Income for the Years Ended December 31, 1995, 1996 and 1997 and the Unaudited Six Months Ended June 30, 1997 and 1998... F-4 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1995, 1996 and 1997 and the Unaudited Six Months Ended June 30, 1998............................................................. F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997 and the Unaudited Six Months Ended June 30, 1997 and 1998...................................................................... F-6 Notes to Consolidated Financial Statements................................. F-7
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors Globe Manufacturing Co. We have audited the accompanying consolidated balance sheets of Globe Manufacturing Co. as of December 31, 1996 and 1997, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Globe Manufacturing Co. at December 31, 1996 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Ernst & Young LLP Providence, Rhode Island March 24, 1998 except for Note 12, as to which the date is August 6, 1998 F-2 GLOBE MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED DECEMBER 31, ------------------ JUNE 30, ASSETS 1996 1997 1998 ------ -------- -------- ----------- (UNAUDITED) Current assets: Cash and cash equivalents..................... $ 3,101 $ 1,947 $ 2,466 Accounts receivable, net...................... 20,517 23,953 29,659 Receivable from joint venture................. -- 213 210 Inventories................................... 11,812 13,764 11,825 Prepaid expenses and other assets............. 445 484 1,207 Deferred income taxes......................... 1,395 2,449 2,449 -------- -------- -------- Total current assets........................ 37,270 42,810 47,816 Property, plant and equipment: Land and land improvements.................... 942 942 942 Building and building improvements............ 31,575 33,122 33,122 Manufacturing equipment....................... 66,359 79,202 79,265 Furniture and equipment....................... 1,826 2,087 2,087 Autos and trucks.............................. 319 319 319 Construction in progress...................... 3,460 5,959 23,086 -------- -------- -------- 104,481 121,631 138,821 Less accumulated depreciation................. (54,359) (63,681) (69,007) -------- -------- -------- Net property, plant and equipment........... 50,122 57,950 69,814 Deferred income taxes.......................... 1,421 2,822 2,694 Cash surrender value of life insurance, net of loans......................................... 1,523 927 927 Intangible assets.............................. 214 -- -- Investment in joint venture.................... -- -- -- Notes receivable from officers................. 264 278 286 Other Assets................................... -- -- 10 Deferred financing costs, net of amortization.. 515 346 306 -------- -------- -------- Total assets................................ $ 91,329 $105,133 $121,853 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable.............................. $ 7,177 $ 7,440 $ 8,883 Accrued expenses.............................. 5,183 4,827 5,900 Payable to joint venture...................... 1,481 -- -- Dividend payable.............................. 872 50 -- Note payable.................................. 2,750 2,475 10,000 Taxes payable................................. 2,206 1,028 -- Long-term lease obligations due within one year......................................... 88 37 31 Long-term debt obligations due within one year......................................... 13,250 7,500 8,125 -------- -------- -------- Total current liabilities................... 33,007 23,357 32,939 Long-term debt................................. 34,500 46,875 42,500 Long-term lease obligation..................... 27 30 60 Other long-term postretirement liability....... 3,521 3,762 4,205 Minimum pension liability...................... 214 -- -- Commitments and contingencies (Note 7)......... -- -- -- Redeemable cumulative preferred stock, Series A, redeemable at $8,000; 30,000 shares authorized, 8,000 issued and outstanding at December 31, 1996............................. 6,466 -- -- Shareholders' equity........................... Common stock, Class A, voting, $.01 par value........................................ 2 2 2 Common stock, Class B, nonvoting, $.01 par value........................................ 16 16 16 Paid in capital............................... 5,700 10,785 10,785 Retained earnings............................. 41,744 56,468 67,508 -------- -------- -------- 47,462 67,271 78,311 Less treasury stock, at cost: Common, Class A, 99,000 shares................ (4,187) (4,187) (4,187) Common, Class B, 683,314 shares............... (28,657) (28,657) (28,657) -------- -------- -------- (32,844) (32,844) (32,844) Unearned compensation.......................... (1,024) (3,318) (3,318) -------- -------- -------- Total shareholders' equity.................. 13,594 31,109 42,149 -------- -------- -------- Total liabilities & shareholders' equity.... $ 91,329 $105,133 $121,853 ======== ======== ========
See accompanying notes. F-3 GLOBE MANUFACTURING CO. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED DECEMBER SIX MONTHS 31, ENDED JUNE 30, ---------------------------- ---------------- 1995 1996 1997 1997 1998 -------- -------- -------- ------- ------- (UNAUDITED) Net sales...................... $128,319 $152,603 $170,941 $84,283 $92,490 Cost of sales.................. 97,182 110,609 115,099 56,450 59,556 -------- -------- -------- ------- ------- Gross margin............... 31,137 41,994 55,842 27,833 32,934 Selling, general and administrative expenses....... 18,515 21,705 24,381 10,616 12,083 Research and development costs. 2,260 2,533 2,633 1,190 2,040 -------- -------- -------- ------- ------- Operating income........... 10,362 17,756 28,828 16,027 18,811 Other Income/(Expense) Interest..................... (6,030) (5,285) (3,968) (2,097) (1,788) Loss in investment in joint venture..................... (643) -- -- -- -- Other income, net............ 438 875 372 86 655 -------- -------- -------- ------- ------- Income before income taxes and extraordinary items... 4,127 13,346 25,232 14,016 17,678 Provision for income taxes..... 1,718 4,784 8,383 5,255 6,638 -------- -------- -------- ------- ------- Income before extraordinary item...................... 2,409 8,562 16,849 8,761 11,040 Loss from write-off of deferred financing costs, net of applicable income taxes of $822 in 1995 and $176 in 1997. 1,294 -- 301 301 -- -------- -------- -------- ------- ------- Net income................. $ 1,115 $ 8,562 $ 16,548 $ 8,460 $11,040 ======== ======== ======== ======= =======
See accompanying notes. F-4 GLOBE MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
SHARES OUTSTANDING TREASURY STOCK --------------- ----------------- COMMON STOCK COMMON STOCK COMMON STOCK TOTAL --------------- --------------- PAID-IN RETAINED ----------------- UNEARNED SHAREHOLDERS' CLASS A CLASS B CLASS A CLASS B CAPITAL EARNINGS CLASS A CLASS B COMPENSATION EQUITY ------- ------- ------- ------- ------- -------- ------- -------- ------------ ------------- Balances, December 31, 1994................... 100,000 931,404 $ 2 $16 $ 4,965 $33,789 $(4,187) $(28,657) $ (630) $ 5,298 Dividends............. -- -- -- -- -- (850) -- -- -- (850) Net income............ -- -- -- -- -- 1,115 -- -- -- 1,115 ------- ------- --- --- ------- ------- ------- -------- ------- ------- Balances, December 31, 1995................... 100,000 931,404 2 16 4,965 34,054 (4,187) (28,657) (630) 5,563 Dividends............. -- -- -- -- -- (872) -- -- -- (872) Unearned compensation relating to the grant of stock options...... -- -- -- -- 735 -- -- -- (735) 0 Amortization of unearned compensation. -- -- -- -- -- -- -- -- 341 341 Net income............ -- -- -- -- -- 8,562 -- -- -- 8,562 ------- ------- --- --- ------- ------- ------- -------- ------- ------- Balances, December 31, 1996................... 100,000 931,404 2 16 5,700 41,744 (4,187) (28,657) (1,024) 13,594 Dividends............. -- -- -- -- -- (290) -- -- -- (290) Redemption of Preferred Stock....... -- -- -- -- -- (1,534) -- -- -- (1,534) Unearned compensation relating to the grant of stock options...... -- -- -- -- 5,085 -- -- -- (5,085) 0 Amortization of unearned compensation. -- -- -- -- -- -- -- -- 2,791 2,791 Net income............ -- -- -- -- -- 16,548 -- -- -- 16,548 ------- ------- --- --- ------- ------- ------- -------- ------- ------- Balances, December 31, 1997................... 100,000 931,404 2 16 10,785 56,468 (4,187) (28,657) (3,318) 31,109 Net income (unaudited)........... -- -- -- -- -- 11,040 -- -- -- 11,040 ------- ------- --- --- ------- ------- ------- -------- ------- ------- Balances, June 30, 1998 (unaudited)............ 100,000 931,404 $ 2 $16 $10,785 $67,508 $(4,187) $(28,657) $(3,318) $42,149 ======= ======= === === ======= ======= ======= ======== ======= =======
See accompanying notes. F-5 GLOBE MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED SIX MONTHS DECEMBER 31, ENDED JUNE 30, --------------------------- ---------------- 1995 1996 1997 1997 1998 -------- -------- ------- ------- ------- (UNAUDITED) Operating Activities Net Income.................... $ 1,115 $ 8,562 $16,548 $ 8,460 $11,040 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............... 10,688 9,335 9,417 4,562 5,366 Amortization of unearned compensation............... -- 341 2,791 -- -- Extraordinary charge--write- off of deferred finance cost....................... 1,801 -- 478 478 -- Provision for losses on accounts receivable........ 336 1,093 691 185 879 Loss in joint venture....... 643 -- -- -- -- Deferred income tax provision (benefit)........ (606) (958) (2,455) 128 128 Other post-retirement benefits charge............ 992 652 515 395 442 Increase (decrease) in cash from changes in assets and liabilities: Accounts receivable....... (1,296) (7,122) (4,127) (4,116) (6,585) Inventories............... (4,008) 4,132 (1,952) (1,708) 1,939 Prepaid expenses and other assets................... 381 12 (38) (403) (584) Refundable income taxes... 1,414 61 -- -- -- Accounts payable.......... (214) 2,459 263 502 1,443 Accrued expenses.......... 840 2,203 (357) 400 1,073 Taxes payable............. 772 1,434 (1,178) (1,719) (1,177) Other long-term postretirement liability. (175) (306) (274) -- -- -------- -------- ------- ------- ------- Net cash provided by operating activities... 12,683 21,898 20,322 7,164 13,964 Investing Activities Capital expenditures.......... (8,640) (5,806) (17,101) (6,913) (17,127) Payable to (receivable from) joint venture................ 1,259 293 (1,694) (345) 3 Note receivable collected from (issued to) shareholders..... 669 (14) (15) -- (7) -------- -------- ------- ------- ------- Net cash used in investing activities... (6,712) (5,527) (18,810) (7,258) (17,131) Financing Activities Net change in note payable.... 3,000 (4,750) (275) (1,750) 7,525 Borrowing on long-term debt... 62,000 -- 15,000 15,000 -- Principal payments on long- term debt.................... (67,500) (11,250) (8,375) (4,625) (3,750) Principal payments on capital lease obligation............. (75) (85) (97) (51) (39) Redemption of preferred stock. -- -- (8,000) (8,000) -- Deferred financing costs...... (754) -- (403) (350) -- Cash surrender value of life insurance, net............... 16 522 596 257 -- Payment of dividends.......... (850) (850) (1,112) (1,112) (50) -------- -------- ------- ------- ------- Net cash provided by (used in) financing activities............. (4,163) (16,413) (2,666) (631) 3,686 Net decrease in cash and cash equivalents.................. 1,808 (42) (1,154) (725) 519 Cash and cash equivalents at beginning of year............ 1,335 3,143 3,101 3,101 1,947 -------- -------- ------- ------- ------- Cash and cash equivalents at end of period................ $ 3,143 $ 3,101 $ 1,947 $ 2,376 $ 2,466 ======== ======== ======= ======= =======
See accompanying notes. F-6 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Globe Manufacturing Co. and its wholly-owned subsidiaries, Globe Elastic Co. and Globe Manufacturing FSC, Ltd. (collectively, the Company). All significant intercompany accounts have been eliminated. CASH AND CASH EQUIVALENTS The Company considers all highly liquid, short-term investments with an original maturity of three months or less to be cash equivalents. RISKS AND UNCERTAINTIES Segment Information and Concentration of Credit Risk The Company operates in one dominant industry segment encompassing the manufacture and sale of elastomeric fibers. These fibers, which consist of spandex fibers and latex thread, are sold to customers in the textile and apparel industries that are geographically diversified throughout the United States and in various foreign countries. The Company performs credit evaluations on all new customers and requires collateral in certain circumstances. For the years ended December 31, 1995, 1996 and 1997, respectively, sales to foreign customers totaled 24%, 27% and 28%. Historically, transfers of product between geographic areas have not been significant. Sales to one customer represented 11%, 9% and 10% of total sales for the years ended December 31, 1995, 1996 and 1997, respectively. Also for the years ended December 31, 1995, 1996 and 1997, respectively, sales to five customers totaled 32%, 34% and 36%. At December 31, 1996 and 1997, 48% and 47%, respectively, of total receivables were from foreign customers. Balances owed from one customer totaled 9% and 8% of total receivables at December 31, 1996 and 1997, respectively. Also at December 31, 1996 and 1997, 33% and 39%, respectively, of total receivables were from five customers of which 21% and 24% represented receivables from foreign customers. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE Accounts receivable at December 31, 1996 and 1997 are shown net of an allowance for doubtful accounts of $1,346 and $1,870, respectively. At December 31, 1994 and 1995, the allowance for doubtful accounts was $314 and $416, respectively. Additions to the allowance for doubtful accounts charged to costs and expenses were $333, $1,085 and $684, respectively, during each of the years in the three-year period ended December 31, 1997. Deductions to the allowance for doubtful accounts were $231, $115 and $160 during each of the years in the three-year period ended December 31, 1997. F-7 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE RECOGNITION Revenue is recognized when products are shipped to customers. INVENTORIES Inventories are valued at lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for latex and certain spandex inventories and the first-in, first out (FIFO) method for the other inventories. Management utilizes LIFO for those product lines that have exhibited increasing costs to better match costs with revenues. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is provided using an accelerated method over estimated useful lives of the assets for financial statement purposes, which range from 3 to 39.5 years. For the years ended December 31, 1995, 1996 and 1997, the Company recorded depreciation expense of $10,390, $9,183 and $9,322, respectively. The Company capitalizes direct materials, labor and certain overhead costs for self-constructed assets. In 1996 and 1997, the Company capitalized $0 and $506,007, respectively, of interest costs incurred in connection with the expansion of the manufacturing plant in Alabama. Total interest costs in 1996 and 1997 amounted to $5,347 and $4,573, respectively. INTANGIBLE ASSET The intangible asset (and minimum pension liability) represents the adjustment required to record the Company's minimum pension liability for a defined benefit pension plan covering salaried employees of the Company at December 31, 1996. INVESTMENT IN JOINT VENTURE The Company accounts for its 40% investment in a joint venture using the equity method of accounting (see Note 10). DEFERRED FINANCING COSTS Deferred financing costs are amortized over the term of the facility using the straight line method of amortization. STOCK BASED COMPENSATION The Company accounts for its stock based compensation arrangements under the provisions of APB 25, Accounting for Stock Issued to Employees. The Company recognizes as compensation expense the excess of the deemed fair value of the common stock issuable upon exercise of compensatory stock options over the aggregate exercise price of such options. The expense is amortized over the vesting period of each option. INCOME TAXES The liability method is used in accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities and F-8 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) are measured using the currently enacted tax rates and laws that are in effect for the period when the differences are expected to reverse. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of accounts receivable, accounts payable, long term debt, notes payable and other current and long-term liabilities approximate their respective fair values. INTEREST RATE SWAP AGREEMENTS The differential to be paid or received on interest rate swap agreements is accrued as an interest rate charge and is recognized over the life of the agreements (see Note 3). UNAUDITED INTERIM FINANCIAL DATA The interim financial data relating to the six months ended June 30, 1997 and 1998 are unaudited; however, in the opinion of the Company's management, the interim data includes all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The results for the six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year or any other interim period. RESEARCH AND DEVELOPMENT COSTS The Company expenses research and development costs as incurred. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (Statement 130), which establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Statement 130 is effective for fiscal years beginning after December 15, 1997. Disclosure of total comprehensive income is required in interim period financial statements. Management does not believe that comprehensive income for prior periods will differ significantly from net income in those periods. In June, 1997, the FASB issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (Statement 131), which is effective for years beginning after December 15, 1997. However, Statement 131 need not be applied to interim financial statements in the initial year of application. Statement 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Since Statement 131 is effective for financial statements for fiscal years beginning after December 15, 1997, the Company will adopt the new requirements retroactively in 1998. Management has not yet determined the impact it will have on disclosures of the Company's reported segments. In February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits (Statement 132), that revises and improves F-9 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) disclosure requirements of FASB Statements No. 87, Employers' Accounting for Pensions, and No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. The Statement is effective for fiscal years beginning after December 15, 1997. Statement 132 does not change the recognition or measurement of pension or postretirement benefit plans, but standardizes disclosure requirements for pensions and other postretirement benefits, eliminates unnecessary disclosures and requires additional information. Management does not anticipate that the adoption of Statement 132 will have a material impact on the Company's financial position or the results of its operations. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and for Hedging Activities (Statement 133). Statement 133 is effective for years beginning after June 15, 1999. Statement 133 provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. Management does not anticipate that the adoption of Statement 133 will have a material impact on the Company's financial position or the results of its operations. 2. INVENTORIES At December 31, 1996 and 1997, inventories totaling approximately $5,452 and $6,465, respectively, were valued using the LIFO method. Had the FIFO method of inventory valuation been used, inventories and income before taxes would have increased (decreased) by approximately $786 and $(687) in 1995; $1,149 and $363 in 1996; and, $1,247 and $98 in 1997. Inventories consist of the following:
DECEMBER 31 ---------------- 1996 1997 ------- ------- Raw materials........................................... $ 2,233 $ 2,460 Finished goods.......................................... 10,728 12,551 ------- ------- 12,961 15,011 Less LIFO reserve....................................... (1,149) (1,247) ------- ------- $11,812 $13,764 ======= =======
3. DEBT On June 9, 1995, the Company refinanced its existing debt by entering into a new debt agreement with a group of banks consisting of a $62,000 term loan and a $12,000 working capital facility. As a result of the refinancing, the unamortized deferred financing costs totaling $1,801, relating to the prior debt facility, and a fee associated with terminating the prior debt agreement of $315, were charged to expense as an extraordinary item in 1995. On April 16, 1997, the Company amended and restated its existing credit agreement (as amended, the "Credit Agreement"). The Credit Agreement consists of a new $60,000 term loan, extension of the $12,000 working capital facility to March 31, 2002, and a reduction in interest rates and other fees charged on the loans. The Credit Agreement allows for letters of credit to the extent of the unused portion of the working capital facility up to a maximum of $3,000. At December 31, 1996 and 1997, respectively, the Company had $2,750 F-10 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) and $2,475 outstanding under the working capital facility and $1,200 and $1,000 outstanding under letters of credit to secure the Company's workers' compensation self-insurance program (see Note 11). In connection with the Credit Agreement, a portion of the additional proceeds from the term note ($15,000) were used to redeem all outstanding shares of Series A Cumulative Preferred Stock for $8,000 (see Note 5). As a result of the amendment, the unamortized deferred financing costs totaling $477, relating to the original term note, were charged to expense as an extraordinary item in 1997. Borrowings under the term loan bear interest at either the bank's prime rate plus a margin ranging from .25% to 1.00% (.0% to .75% for advances under the working capital facility) or the applicable Eurodollar rate plus a margin ranging from 1.25% to 2.00% (1.125% to 1.875% for advances under the working capital facility), as determined by the borrower. At December 31, 1996 and 1997, the weighted average interest rates on the working capital facility were 9.75% and 8.75%, respectively. In February 1998, the Credit Agreement was modified so as to provide an additional $14,000 in term loans beginning on June 30, 1998. Long-term debt consists of the following:
DECEMBER 31 --------------- 1996 1997 ------- ------- Term note, principal due in variable quarterly installments through 2003; variable interest rates based on the base rate (see above) (7.3125%-8.75% at December 31, 1997; 8.3789%- 8.5938% at December 31, 1996)................................. $47,750 $54,375 Less current maturities........................................ 13,250 7,500 ------- ------- $34,500 $46,875 ======= =======
The Credit Agreement contains certain covenants that limit, among other things, capital expenditures, investments, debt, and dividends declared and distributed. The Credit Agreement also limits net extraordinary losses and requires the maintenance of a minimum fixed charge coverage, leverage ratio, and earnings before interest, income taxes, depreciation and amortization as defined in the Credit Agreement. All of the Company's assets are pledged under the Credit Agreement. The Company uses interest-rate swap agreements to effectively convert a portion of its floating rate debt to a fixed rate basis, thus reducing the impact of interest-rate changes on future income. At December 31, 1997, the Company had outstanding interest rate swap agreements with a commercial bank, having a total notional principal amount of $15 million. These agreements effectively change the Company's interest rate exposure on $15 million of its variable rate term notes to a fixed rate of 6.29%. The interest rate swap agreements in effect at December 31, 1997 matured on March 18, 1998. The Company is obligated to maintain such agreements during the first two years that the term note is outstanding. While the Company is exposed to credit loss for the periodic settlement of amounts due under the agreements in the event of nonperformance by the counterparty, the Company does not anticipate nonperformance by this party. The fair value of these agreements representing the estimated amount that the Company would receive from a third party assuming the Company's obligations under the interest rate agreements ceased at December 31, 1997, is approximately $187. The fair value of the agreements was determined by independent commercial bankers and represents the fair value based on pricing models or formulas using current assumptions. F-11 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The term loan matures on a quarterly basis during the following years: December 31 1998........................... $ 7,500 1999........................... 9,375 2000........................... 10,000 2001........................... 11,875 2002........................... 12,500 2003........................... 3,125 ------- $54,375 =======
Cash paid for interest, net of amounts capitalized amounted to $6,182, $5,469 and $4,192 in 1995, 1996 and 1997, respectively. 4. LEASE COMMITMENTS The Company leases certain assets under capital leases. At December 31, 1996 and 1997, leased assets, with a cost of approximately $316 and $366, have been included in property, plant and equipment. Accumulated amortization was approximately $256 and $302 at December 31, 1996 and 1997, respectively. Future minimum lease payments relating to the equipment under the capital lease are as follows: 1998............................................................... $40 1999............................................................... 15 2000............................................................... 9 2001............................................................... 6 2002............................................................... 4 --- Total minimum lease payments....................................... 74 Less amount representing interest.................................. 7 --- Present value of net minimum lease payments........................ 67 Lease payments due within one year................................. 37 --- Lease obligations due after one year............................... $30 ===
5. REDEEMABLE CUMULATIVE PREFERRED STOCK AND WARRANTS At December 31, 1996, the Company had authorized 30 shares of Series A Cumulative Preferred Stock with a redemption price of $1,000 per share. Dividends were payable on December 22 of each year at a rate of 10% per annum, to the extent that such dividends were paid in cash and 15% per annum, to the extent that dividends were paid in additional shares of Series A Cumulative Preferred Stock. In 1997, the Company redeemed all outstanding shares of Series A Cumulative Preferred Stock at a price of $1,000 per share, plus unpaid dividends at the time of redemption. In connection with the redemption, the Company terminated any future vesting associated with its agreement to issue warrants to purchase shares of Class B Common Stock at a price of $.01 per share. At December 31, 1996 and 1997, the Company had 59 and 50 of such warrants issued and outstanding. During the years ended December 31, 1995, 1996 and 1997, the Company paid cash dividends on the preferred stock of $800, $822 and $240, respectively. The preferred stock required redemption on the earlier of December 21, 1999 or consummation of certain transactions. F-12 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 6. SHAREHOLDERS' EQUITY COMMON STOCK The Company has authorized 2,000 shares of Class A Common Stock and 2,000 shares of Class B Common Stock. Class B Common Stock automatically converts into Class A Common Stock if the Company sells stock pursuant to a registered public offering and Class A Common Stock automatically converts into Class B Common Stock upon certain transfers of Class A Common Stock. The Company paid cash dividends of $0.05 per share in 1995, 1996 and 1997. STOCK OPTIONS The Company has a Management Incentive Plan ("the Plan") which authorizes the grant of incentive stock options and nonqualified stock options including performance options based on the financial performance of the Company to employees. A total of 103 shares has been reserved for issuance under the Plan. The exercise price of incentive stock options granted under the Plan may not be less than 100% of the fair market value of the common stock as of the grant date, as determined by the Board of Directors. The exercise price of nonqualified stock options may not be less than $1.00 per share. Options issued under the Plan generally have a five year vesting period, unless otherwise determined by the Board of Directors. The term of stock options granted under the Plan may not exceed ten years. The following table presents the activity under the Plan for the years ended December 31, as follows:
1996 1997 ---------------------- ---------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE ------- -------------- ------- -------------- Outstanding at January 1......... 22,500 $30.00 22,500 $30.00 Granted........................ -- -- 22,500 30.00 Canceled....................... -- -- -- -- ------ ------ ------ ------ Outstanding at December 31....... 22,500 $30.00 45,000 $30.00 ====== ====== ====== ====== Options exercisable at December 31............................ 9,000 $30.00 22,500 $30.00 ====== ====== ====== ======
In connection with the grant of performance options, the Company recorded a total of $5,820 of unearned compensation ($735 and $5,085 in 1996 and 1997, respectively) of which $341 and $2,791 was earned and recognized as compensation expense in 1996 and 1997, respectively. Options that did not vest in the years 1994 and 1995 were vested in the current year since cumulative five-year performance measurements were achieved for the option granted in 1993. The weighted average remaining contractual life of options outstanding at December 31, 1996 and 1997, is six and eight years, respectively. FAS 123 DISCLOSURES The Company has only adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("Statement 123"). If the compensation cost for the option plans had been determined based on the fair value at the grant date for grants in 1997, consistent with the provisions of Statement 123, the pro forma net income for 1997, would not have differed materially from reported amounts. F-13 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The weighted average fair value per share of options granted during 1997 was $219.44. The fair value of options issued at the date of grant were estimated using the Black-Scholes model with the following weighted average assumptions:
OPTIONS GRANTED 1997 ------- Expected life (years)............ 5.0 Interest rate.................... 5.7%
STOCK RESERVED As of December 31, 1997, a total of 1,668,383 shares of Class A Common Stock and 258,383 shares of Class B Common Stock are reserved for issuance under the various capital stock conversion and warrant arrangements. 7. COMMITMENTS AND CONTINGENCIES The Company is a party to an agreement with a utility company, under the terms of which, the Company is obligated to purchase power generated from a co-generation power plant through 2006. The Company receives a portion of the savings generated by the plant and profits on excess supply generated. The co- generation power plant began operations in January 1991. From time to time, the Company has been and is involved in various legal and environmental proceedings, all of which management believes are routine in nature and incidental to the conduct of its business. The ultimate legal and financial liability of the Company with respect to such proceedings cannot be estimated with certainty, but the Company believes, based on its examination of such matters, that none of such proceedings, if determined adversely to the Company, would have a material adverse effect on the Company's results of operations, or financial condition. 8. PENSION AND OTHER BENEFITS The Company sponsors three noncontributory defined benefit pension plans covering substantially all employees. The Plan assets are invested in a group annuity contract with an insurance company and in a trust that holds a balanced portfolio of corporate stocks and bonds, U.S. Government bonds and money market investments. The plan covering salaried employees at the Massachusetts, North Carolina and Alabama locations provides pension benefits based on the employee's average monthly compensation during a defined period. The plans covering hourly employees at the Massachusetts, North Carolina and Alabama locations provide benefits based on years of service. The Company's funding policy is to contribute annually the maximum deductible amount allowable under applicable tax regulations. Net periodic pension cost includes the following components:
DECEMBER 31 ----------------------- 1995 1996 1997 ------- ----- ------- Service cost..................................... $ 258 $ 257 $ 303 Interest cost on projected benefit obligations... 471 427 477 Actual return on plan assets..................... (1,103) (669) (1,102) Net amortization and deferral.................... 798 337 697 ------- ----- ------- Net periodic pension cost........................ $ 424 $ 352 $ 375 ======= ===== =======
F-14 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following summarizes the funded status of the Company's pension plans, measured as of:
DECEMBER 31 ----------------------------------------------- 1996 1997 ----------------------- ----------------------- ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACTUARIAL PRESENT VALUE OF ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFIT OBLIGATIONS BENEFITS ASSETS BENEFITS ASSETS -------------------------- ----------- ----------- ----------- ----------- Vested benefit obligations..... $2,010 $3,856 $2,250 $3,631 ====== ====== ====== ====== Accumulated benefit obligations................... $2,071 $3,925 $2,309 $3,736 ====== ====== ====== ====== Projected benefit obligations.. $2,071 $4,268 $2,309 $4,282 Less: Plan assets at fair value, mutual funds........... 2,313 3,770 2,699 3,981 ------ ------ ------ ------ Projected benefit obligations (in excess of) less than plan assets........................ 242 (498) 390 (301) Unrecognized actuarial net losses (gains)................ 123 159 (5) (13) Prior service cost to be recognized in future periods.. 14 204 12 179 Unrecognized initial net (asset) obligation............ (123) 193 (104) 152 Adjustment required to recognize minimum liability... -- (213) -- -- ------ ------ ------ ------ Prepaid (accrued) pension cost at end of period.............. $ 256 $ (155) $ 293 $ 17 ====== ====== ====== ======
In 1996 and 1997, the salaried and Massachusetts hourly plans had distribution of $502 and $602, respectively. Inasmuch as the 1996 settlements exceeded the 1996 service and interest cost components of the net periodic pension cost, an additional loss of $89 has been recognized in the accompanying statement of income. Assumptions used in calculating the pension expense and the accumulated benefit obligation, were as follows:
DECEMBER 31 -------------- 1995 1996 1997 ---- ---- ---- Discount rate.............................................. 7.5% 7.5% 7.5% Rate of increase in compensation levels.................... 5.5% 5.5% 5.5% Expected long-term rate of return on assets................ 7.5% 7.5% 7.5%
The Company has instituted a tax deferred savings plan covering all employees of the Company under Section 401(k) of the Internal Revenue Code. Under the Plan, subject to certain limitations, each eligible employee may contribute up to 10% of gross wages per year to the maximum amount set by law. The Company matches one third of the first 6% of employee contributions. Company contributions to the Plan for employees were approximately $345 in 1995; $356 in 1996; and $384 in 1997. In addition to the Company's defined benefit plans, the Company currently provides postretirement medical and life insurance benefits (postretirement benefits) to eligible full-time employees. The Company is recognizing the initial accumulated benefit obligation over a 20-year period. F-15 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following table provides information on the status of the postretirement benefit plan as of December 31:
1996 1997 ------- ------- Accumulated postretirement benefit obligation: Retirees............................................. $ 1,675 $ 1,505 Fully eligible plan participants..................... 1,077 1,186 Other active plan participants....................... 2,324 2,968 ------- ------- Total.............................................. 5,076 5,659 Unrecognized net gain.................................. 1,594 1,055 Unrecognized transition obligation..................... (3,149) (2,952) ------- ------- Accrued postretirement benefit cost................ $ 3,521 $ 3,762 ======= =======
Net periodic postretirement benefit cost consisted of the following:
1995 1996 1997 ----- ----- ---- Service cost--benefits attributed to service during the period......................................... $ 442 $284 $273 Interest cost on accumulated postretirement benefit obligation......................................... 550 347 366 Amortization of unrecognized net (gain) or loss..... (379) (175) (192) Amortization of unrecognized transition obligation.. 379 196 197 ----- ----- ---- Net periodic postretirement benefit cost.......... $ 992 $ 652 $644 ===== ===== ====
At December 31, 1995, 1996 and 1997, respectively, 951, 908 and 833 active employees and 176, 185 and 181 retired employees are covered by the Plan. The Company's policy is to fund postretirement benefits as claims are paid. The accumulated postretirement benefit obligation was determined using a discount rate of 7% in 1996 and 7.5% in 1997 and a health care cost trend rate of 9.5%, declining each year to 4% in the year 2007 and thereafter. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation by approximately $481 and the annual net periodic postretirement benefit cost by approximately $74. F-16 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 9. INCOME TAXES Significant components of the Company's deferred tax assets and liabilities as of December 31, are as follows:
1996 1997 ------ ------ Deferred tax liabilities: Pension................................................. $ 125 $ 126 Depreciation............................................ 235 249 ------ ------ Total deferred tax liabilities........................ 360 375 Deferred tax assets: Other postretirement benefits........................... 1,390 1,519 Joint venture........................................... 428 -- Professional fees, primarily financing fees............. 84 279 Inventories............................................. 231 639 Bad debts............................................... 534 759 Workers' compensation accrued........................... 344 491 Deferred compensation................................... 198 1,330 Vacation accrued........................................ 221 241 Other, net.............................................. 174 388 ------ ------ Total deferred tax assets............................. 3,604 5,646 Valuation allowance for deferred tax assets............... (428) -- ------ ------ Net deferred tax assets............................... $2,816 $5,271 ====== ======
The following table sets forth selected data with respect to the Company's provision for income taxes from continuing operations for the years ended:
1995 1996 1997 ------ ------ ------- Current: Federal....................................... $1,819 $4,683 $ 9,090 State......................................... 505 1,059 1,748 ------ ------ ------- 2,324 5,742 10,838 Deferred: Federal....................................... (448) (820) (2,034) State......................................... (158) (138) (421) ------ ------ ------- (606) (958) (2,455) ------ ------ ------- Total....................................... $1,718 $4,784 $ 8,383 ====== ====== =======
F-17 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense for continuing operations is as follows:
1995 1996 1997 ------------ ------------ ------------ AMOUNT % AMOUNT % AMOUNT % ------ ---- ------ ---- ------ ---- Tax at statutory rate................ $1,403 34.0 $4,538 34.0 $8,831 35.0 State income tax expense, less federal tax benefit................. 351 8.5 601 4.5 858 3.4 Foreign sales corporation............ (187) (4.5) (203) (1.5) (775) (3.0) Change in valuation allowance........ 219 5.3 -- -- (428) (1.7) Other, net........................... (68) (1.7) (152) (1.1) (103) (0.5) ====== ==== ====== ==== ====== ==== Total.............................. $1,718 41.6 $4,784 35.9 $8,383 33.2 ====== ==== ====== ==== ====== ====
Cash paid for income taxes amounted to $1,150, $4,247 and $11,833 in 1995, 1996 and 1997, respectively. 10. INVESTMENT IN JOINT VENTURE On November 23, 1990, the Company entered into a joint venture agreement (Joint Venture) with PT Bakrie Nusantara Corporation ("Bakrie"), an Indonesian company, to engage in the business of the manufacturer of rubber thread and its related products. During 1997, the Company took steps to terminate its Joint Venture relationship. However, the Company continues to acquire and sell the entire production of the Joint Venture other than production sold in Indonesia. During the years ended December 31, 1996 and 1997, respectively, the Company purchased inventory totaling $5,912 and $9,854 from the Joint Venture. 11. SELF-INSURANCE The Company has a self-insurance program for its workers' compensation. The plan, which is administered by an insurance company, contains certain stop loss clauses that limit the Company's liability in the event of catastrophic losses ($200 per incident, $580 in the aggregate per year). Claims are accrued as incurred based on available claim information and management's estimate of claims incurred but not yet reported. At December 31, 1996 and 1997, the Company had outstanding letters of credit of $1,200 and $1,000, respectively, to secure the Company's workers' compensation self-insurance program. 12. SUBSEQUENT EVENTS On June 23, 1998, the Company entered into an Agreement and Plan of Merger (the Agreement) with an affiliate of Code, Hennessy & Simmons III, L.P. The Agreement provides for the obtaining of additional debt and equity to be used in a recapitalization transaction whereby Code, Hennessy & Simmons III, L.P. will obtain a majority interest in the Company and certain continuing shareholders will retain a minority interest. The recapitalization transaction will be financed with $50,000 of equity and $295,000 of debt. Prior to the closing of the Merger, substantially all of the assets and liabilities of Globe Manufacturing Co. will be contributed to its wholly owned subsidiary, Globe Elastic Co., Inc., which will be renamed Globe Manufacturing Corp. On July 31, 1998, Globe Manufacturing Corp. issued $150,000 of 10% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes"). The proceeds of the Senior Subordinated Notes were used to (i) pay consideration under the Agreement to certain shareholders of the Company (ii) repay certain indebtedness of the Company and (iii) repay related fees and expenses of the recapitalization and refinancing. F-18 GLOBE MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) DECEMBER 31, 1996 AND 1997 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) On August 6, 1998 the Company issued and sold 49,086 units (the "Units"), each consisting of one 14% Senior Discount Note due 2009 (the "Notes") and one warrant (a "Warrant") to purchase 1.4155 shares of Class A Common Stock, $.01 par value, of the Company. The aggregate purchase price of the Units was $25,000 and the net proceeds to the Company were $24,562 after deducting underwriting discounts and commissions and other expenses payable by the Company. The proceeds of these Units were used to repay a $25,000 loan made by Code, Hennessy & Simmons, III, L.P. to the Company pursuant to the recapitalization transaction. F-19 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary........................................................ 1 Risk Factors.............................................................. 13 Use of Proceeds........................................................... 22 Capitalization............................................................ 23 Selected Consolidated Financial Data...................................... 24 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 26 Business.................................................................. 38 Management................................................................ 48 Certain Relationships and Related Transactions............................ 51 Security Ownership of Certain Beneficial Owners and Management............ 55 Description of Senior Credit Facility..................................... 56 Description of Senior Subordinated Notes.................................. 58 Description of the New Notes.............................................. 59 Description of the Warrants............................................... 98 Description of Capital Stock.............................................. 101 Certain United States Federal Tax Considerations.......................... 102 Book-Entry Procedures and Transfer........................................ 107 Plan of Distribution...................................................... 108 Legal Matters............................................................. 109 Experts................................................................... 109 Available Information..................................................... 109 Index to Consolidated Financial Statements................................ F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LOGO GLOBE HOLDINGS, INC. OFFER TO EXCHANGE ITS 14% SENIOR DISCOUNT NOTES DUE 2009, SERIES B FOR ANY AND ALL OF ITS OUTSTANDING 14% SENIOR DISCOUNT NOTES DUE 2009 ------------------- PROSPECTUS , 1998 ------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 67 of Chapter 156B of the Massachusetts General Laws ("Section 67") provides that a corporation may indemnify its directors and officers to the extent specified in or authorized by (i) the articles of organization, (ii) a by-law adopted by the stockholders, or (iii) a vote adopted by the holders of a majority of the shares of stock entitled to vote on the election of directors. In all instances, the extent to which a corporation provides indemnification to its directors and officers under Section 67 is optional. Article VI of the Company's Restated Articles of Organization, as amended (the "Articles of Organization") eliminates the personal liability of the Company's directors to the Company or its stockholders for monetary damages for breach of a director's fiduciary duty, except to the extent Chapter 156B of the Massachusetts General Laws prohibits the elimination or limitation of such liability. Article VI of the Articles of Organization provides that the Company shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was, or has agreed to become, a director or officer of the Company, or is or was serving, or has agreed to serve, at the request of the Company, as a director or officer of, or in a similar capacity with, another organization or in any capacity with respect to any employee benefit plan of the Company (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments and fines incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, unless the Indemnitee shall be finally adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the Company or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. Notwithstanding anything to the contrary in Article VI, except as set forth in Article VI(B)(6) (which provides that indemnification may be denied if the Indemnitee violated the applicable standard of conduct), the Company shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Company. Notwithstanding anything to the contrary in Article VI, the Company shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Company makes any indemnification payments to an Indemnitee and the Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund such indemnification payments to the Company to the extent of such insurance reimbursement. The right to indemnification conferred by Article VI includes the right to be paid by the Company for amounts paid in settlement of any such action, suit or proceeding and any appeal therefrom, and all expenses (including attorneys' fees) incurred in connection with such settlement, pursuant to a consent decree or otherwise, unless and to the extent it is determined that the Indemnitee did not act in good faith in the reasonable belief that his action was in the best interests of the Company or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. The indemnification and advancement of expenses provided by Article VI shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Company, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in Article VI shall be deemed to prohibit, and the Company is specifically authorized to enter into, agreements with officers and directors II-1 providing indemnification rights and procedures different from those set forth in Article VI. In addition, the Company may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Company or other persons serving the Company and such rights may be equivalent to, or greater or less than, those set forth in Article VI. All of the directors and officers of the Company are covered by insurance policies maintained and held in effect by the Company against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933. ITEM 21. EXHIBITS.
EXHIBIT NO. DESCRIPTION ------- ----------- 2.1 Agreement and Plan of Merger dated as of June 23, 1998 between the Company and Globe Acquisition Company.(1) 2.2 Asset Transfer Agreement dated as of July 29, 1998 between Globe Elastic Co., Inc. and the Company.(1) 2.3 Amendment No. 1 dated as of July 17, 1998 to the Agreement and Plan of Merger dated as of June 23, 1998 between the Company and Globe Acquisition Company.(1) 2.4 Amendment No. 2 dated as of July 30, 1998 to the Agreement and Plan of Merger dated as of June 23, 1998 between the Company and Globe Acquisition Company.(1) 2.5 Purchase Agreement dated as of July 31, 1998 by and among Globe Acquisition Company, Code, Hennessy & Simmons III, L.P. and certain other purchasers to purchase shares of Globe Acquisition Company's stock.(1) 3.1 Articles of Merger filed July 31, 1998 for the merger of Globe Acquisition Company and the Company and amending the Company's Restated Articles of Organization. 3.2 Articles of Amendment filed July 2, 1998 amending the Company's Restated Articles of Organization. 3.3 Restated Articles of Organization of the Company filed July 22, 1992. 3.4 Bylaws of the Company. 4.1 Indenture dated as of August 6, 1998 by and between the Company and Norwest Bank Minnesota, National Association. 4.2 Purchase Agreement dated as of August 6, 1998 by and between the Company and BancAmerica Robertson Stephens. 4.3 Registration Rights Agreement dated as of August 6, 1998 by and between the Company and BancAmerica Robertson Stephens. 4.4 Unit Agreement dated as of August 6, 1998 by and between the Company and BancAmerica Robertson Stephens. 4.5 Warrant Agreement dated as of August 6, 1998 by and between the Company and BancAmerica Robertson Stephens. 4.6 Warrant Registration Rights Agreement dated as of August 6, 1998 by and between the Company and BancAmerica Robertson Stephens. 4.7 Securityholders Agreement dated as of July 31, 1998 by and among the shareholders of the Company.(1) 4.8 Registration Agreement dated as of July 31, 1998 by and among the shareholders of the Company.(1) 5.1* Opinion and Consent of Kirkland & Ellis. 10.1 Employment Agreement dated as of December 31, 1997 between the Company and Thomas A. Rodgers, III.(1)
II-2
EXHIBIT NO. DESCRIPTION ------- ----------- 10.2 Employment Agreement dated as of December 31, 1997 between the Company and Americo Reis.(1) 10.3 Employment Agreement dated as of December 31, 1997 between the Company and Lawrence R. Walsh.(1) 10.4 Employment Agreement dated as of December 31, 1997 between the Company and Robert L. Bailey.(1) 10.5 Form of Executive Securities Agreement dated as of July 31, 1998 between the Company, Code Hennessy & Simmons and each of Messrs. Walsh, Reis and Bailey.(1) 10.6 Form of Non-Competition Agreement dated as of July 31, 1998 between the Company and each of Messrs. Rodgers, III, Walsh, Reis and Bailey. Mr. Bailey's non-competition restriction terminates on December 31, 2000, compared to July 31, 2001 for the other executives.(1) 10.7 Management Agreement, dated as of July 31, 1998 between Globe Manufacturing and CHS Management III, L.P.(1) 10.8 Tax Sharing Agreement dated as of July 31, 1998 between the Company and Globe Manufacturing.(1) 10.9 Credit Agreement dated as of July 31, 1998 by and among the Company, Globe Manufacturing, various banks, Bank of America National Trust and Savings Association, BancAmerica Robertson Stephens and Merrill Lynch, Pierce, Fenner & Smith, Inc.(1) 10.10 Pledge Agreement dated as of July 31, 1998 by the Company and Globe Manufacturing in favor of Bank of America Trust and Savings Association.(1) 10.11 Security Agreement dated as of July 31, 1998 by the Company and Globe Manufacturing in favor of Bank of America National Trust and Savings Association.(1) 10.12 Form of Amended and Restated Performance Option Agreement by and between the Company and each of Messrs. Walsh, Reis, and Bailey.(1) 10.13 Globe Holdings Management Incentive Plan.(1) 10.14* Consulting Agreement dated as of July 31, 1998 between Globe Manufacturing and Thomas A. Rodgers.(1) 12.1 Statement of Computation of Ratios. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP. 23.2* Consent of Kirkland & Ellis (included in Exhibit 5-1). 24.1 Powers of Attorney (included in signature page). 25.1 Statement of Eligibility of Trustee on Form T-1. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Tender Instructions.
- -------- * To be filed by amendment +The Company agrees to furnish supplementally to the Commission a copy of any omitted schedule to such agreement upon the request of the Commission in accordance with Item 601(b)(2) of Regulation S-K. (1) Filed as an Exhibit to the Registration Statement on Form S-4 (File No. 333- ) filed by Globe Manufacturing Corp. with the Securities and Exchange Commission on September 29, 1998. II-3 (b) FINANCIAL STATEMENT SCHEDULE. Note: All financial statement schedules have been omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes thereto. ITEM 22. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or 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. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (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 the 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. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered, therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) 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 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 Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (e) 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-4 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CITY OF FALL RIVER, STATE OF MASSACHUSETTS, ON THE 28TH DAY OF SEPTEMBER, 1998. Globe Holdings, Inc. /s/ Thomas A. Rodgers, III By: _________________________________ Thomas A. Rodgers, III President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS THOMAS A. RODGERS, III, LAWRENCE R. WALSH AND EDWARD M. LHEE , AND EACH 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 OR ALL AMENDMENTS (INCLUDING 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 INTENDS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-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, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE 28TH DAY OF SEPTEMBER, 1998.
SIGNATURE TITLE --------- ----- /s/ Thomas A. Rodgers, Jr. Chairman ___________________________________________ Thomas A. Rodgers, Jr. /s/ Thomas A. Rodgers, III President, Chief Executive Officer and ___________________________________________ Director (Principal Executive Officer) Thomas A. Rodgers, III /s/ Lawrence R. Walsh Vice President, Finance and Administration ___________________________________________ (Principal Financial Officer) Lawrence R. Walsh /s/ Kevin T. Cardullo Director of Finance and Accounting ___________________________________________ (Principal Accounting Officer) Kevin T. Cardullo /s/ Andrew W. Code Director ___________________________________________ Andrew W. Code /s/ Peter M. Gotsch Director ___________________________________________ Peter M. Gotsch /s/ Edward M. Lhee Director ___________________________________________ Edward M. Lhee
II-5 EX-3.1 2 ARTICLES OF MERGER Exhibit 3.1 FEDERAL IDENTIFICATION FEDERAL IDENTIFICATION No. Applied For No. 04-2017769 __________ Examiner The Commonwealth of Massachusetts William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF MERGER (General Laws, Chapter 156B, Section 79) merger of Globe Acquisition Company (a Delaware corporation) Globe Manufacturing Co. (a Massachusetts corporation), the constituent corporations, into Globe Manufacturing Co. (the name of which is changed to Globe Holdings, Inc. pursuant to Article 3 below) one of the constituent corporations organized under the laws of: Massachusetts. The undersigned officers of each of the constituent corporations certify under the penalties of perjury as follows: 1. An agreement of merger has been duly adopted in compliance with the requirements of General Laws, Chapter 156B, Section 79, and will be kept as provided by Subsection (c) thereof. The surviving corporation will furnish a copy of said agreement to any of its stockholders, or to any person who was a stockholder of any constituent corporation, upon written request and without charge. 2. The effective date of the merger determined pursuant to the agreement of merger shall be the date approved and filed by the Secretary of the Commonwealth. If a later effective date is desired, specify such date which shall not be more than thirty days after the date of filing: 3. (For a merger) The following amendments to the Articles of Organization of the surviving corporation have been effected pursuant to the agreement of merger: See Attachment 3A ___ C ___ ___ P ___ ___ M ___ ___ R.A. ___ *Delete the inapplicable words. _________ Note: If the space provided under any article or item on this form P.C. is insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a single sheet as long as each article requiring each addition is clearly indicated. (For a consolidation) (b) State the total number of shares and the par value, if any, of each class of stock which the resulting corporation is authorized to issue.
- ----------------------------------------------------------------------------- WITHOUT PAR VALUE WITH PAR VALUE - ----------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ----------------------------------------------------------------------------- Common: Common: - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Preferred: Preferred: - ----------------------------------------------------------------------------- - -----------------------------------------------------------------------------
**(C) If more than one class of stock is authorized, state a distinguishing designation for each class and provide a description of the preferences, voting powers, qualifications, and special or relative rights or privileges of each class and of each series then established. **(d) The restrictions, if any, on the transfer of stock contained in the agreement of consolidation are: **(e) Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: Item 4 below may be deleted if the resulting/surviving corporation is organized under the laws of a state other than Massachusetts. 4. The information contained in Item 4 is not a permanent part of the Articles of Organization of the surviving corporation. (a) The street address (post office boxes are not acceptable) of the surviving corporation in Massachusetts is: 456 Bedford Street Fall River, MA 02720 ATTACHMENT 3A ------------- In connection with the merger of Globe Acquisition Company, a Delaware corporation, with and into Globe Manufacturing Co., a Massachusetts corporation and the surviving corporation in such merger, pursuant to Article 3 of the Articles of Merger to which these amendments are attached, the following Articles of the current Articles of Organization of Globe Manufacturing Co. are amended as set forth below. ARTICLE I The exact name of the corporation is: GLOBE HOLDINGS, INC. ARTICLE III
WITHOUT PAR VALUE WITH PAR VALUE - ------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------------------------------------------------------------------- Common: None Class A Common: 5,000,000 $.01 - ------------------------------------------------------------------------------- None Class B Common: 350,000 $.01 - ------------------------------------------------------------------------------- Preferred: None Class C Common: 600,000 $.01 - ------------------------------------------------------------------------------- None Class A Preferred: 40,000 $.01 - -------------------------------------------------------------------------------
ARTICLE IV The total number of shares of all classes of stock which the corporation shall have authority to issue is 5,990,000 shares, consisting of (i) 5,000,000 shares of the Class A Common Stock, $.01 par value per share (the "Class A Common Stock"), (ii) 350,000 shares of the Class B Common Stock, $.01 par value per share (the "Class B Common Stock"), (iii) 600,000 shares of the Class C Common Stock, $.01 par value per share (the "Class C Common Stock"), and (iv) 40,000 shares of the Class A Preferred Stock, $.01 par value per share (the "Class A Preferred"). The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the corporation. 3A-1 A. COMMON STOCK Section 1. General. Except as otherwise provided in this Part A, or as otherwise required by applicable law, the rights and privileges of the Class A Common Stock, the Class B Common Stock and the Class C Common Stock shall be identical, and the Class A Common Stock, the Class B Common Stock and the Class C Common Stock (the Class A Common Stock, the Class B Common Stock and the Class C Common Stock are sometimes collectively referred to herein as the "Common Stock") shall be treated as one class of stock of the corporation. The voting, dividend and liquidation rights of the holders of the Class A Common Stock, the Class B Common Stock and the Class C Common Stock are subject to and qualified by the rights of the holders of the Class A Preferred. Section 2. Voting Rights. Except as otherwise provided in this Part A, or as otherwise required by applicable law, the holders of the Class A Common Stock shall be entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings), and the holders of the Class B Common Stock and the Class C Common Stock shall have no voting rights; provided that the holders of Class C Common Stock shall have the right to vote as a separate class on any merger or consolidation of the Corporation with or into another entity or entities, or any recapitalization or reorganization, in which shares of Class C Common Stock would receive or be exchanged for consideration different on a per share basis from consideration received with respect to or in exchange for the shares of Class A Common Stock or would otherwise be treated differently from shares of Class A Common Stock in connection with such transaction, except that shares of Class C Common Stock may, without such a separate class vote, receive or be exchanged for non-voting securities (except as otherwise required by law) which are otherwise identical on a per share basis in amount and form to the voting securities received with respect to or exchanged for the Class A Common Stock so long as (i) such non- voting securities are convertible into such voting securities on the same terms as the Class C Common Stock is convertible into Class A Common Stock and (ii) all other consideration is equal on a per share basis. There shall be no cumulative voting. Section 3. Dividends. Dividends may be declared and paid on the Class A Common Stock, the Class B Common Stock and the Class C Common Stock from funds lawfully available therefor if, as and when determined by the Board of Directors of the Corporation (the "Board") and subject to any preferential dividend rights of any then outstanding Class A Preferred. As and when dividends are declared or paid with respect to shares of Common Stock, whether in cash, property or securities of the Corporation, the holders of the Class A Common Stock, the holders of the Class B Common Stock and the holders of the Class C Common Stock shall be entitled to receive such dividends pro rata at the same rate per share of each class of Common Stock; provided that (i) if 3A-2 dividends are declared or paid in shares of Common Stock, the dividends payable to holders of the Class A Common Stock shall be payable in shares of the Class A Common Stock, the dividends payable to the holders of the Class B Common Stock shall be payable in shares of the Class B Common Stock and the dividends payable to the holders of the Class C Common Stock shall be payable in shares of the Class C Common Stock and (ii) if the dividends consist of other voting securities of the Corporation, the Corporation shall make available to each holder of the Class C Common Stock, at such holder's request, dividends consisting of non-voting securities (except as otherwise required by law) of the Corporation which are otherwise identical to the voting securities and which are convertible into such voting securities on the same terms as the Class C Common Stock is convertible into the Class A Common Stock. The right of the holders of Common Stock to receive dividends are subject to the provisions of the Class A Preferred. Section 4. Liquidation. Subject to the provisions of the Class A Preferred, the holders of the Class A Common Stock, the holders of the Class B Common Stock and the holders of the Class C Common Stock shall be entitled to participate pro rata at the same rate per share of each class of Common Stock in all distributions to the holders of Common Stock in any liquidation, dissolution or winding up of the Corporation. Section 5. Conversion. 5A. Conversion of the Class A Common Stock. Each holder of Class A Common Stock shall be entitled at any time to convert any or all of the shares of such holder's Class A Common Stock into an equal number of shares of Class C Common Stock. 5B. Conversion of the Class B Common Stock. 1. Class B Conversion Event. (a) Without any action on the part of the holder thereof, each outstanding share of Class B Common Stock shall automatically be converted into a share of Class A Common Stock immediately prior to the consummation of a Class B Conversion Event (the "Class B Mandatory Conversion Date"). (b) For purposes of this paragraph 5B, a "Class B Conversion Event" shall mean any public offering of Common Stock registered under the Securities Act of 1933. 3A-3 (ii) Certificate Exchange Procedure. (a) All holders of record of shares of Class B Common Stock will be given written notice of the Class B Mandatory Conversion Date and the place designated for mandatory conversion of all such shares of Class B Common Stock pursuant to this paragraph 5B. Upon receipt of such notice, each holder of shares of Class B Common Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Class A Common Stock to which such holder is entitled pursuant to this paragraph 5B. On the Class B Mandatory Conversion Date the rights of the holder of the converted Class B Common Stock as such holder shall cease and the person or persons in whose name or names the certificate or certificates for shares of the Class A Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of the Class A Common Stock represented thereby. (b) Promptly after the surrender of certificates, the Corporation shall issue and deliver in accordance with the surrendering holder's instructions the certificate or certificates for the Class A Common Stock issuable upon such conversion. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing. (c) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of the Class A Common Stock solely for the purpose of issuance upon the conversion of the Class B Common Stock such number of shares of the Class A Common Stock issuable upon the conversion of all outstanding Class B Common Stock. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Class A Common Stock may be listed (except for official notice of issuance which shall be immediately transmitted by the Corporation upon issuance). (d) The issuance of certificates for the Class A Common Stock upon conversion of the Class B Common Stock shall be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of the Class A Common Stock. 3A-4 (e) The Corporation shall not close its books against the transfer of shares of Class B Common Stock in any manner which would interfere with the timely conversion of any shares of Class B Common Stock. The Corporation shall assist and cooperate with any holder of Class B Common Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of Common Stock hereunder (including, without limitation, making any filings required to be made by the Corporation). 5C. Conversion of the Class C Common Stock. (i) Class C Conversion Events. (a) In connection with the occurrence (or the expected occurrence as described in 5C(iii) below) of any Class C Conversion Event, each holder of Class C Common Stock shall be entitled to convert into an equal number of shares of Class A Common Stock any or all of the shares of such holder's Class C Common Stock being (or expected to be) distributed, disposed of or sold in connection with such Class C Conversion Event. (b) For purposes of this paragraph 5C, a "Class C Conversion Event" shall mean (a) any public offering or public sale of securities of the Corporation (including a public offering registered under the Securities Act of 1933 and a public sale pursuant to Rule 144 of the Securities and Exchange Commission or any similar rule then in force), (b) any sale of securities of the Corporation to a person or group of persons (within the meaning of the Securities Exchange Act of 1934, as amended (the "1934 Act")) if, after such sale, such person or group of persons in the aggregate would own or control securities which possess in the aggregate the ordinary voting power to elect a majority of the Corporation's directors (provided that such sale has been approved by the Board or a committee thereof), (c) any sale of securities of the Corporation to a person or group of persons (within the meaning of the 1934 Act) if, after such sale, such person or group of persons in the aggregate would own or control securities of the Corporation (excluding any Class C Common Stock being converted and disposed of in connection with such Class C Conversion Event) which possess in the aggregate the ordinary voting power to elect a majority of the Corporation's directors, (d) any sale of securities of the Corporation to a person or group of persons (within the meaning of the 1934 Act) if, after such sale, such person or group of persons would not, in the aggregate, own, control or have the right to acquire more than two percent (2%) of the outstanding securities of any class of voting securities of the Corporation, and (e) a merger, consolidation or similar transaction involving the Corporation if, after such transaction, a person or group of persons (within the meaning of the 1934 Act) in the aggregate would own or control securities which possess in the aggregate the ordinary voting power to elect a majority of the surviving corporation's directors (provided that the 3A-5 transaction has been approved by the Board or a committee thereof). For purpose of this paragraph 5C, "person" shall include any natural person and any corporation, partnership, joint venture, trust, unincorporated organization and any other entity or organization. (ii) Class C Conversion Procedure. (a) Each holder of Class C Common Stock shall be entitled to convert shares of Class C Common Stock in connection with any Class C Conversion Event if such holder reasonably believes that such Class C Conversion Event shall be consummated, and a written request for conversion from any holder of Class C Common Stock to the Corporation stating such holder's reasonable belief that a Class C Conversion Event shall occur shall be conclusive and shall obligate the Corporation to effect such conversion in a timely manner so as to enable each such holder to participate in such Class C Conversion Event. The Corporation shall not cancel the shares of the Class C Common Stock so converted before the tenth day following such Class C Conversion Event and shall reserve such shares until such tenth day for reissuance in compliance with the next sentence. If any shares of the Class C Common Stock are converted into shares of the Class A Common Stock in connection with a Class C Conversion Event and such shares of the Class A Common Stock are not actually distributed, disposed of or sold pursuant to such Class C Conversion Event, such shares of the Class A Common Stock shall be promptly converted back into the same number of shares of the Class C Common Stock as were originally converted to the Class A Common Stock. (b) Unless otherwise provided in connection with a Class C Conversion Event, each conversion of shares of Class C Common Stock into shares of Class A Common Stock shall be effected by the surrender of the certificate or certificates representing the shares to be converted at the principal office of the Corporation at any time during normal business hours, together with a written notice by the holder of such Class C Common Stock stating that such holder desires to convert the shares, or a stated number of the shares, of such Class C Common Stock represented by such certificate or certificates into shares of Class A Common Stock. Unless otherwise provided in connection with a Class C Conversion Event, each conversion shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates have been surrendered and such notice has been received, and at such time the rights of the holder of the converted Class C Common Stock as such holder shall cease and the person or persons in whose name or names the certificate or certificates for shares of the Class A Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of the Class A Common Stock represented thereby. 3A-6 (c) Promptly after the surrender of certificates, the Corporation shall issue and deliver in accordance with the surrendering holder's instructions (a) the certificate or certificates for the Class A Common Stock issuable upon such conversion and (b) a certificate representing any Class C Common Stock which was represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which was not converted. (d) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of the Class A Common Stock solely for the purpose of issuance upon the conversion of the Class C Common Stock such number of shares of the Class A Common Stock issuable upon the conversion of all outstanding Class C Common Stock. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Class A Common Stock may be listed (except for official notice of issuance which shall be immediately transmitted by the Corporation upon issuance). (e) The issuance of certificates for the Class A Common Stock upon conversion of the Class C Common Stock shall be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of the Class A Common Stock. (f) The Corporation shall not close its books against the transfer of shares of Class C Common Stock in any manner which would interfere with the timely conversion of any shares of Class C Common Stock. The Corporation shall assist and cooperate with any holder of Class C Common Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of Class C Common Stock hereunder (including, without limitation, making any filings required to be made by the Corporation). 5D. Stock Splits. If the Corporation in any manner subdivides or combines the outstanding shares of one class of Common Stock, the outstanding shares of the other class of Common Stock shall be proportionately subdivided or combined in a similar manner. Section 6. Registration of Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Common Stock. Upon the surrender of any certificate 3A-7 representing Common Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of shares as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Common Stock represented by such new certificate from the date to which dividends have been fully paid on such Common Stock represented by the surrendered certificate. Section 7. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Common Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Common Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. Section 8. Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and shall be deemed to have been given when so mailed or sent (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). Section 9. Amendment and Waiver. No amendment or waiver of any provision of this Part A shall be effective without the prior approval of the holders of a majority of the then outstanding Class C Common Stock voting as a separate class. B. CLASS A PREFERRED Section 1. Dividends. 1A. General Obligation. When, if and as declared by the Board and to the extent permitted under the Business Corporation Law of the Commonwealth of 3A-8 Massachusetts, the Corporation shall pay preferential dividends in cash to the holders of the Class A Preferred as provided in this Section 1. Dividends on each share of the Class A Preferred (a "Share") shall accrue on a daily basis at the rate of 14% per annum of the sum of the Liquidation Value thereof plus all accumulated and unpaid dividends thereon from and including the date of issuance of such Share to and including the first to occur of (i) the date on which the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) is paid to the holder thereof in connection with the liquidation of the Corporation or the redemption of such Share by the Corporation or (ii) the date on which such Share is otherwise acquired by the Corporation. Such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends, and such dividends shall be cumulative such that all accrued and unpaid dividends shall be fully paid or declared with funds irrevocably set apart for payment before any dividends, distributions, redemptions or other payments may be made with respect to any Junior Securities. The date on which the Corporation initially issues any Share shall be deemed to be its "date of issuance" regardless of the number of times transfer of such Share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such Share. 1B. Dividend Reference Dates. To the extent not paid on July 31 of each year, beginning on July 31, 1999 (the "Dividend Reference Dates"), all dividends which have accrued on each Share outstanding during the twelve-month period (or other period in the case of the initial Dividend Reference Date) ending upon each such Dividend Reference Date shall be accumulated and shall remain accumulated dividends with respect to such Share until paid to the holder thereof. 1C. Distribution of Partial Dividend Payments. Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Class A Preferred, such payment shall be distributed pro rata among the holders thereof based upon the aggregate accrued but unpaid dividends on the Shares held by each such holder. Section 2. Liquidation. Upon any liquidation, dissolution or winding up of the Corporation (whether voluntary or involuntary), each holder of Class A Preferred shall be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Liquidation Value of all Shares held by such holder (plus all accrued and unpaid dividends thereon), and the holders of Class A Preferred shall not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation, the Corporation's assets to be distributed among the holders of the Class A Preferred are insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid under this Section 2, then the entire assets available to be distributed to the 3A-9 Corporation's stockholders shall be distributed pro rata among such holders based upon the aggregate Liquidation Value (plus all accrued and unpaid dividends) of the Class A Preferred held by each such holder. Prior to the liquidation, dissolution or winding up of the Corporation, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Class A Preferred, but only to the extent of funds of the Corporation legally available for the payment of dividends. Not less than 60 days prior to the payment date stated therein, the Corporation shall mail written notice of any such liquidation, dissolution or winding up to each record holder of Class A Preferred, setting forth in reasonable detail the amount of proceeds to be paid with respect to each Share and each share of Common Capital Stock in connection with such liquidation, dissolution or winding up. Section 3. Priority of Class A Preferred on Dividends and Redemptions. So long as any Class A Preferred remains outstanding, without the prior written consent of the holders of a majority of the outstanding shares of Class A Preferred, the Corporation shall not, nor shall it permit any Subsidiary to redeem, purchase or otherwise acquire directly or indirectly any Junior Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution upon any Junior Securities, provided that the Corporation may repurchase shares of Common Capital Stock from present or former employees of the Corporation and its Subsidiaries, and from certain other security holders in accordance with the provisions of agreements approved by the Board. Section 4. Voting Rights. Except as otherwise provided herein and as otherwise required by applicable law, the Class A Preferred shall have no voting rights. Section 5. Registration of Transfer. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Class A Preferred. Upon the surrender of any certificate representing Class A Preferred at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of Shares represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of Shares as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Class A Preferred represented by such new certificate from the date to which dividends have been fully paid on such Class A Preferred represented by the surrendered certificate. Section 6. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate 3A-10 evidencing Shares of Class A Preferred, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Class A Preferred represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. Section 7. Definitions. "Common Capital Stock" means, collectively, the Corporation's Common Stock and any capital stock of any class of the Corporation hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Corporation. "Junior Securities" means any capital stock or other equity securities of the Corporation, except for the Class A Preferred. "Liquidation Value" of any Share as of any particular date shall be equal to $1,000.00. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a government entity or any department, agency or political subdivision thereof. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons 3A-11 shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing general partner of such limited liability company, partnership, association or other business entity. Section 8. Amendment and Waiver. No amendment, modification or waiver shall be binding or effective with respect to any provision of this Part B without the prior written consent of the holders of a majority of the Class A Preferred outstanding at the time such action is taken; provided that no change in the terms hereof may be accomplished by merger or consolidation of the Corporation with another corporation or entity unless the Corporation has obtained the prior written consent of the holders of the applicable percentage of the Class A Preferred then outstanding. Section 9. Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and shall be deemed to have been given when so mailed or sent (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). Section 10. Fractional Shares. The Corporation may issue fractional Shares or fractional interest in Shares, and if they are issued, they shall entitle the holder to receive dividends, participate in distributions and to have the benefit of all other rights of a holder of the Class A Preferred in proportion to the fractional shares or interest held by such holder. ARTICLE VI Other lawful provisions for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: A. LIMITATION OF DIRECTOR LIABILITY Except to the extent that Chapter 156B of the Massachusetts General Laws prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or 3A-12 repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. B. INDEMNIFICATION 2. Actions, Suits and Proceedings. The corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was, or has agreed to become, a director or officer of the corporation, or is or was serving, or has agreed to serve, at the request of the corporation, as a director or officer of, or in a similar capacity with, another organization or in any capacity with respect to any employee benefit plan of the corporation (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments and fines incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, unless the Indemnitee shall be finally adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. Notwithstanding anything to the contrary in this Article, except as set forth in Section 6 below, the corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the corporation. Notwithstanding anything to the contrary in this Article, the corporation shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the corporation makes any indemnification payments to an Indemnitee and the Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund such indemnification payments to the corporation to the extent of such insurance reimbursement. 3. Settlements. The right to indemnification conferred in this Article shall include the right to be paid by the corporation for amounts paid in settlement of any such action, suit or proceeding and any appeal therefrom, and all expenses (including attorneys' fees) incurred in connection with such settlement, pursuant to a consent decree or otherwise, unless and to the extent it is determined pursuant to Section 5 below that the Indemnitee did not act in good faith in the reasonable belief that his 3A-13 action was in the best interests of the corporation or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. 4. Notification and Defense of Claim. As a condition precedent to his right to be indemnified, the Indemnitee must notify the corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the corporation is so notified, the corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the corporation to the Indemnitee of its election so to assume such defense, the corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 3. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the corporation and the Indemnitee in the conduct of the defense of such action or (iii) the corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the corporation, except as otherwise expressly provided by this Article. The corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. 5. Advance of Expenses. Subject to the provisions of Section 5 below, in the event that the corporation does not assume the defense pursuant to Section 3 of this Article of any action, suit, proceeding or investigation of which the corporation receives notice under this Article, any expenses (including attorneys' fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the corporation in advance of the final disposition of such matter; provided, however, that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the corporation as authorized in this Article. Such undertaking shall be accepted without reference to the financial ability of the Indemnitee to make such repayment. 3A-14 6. Procedure for Indemnification. In order to obtain indemnification or advancement of expenses pursuant to Section 1, 2 or 4 of this Article, the Indemnitee shall submit to the corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the corporation of the written request of the Indemnitee, unless the corporation determines within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (a) a majority vote of a quorum of the directors of the corporation, (b) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (c) independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the corporation), or (d) a court of competent jurisdiction. 7. Remedies. The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnitee in any court of competent jurisdiction if the corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 5. Unless otherwise required by law, the burden of proving that the Indemnitee is not entitled to indemnification or advancement of expenses under this Article shall be on the corporation. Neither the failure of the corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the corporation pursuant to Section 5 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitee's expenses (including attorneys' fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the corporation. 8. Subsequent Amendment. No amendment, termination or repeal of this Article or of the relevant provisions of Chapter 156B of the Massachusetts General Laws or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 3A-15 9. Other Rights. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the corporation or other persons serving the corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article. 10. Partial Indemnification. If an Indemnitee is entitled under any provision of this Article to indemnification by the corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled. 11. Insurance. The corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another organization or employee benefit plan against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under Chapter 156B of the Massachusetts General Laws. 12. Merger or Consolidation. If the corporation is merged into or consolidated with another corporation and the corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation. 13. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees), 3A-16 judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. 14. Subsequent Legislation. If the Massachusetts General Laws are amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the corporation shall indemnify such persons to the fullest extent permitted by the Massachusetts General Laws, as so amended. C. OTHER PROVISIONS (a) The directors may make, amend, or repeal the by-laws in whole or in part, except with respect to any provision of such by-laws which by law or these Articles or the by-laws requires action by the stockholders. (b) Meetings of the stockholders of the corporation may be held anywhere in the United States. (c) The corporation shall have the power to be a partner in any business enterprise which this corporation would have the power to conduct by itself. 3A-17 (b) The name, residential address and post office address of each director and officer of the surviving corporation is: POST OFFICE NAME RESIDENTIAL ADDRESS ADDRESS President: Thomas A. Rodgers, III Treasurer: Thomas A. Rodgers, Jr. Clerk: Directors: Thomas A. Rodgers, III Thomas A. Rodgers, Jr. Elizabeth Cogan Richard Friedman Robert E. Gregory Robert F. Stoico (c) The fiscal year end (i.e. tax year) of the surviving corporation shall end on the last day of the month of: December (d) The name and business address of the resident agent, if any, of the surviving corporation is: Lawrence R. Walsh, 456 Bedford Street, Fall River, MA 02720 Item 5 below may be deleted if the resulting/surviving corporation is organized under the laws of Massachusetts. FOR MASSACHUSETTS CORPORATIONS The undersigned *President*/*Vice President* and *Clerk/*Assistant Clerk of Globe Manufacturing Co., a corporation organized under the laws of Massachusetts, further state under the penalties of perjury that the agreement of merger has been duly executed on behalf of such corporation and duly approved in the manner required by General Laws, Chapter 156B, Section 78. /s/ Thomas A. Rodgers, III, President /s/ Lawrence R. Walsh, Asst. Clerk, Clerk/Assistant Clerk FOR CORPORATIONS ORGANIZED IN A STATE OTHER THAN MASSACHUSETTS The undersigned, +/s/ Peter M. Gotsch and ----------------------------------------------------- ++/s/ Edward M. Lhee , - ------------------------------------------------------------- of Globe Acquisition Company, a corporation organized under the laws of Delaware, further state under the penalties of perjury that the agreement of merger has been duly adopted by such corporation in the manner required by the laws of Delaware. *Delete the inapplicable words +Specify the officer having powers and duties corresponding to those of the president or vice president of a Massachusetts corporation organized under General Laws, Chapter 156B. +__________________________________ ++Specify the officer having powers and duties corresponding to the clerk or assistant clerk of such a Massachusetts corporation. ++_________________________________ THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF *CONSOLIDATION/*MERGER (General Laws, Chapter 156B, Section 79) ================================================================================ I hereby approve the written Articles of *Consolidation/*Merger and, the filing fee in the amount of $1,860 having been paid, said articles are deemed to have been filed with me this 31st day of July, 1998. Effective date:_____________________________ WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION Photocopy of document to be sent to: Karen Pitzi Hale and Door LLP 60 State Street Boston, MA 02109 Telephone: (617) 526-5177 EX-3.2 3 ARTICLES OF AMENDMENT EXHIBIT 3.2 FEDERAL IDENTIFICATION NO. 04-2017769 The Commonwealth of Massachusetts /s/ JM William Francis Galvin - ------------ Secretary of the Commonwealth Examiner One Ashburton Place, Boston, Massachusetts 02108-1512 /s/ N/A - ------------- ARTICLES OF AMENDMENT Name Approved (General Laws, Chapter 156B, Section 72) We, Thomas A. Rodgers III, President ---------------------------------------------------- and Lawrence Walsh Assistant Clerk ---------------------------------------------- of Globe Manufacturing Co. , ------------------------------------------------------------- (Exact name of corporation) located at 456 Bedford Street, Fall River MA 02720 , ------------------------------------------------------ (Street address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered: Articles #3 and 4 ---------------------------------------------------------------- (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the Articles of Organization were duly adopted at a meeting held on June 23, 1998, by vote of:
100,000 shares of Class A Common Stock of 100,000 shares outstanding, ------- -------------------- ------- (type, class & series, if any) shares of of shares outstanding, and ---------- ------------- -------- (type, class & series, if any) shares of of shares outstanding, and ---------- ------------- -------- (type, class & series, if any)
C [__] or /2/being at least two thirds of each type, class or series outstanding and entitled to vote thereon and of each type, class or P [__] series of stock whose rights are adversely affected thereby: M [__] *Delete the inapplicable words. **Delete the inapplicable clause. /1/ For amendments adopted pursuant to Chapter 156B, Section 70. R.A. [__] /2/ For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any article or item on this form 8 is insufficient, additions shall be set forth on one side only of - ------- separate 8 1/2 x 11 sheets of paper with a left margin of at least P.C. 1 inch. Additions to more than one article may be made on a single sheet so long as each article requiring each addition is clearly indicated. To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ---------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF PAR VALUE SHARES - ---------------------------------------------------------------------------- Common: None Common: Class A: 2,000,000 $0.01 - ---------------------------------------------------------------------------- Class B: 2,000,000 $0.01 - ---------------------------------------------------------------------------- Preferred: None Preferred: Series A: 30,000 $0.01 - ----------------------------------------------------------------------------
Change the total authorized to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ---------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF PAR VALUE SHARES - ---------------------------------------------------------------------------- Common: None Common: Class A: 2,000,000 $0.01 - ---------------------------------------------------------------------------- Class B: 2,000,000 $0.01 - ---------------------------------------------------------------------------- Preferred: None Class C: 100,000 $0.01 - ---------------------------------------------------------------------------- Preferred: Series A: 30,000 $0.01 - ----------------------------------------------------------------------------
ATTACHMENT 4 ------------ AMENDMENT OF ARTICLE FOUR The two unnumbered introductory paragraphs and Part A of Article Four of the Articles of Organization of Globe Manufacturing Co. (the "Corporation") are hereby deleted in their entirety and replaced by the following: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 4,130,000 shares, consisting of (i) 2,000,000 shares of Class A Common Stock, $.01 par value per share ("Class A Common Stock"), (ii) 2,000,000 shares of Class B Common Stock, $.01 par value per share ("Class B Common Stock"), (iii) 100,000 shares of Class C Common Stock, $.01 par value per share ("Class C Common Stock"), and (iv) 30,000 shares of Series A Cumulative Preferred Stock, $.01 par value per share ("Series A Preferred"). The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation. 1. CLASS A COMMON STOCK, CLASS B COMMON STOCK AND CLASS C COMMON STOCK. a. General. The voting, dividend and liquidation rights of the holders of the Class A Common Stock, Class B Common Stock and Class C Common Stock are subject to and qualified by the rights of the holders of the Series A Preferred. Except for the mandatory conversion provisions, the difference in voting rights and provisions with respect to an Acquisition Event (as defined in Section 7 below), each as set forth below, the rights and privileges of the Class A Common Stock, Class B Common Stock and Class C Common Stock shall be identical, and the Class A Common Stock, Class B Common Stock and Class C Common Stock shall be treated as one class of stock of the Corporation. The Class A Common Stock, Class B Common Stock and Class C Common Stock are sometimes collectively referred to herein as the "Common Stock." b. Voting. The holders of the Class A Common Stock and Class C Common Stock, voting together as a single class, are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). The holders of the Class B Common Stock shall have no voting rights except as otherwise required by law. There shall be no cumulative voting. c. Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Series A Preferred. d. Liquidation. Upon the dissolution or liquidation of the Corporation, whether IV-1 voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Series A Preferred. e. Mandatory Conversion of Class A Common Stock. i. At any time prior to the termination of that certain Shareholders' Agreement dated as of December 22, 1992 among the Corporation, the Shareholders (as such term is defined therein) and the other individuals named on the signature pages thereof, as such agreement may be amended or otherwise modified from time to time (the "Shareholders Agreement"), each outstanding share of Class A Common Stock transferred in violation of Section 4.4 of the Shareholders Agreement shall be automatically converted into a share of Class B Common Stock on the date of such transfer ("Class A Mandatory Conversion Date"). ii. Upon any such transfer of shares of Class A Common Stock in violation of Section 4.4 of the Shareholders Agreement, each transferee of such shares of Class A Common Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at its principal office, and shall thereafter receive certificates for the number of shares of Class B Common Stock to which such holder is entitled pursuant to this Section A.5. On the Class A Mandatory Conversion Date, all rights with respect to the Class A Common Stock so converted will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Class B Common Stock into which such Class A Common Stock has been converted, and payment of any declared or accrued but unpaid dividends thereon (all of which shall be deemed to be declared by the Board of Directors on the Class A Mandatory Conversion Date). If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing. As soon as practicable after the Class A Mandatory Conversion Date and the surrender of the certificate or certificates for Class A Common Stock, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Class B Common Stock issuable on such conversion in accordance with the provisions hereof and cash as reasonably determined by the Board of Directors in respect of any fraction of a share of Class B Common Stock otherwise issuable upon such conversion. iii. All certificates evidencing shares of Class A Common Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the Class A Mandatory Conversion Date, be deemed to have been retired and cancelled and the shares of Class A Common Stock represented thereby converted into Class B Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. The Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized Class A Common Stock accordingly. IV-2 f. Mandatory Conversion of Class B Common Stock and Class C Common Stock. i. Without any action on the part of the holder thereof, each outstanding share of Class B Common Stock and Class C Common Stock shall automatically be converted into a share of Class A Common Stock immediately prior to the consummation of a primary or secondary sale of Common Stock to the public pursuant to a registered public offering under the Securities Act of 1933, as amended (the "Securities Act"), as a result of which offering the public (including for this purpose, all purchasers in the underwriting irrespective of any relationship with the Corporation) will own 20% or more of the Common Stock then issued and outstanding (the "Class B/C Mandatory Conversion Date"). ii. All holders of record of shares of Class B Common Stock and Class C Common Stock will be given written notice of the Class B/C Mandatory Conversion Date and the place designated for mandatory conversion of all such shares of Class B Common Stock and Class C Common Stock pursuant to this Section A.6. Such notice shall be sent by first class or registered mail, postage prepaid, to each record holder of Class B Common Stock and Class C Common Stock at such holder's address last shown on the records of the transfer agent for the Class B Common Stock and Class C Common Stock (or the records of the Corporation, if it serves as its own transfer agent). Upon receipt of such notice, each holder of shares of Class B Common Stock and/or Class C Common Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Class A Common Stock to which such holder is entitled pursuant to this Section A.5. On the Class B/C Mandatory Conversion Date, all rights with respect to the Class B Common Stock and Class C Common Stock so converted will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Class A Common Stock into which such Class B Common Stock and/or Class C Common Stock has been converted, and payment of any declared or accrued but unpaid dividends thereon (all of which shall be deemed to be declared by the Board of Directors on the Class B/C Mandatory Conversion Date). If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing. As soon as practicable after the Class B/C Mandatory Conversion Date and the surrender of the certificate or certificates for Class B Common Stock and Class C Common Stock, the Corporation shall cause to be issued and delivered to such holder or on his or its written order, a certificate or certificates for the number of full shares of Class A Common Stock issuable on such conversion in accordance with the provisions hereof and cash as reasonably determined by the Board of Directors in respect of any fraction of a share of Class A Common Stock otherwise issuable upon such conversion. iii. All certificates evidencing shares of Class B Common Stock and Class C Common Stock which are required to be surrendered for conversion in accordance with the provisions IV-3 hereof shall, from and after the Class B/C Mandatory Conversion Date, be deemed to have been retired and cancelled and the shares of Class B Common Stock and Class C Common Stock represented thereby converted into Class A Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. The Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized Class B Common Stock and Class C Common Stock accordingly. g. Exchange of Class C Common Stock Upon an Acquisition Event. Upon the merger or consolidation of the Corporation with or into another corporation (except one in which the holders of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at least 75% by voting power of the capital stock of the surviving corporation) (an "Acquisition Event"), the Board of Directors of the Corporation may provide that debt and/or equity of the corporation surviving such merger or consolidation shall be distributed to the holders of Class C Common Stock, notwithstanding that cash, property or other different rights or securities are to be distributed to the holders of Class A Common Stock and/or Class B Common Stock by the Corporation or the acquiring person, firm or other entity; provided that the value of the consideration to be distributed to the holders of Class C Common Stock shall be equal on a per-share basis to the value of the consideration to be distributed to the holders of Class A Common Stock and/or Class B Common Stock, such valuations to be determined in good faith by the Board of Directors of the Corporation and to be conclusive and binding on the stockholders of the Corporation. IV-4 The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date:___________________________________. SIGNED UNDER THE PENALTIES OF PERJURY, this 29th day of June, 1998. /s/ Thomas A. Rodgers, III *President, - ------------------------------------------------------- /s/ Lawrence R. Walsh *Assistant Clerk. - ------------------------------------------------------- *Delete the inapplicable words THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) ======================================== I hereby approve the written Articles of Amendment and, the filing fee in the amount of $200 having been paid, said articles are deemed to have been filed with me this 2nd day of July, 1998. Effective date:_____________________________ /s/ William Francis Galvin WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION Photocopy of document to be sent to: Pamela L. Finan, Corporate Paralegal Hale and Door LLP 60 State Street Boston, MA 02109 EX-3.3 4 RESTATED ARTICLES OF ORGANIZATION Exhibit 3.3 The Commonwealth of Massachusetts /s/ illegible FEDERAL IDENTIFICATION - ---------------- No. 04-2017769 Examiner ---------------------- MICHAEL JOSEPH CONNOLLY Secretary of State ONE ASHBURTON PLACE, BOSTON, MASS: 02108 RESTATED ARTICLES OF ORGANIZATION General Laws, Chapter 156B, Section 74 This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the restated articles of organization. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts. ------------------- We, Thomas A. Rodgers, III, President and Lawrence R. Walsh, Assistant Clerk of Globe Manufacturing Co. ---------------------------------------------------------------------- (Name of Corporation) located at 156 Bedford Street, Fall River, MA 02720 ----------------------------------------------------------- do hereby certify that the following restatement of the articles of organization of the corporation was duly adopted by unanimous written consent of all of the stockholders of the Corporation on December 21, 1992, by vote of
150 shares of Voting Common Stock out of 150 shares outstanding, ----- --------------------- ----- (Class of Stock) 1,609 shares of Class B Common Stock out of 1,609 shares outstanding and ----- ---------------------- ----- (Class of Stock) shares of out of shares outstanding. ------- ----------------------- ------- (Class of Stock)
being at least two-thirds of each class of stock outstanding and entitled to vote and of each class or series of stock adversely affected thereby: 1. The name by which the corporation shall be known is: Globe Manufacturing Co. 2. The purposes for which the corporation is formed are as follows: (a) To manufacture and sell elastomeric fibers, including spandex fiber and latex thread. (b) To carry on any business or other activity which may C [_] lawfully be carried on by a corporation organized under the P [_] Business Corporation Law of the Commonwealth of M [_] Massachusetts, whether or not related to those referred to RA [_] in the preceding paragraph. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on separate 8-1/2 x 11 sheets of paper leaving a left hand margin of at least 1 inch for 25 binding. Additions to more than one article may be continued on a - ------ single sheet so long as each article requiring each such addition is P.C. clearly indicated. 3. The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue is as follows:
WITHOUT PAR VALUE WITH PAR VALUE ----------------- -------------- CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE - -------------- ---------------- ---------------- --------- Preferred Series A Cumulative Preferred Stock 30,000 $.01 Common Class A Common 2,000,000 $.01 Class B Common 2,000,000 $.01
*4. If more than one class is authorized, a description of each of the different classes of stock with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each class thereof and any series now established: See Attachment 4 *5. The restrictions, if any, imposed by the articles of organization upon the transfer of shares of stock of any class are as follows: None. *6. Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders. See Attachment 6 * If there are no such provisions, state "None". ATTACHMENT 4 ------------ The total number of shares of all classes of stock which the corporation shall have authority to issue is 4,030,000 shares, consisting of (i) 2,000,000 shares of Class A Common Stock, $.01 par value per share ("Class A Common Stock"), (ii) 2,000,000 shares of Class B Common Stock, $.01 par value per share, and (iii) 30,000 shares of Series A Cumulative Preferred Stock, $.01 par value per share ("Series A Preferred"). The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the corporation. A. CLASS A COMMON STOCK AND CLASS B COMMON STOCK. 1. General. The voting, dividend and liquidation rights of the holders of the Class A Common Stock and Class B Common Stock are subject to and qualified by the rights of the holders of the Series A Preferred. Except for the mandatory conversion provisions and the difference in voting rights as set forth below, the rights and privileges of the Class A Common Stock and Class B Common Stock shall be identical, and the Class A Common Stock and Class B Common Stock shall be treated as one class of stock of the corporation. The Class A Common Stock and Class B Common Stock are hereinafter collectively referred to as "Common Stock". 2. Voting. The holders of the Class A Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). The holders of the Class B Common Stock shall have no voting rights except as otherwise required by law. There shall be no cumulative voting. 3. Dividends. Dividends may be declared and paid on the Class A Common Stock and Class B Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Series A Preferred. 4. Liquidation. Upon the dissolution or liquidation of the corporation, whether voluntary or involuntary, holders of Class A Common Stock and Class B Common Stock will be entitled to receive all assets of the corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Series A Preferred. 5. Mandatory Conversation of Class B Common Stock. (a) Without any action on the part of the holder thereof, each outstanding share of Class B Common Stock shall automatically be converted into a share of Class A Common Stock immediately prior to the consummation of a primary or secondary sale of Common Stock to the public pursuant to a registered public offering under the Securities Act of 1933, as amended (the 1 "Securities Act"), as a result of which offering the public (including for this purpose, all purchasers in the underwriting irrespective of any relationship with the Corporation) will own 20% or more of the Common Stock then issued and outstanding (the "Class B Mandatory Conversion Date"). (b) All holders of record of shares of Class B Common Stock will be given written notice of the Class B Mandatory Conversion Date and the place designated for mandatory conversion of all such shares of Class B Common Stock pursuant to this Section A.5. Such notice shall be sent by first class or registered mail, postage prepaid, to each record holder of Class B Common Stock at such holder's address last shown on the records of the transfer agent for the Class B Common Stock (or the records of the Corporation, if it serves as its own transfer agent). Upon receipt of such notice, each holder of shares of Class B Common Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Class A Common Stock to which such holder is entitled pursuant to this Section A.5. On the Class B Mandatory Conversion Date, all rights with respect to the Class B Common Stock so converted will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Class A Common Stock into which such Class B Common Stock has been converted, and payment of any declared or accrued but unpaid dividends thereon (all of which shall be deemed to be declared by the Board of Directors on the Class B Mandatory Conversion Date). If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing. As soon as practicable after the Class B Mandatory Conversion Date and the surrender of the certificate or certificates for Class B Common Stock, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Class A Common Stock issuable on such conversion in accordance with the provisions hereof and cash as reasonably determined by the Board of Directors in respect of any fraction of a share of Class A Common Stock otherwise issuable upon such conversion. (c) All certificates evidencing shares of Class B Common Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the Class B Mandatory Conversion Date, be deemed to have been retired and cancelled and the shares of Class B Common Stock represented thereby converted into Class A Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. The Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized Class B Common Stock accordingly. 2 6. Mandatory Conversion of Class A Common Stock. (a) At any time prior to the termination of that certain Shareholders' Agreement dated as of December __, 1992 among the Corporation, the Shareholders (as such term is defined therein) and the other individuals named on the signature pages thereof, as such agreement may be amended or otherwise modified from time to time (the "Shareholders Agreement"), each outstanding share of Class A Common Stock transferred in violation of Section 4.4 of the Shareholders Agreement shall be automatically converted into a share of Class B Common Stock on the date of such transfer ("Class A Mandatory Conversion Date"). (b) Upon any such transfer of shares of Class A Common Stock in violation of Section 4.4 of the Shareholders Agreement, each transferee of such shares of Class A Common Stock shall surrender his or its certificate or certificates for all such shares to the Corporation at its principal office, and shall thereafter receive certificates for the number of shares of Class B Common Stock to which such holder is entitled pursuant to this Section A.6. On the Class A Mandatory Conversion Date, all rights with respect to the Class A Common Stock so converted will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Class B Common Stock into which such Class A Common Stock has been converted, and payment of any declared or accrued but unpaid dividends thereon (all of which shall be deemed to be declared by the Board of Directors on the Class A Mandatory Conversion Date). If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his or its attorney duly authorized in writing. As soon as practicable after the Class A Mandatory Conversion Date and the surrender of the certificate or certificates for Class A Common Stock, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Class B Common Stock issuable on such conversion in accordance with the provisions hereof and cash as reasonably determined by the Board of Directors in respect of any fraction of a share of Class B Common Stock otherwise issuable upon such conversion. (c) All certificates evidencing shares of Class A Common Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the Class A Mandatory Conversion Date, be deemed to have been retired and cancelled and the shares of Class A Common Stock represented thereby converted into Class B Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. The Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized Class A Common Stock accordingly. 3 B. SERIES A CUMULATIVE PREFERRED STOCK. 1. Number of Shares. (a) The number of authorized shares constituting Series A Preferred is 30,000. (b) All shares of Series A Preferred redeemed, purchased or otherwise acquired by the Corporation shall be retired and cancelled and shall be restored to the status of authorized but unissued shares of preferred stock, without designation as to series, and may thereafter be issued, but not as shares of Series A Preferred. After the Series A Initial Issuance Date (as defined below), the Corporation shall not issue any shares of Series A Preferred other than shares which comprise Additional Shares of Series A Preferred (as defined below) pursuant to Section B.2.(b) herein or shares which are issued pursuant to Section 7.7 of the Stock and Warrant Purchase and Recapitalization Agreement, dated as of December 21, 1991, by and among the Goldman Shareholders (as defined therein), the Corporation, Island Development Corp., and the Shareholders (as defined therein) (the "Section 7.7 Shares"). (c) The Series A Preferred shall, with respect to dividend rights and rights of liquidation, winding up and dissolution, rank (i) junior to any other series of preferred stock established by the Board of Directors of the Corporation, the terms of which shall specifically provide that such series shall rank prior to the Series A Preferred, (ii) on a parity with any other series of preferred stock established by the Board of Directors, the terms of which shall specifically provide that such series shall rank on a parity with the Series A Preferred, and (iii) prior to any other equity securities of the Corporation, including without limitation, all classes of the Common Stock; all of such equity securities of the Corporation to which the Series A Preferred ranks prior, including without limitation the Common Stock, are collectively referred to herein as the "Junior Securities"). 2. Dividends. (a) Subject to Section B.2(c) hereof, with respect to each dividend period the Board of Directors shall declare, the Corporation shall pay and the holders of the shares of Series A Preferred shall be entitled to receive, out of funds legally available therefor, cumulative dividends on the shares of the Series A Preferred, at a rate per annum equal to the Applicable Rate (as defined below) multiplied by the liquidation preference thereof. All dividends described in this Section B.2(a) shall be payable on December 22 of each year, which date shall be the first day of the next succeeding dividend period (an "Annual Dividend Period"), and on the date of any redemption of the Series A Preferred, or if any such date is not a Business Day (as hereinafter defined), on the next succeeding Business Day (each of such dates being a "Series A Dividend Payment Date"), commencing December 22, 1993, in preference to and in priority over dividends on the Junior Securities, except as provided in Section B.2(d)(iii) below. Such dividends shall be paid to the holders of record at the close of business on the date specified by the Board of Directors of the Corporation at the time such dividend is declared; provided, 4 however, that such date shall not be more than 60 days nor less than 10 days prior to the respective Series A Dividend Payment Date. Each of such annual dividends shall be fully cumulative and shall accrue (whether or not earned or declared), without interest, from the first day of the Annual Dividend Period, except that with respect to the Annual Dividend Period ending on December 22, 1993, such dividend shall accrue from the initial date of issuance of the Series A Preferred (the "Series A Initial Issuance Date"). The amount of dividends payable hereunder shall be determined on the basis of twelve 30-day months and a 360-day year. Cumulative dividends with respect to Series A Preferred which are in arrears may be declared and paid at any time without reference to any regular Series A Dividend Payment Date. (b) Any dividend on the Series A Preferred accrued and payable on any Series A Dividend Payment Date shall be paid either, as so elected by the vote of a majority of the members of Board of Directors of the Corporation (excluding the Goldman Directors, as that term is defined in a certain Shareholders' Agreement, dated as of December 22, 1992, among the Corporation and its shareholders), (x) in cash or (y) by issuing a number of additional shares of the Series A Preferred (the "Additional Shares of Series A Preferred") for each such share (or partial share) of Series A Preferred then outstanding equal to the dividend then payable on each such share (or partial share) of Series A Preferred for the Annual Dividend Period then ended (expressed as a dollar amount) divided by the liquidation value of one share of Series A Preferred (expressed as a dollar amount). If at any time after the Series A Initial Issuance Date, the Corporation fails for any reason to pay any dividend on the Series A Preferred in cash as set forth in clause (x) of the preceding sentence, then the Corporation shall instead pay such dividend by the issuance of Additional Shares of Series A Preferred as set forth in clause (y) of the preceding sentence. For purposes of this Section B.2., the "Applicable Rate" shall mean (i) 10% per annum, to the extent that dividends are paid in cash and (ii) 15% per annum, to the extent that dividends are paid in Additional Shares of Series A Preferred. (c) Notwithstanding any of the other provisions of this Section B.2, the Corporation shall not be required to pay cash dividends on shares of Series A Preferred to the extent the payment of cash dividends on shares of Series A Preferred is prohibited by the then applicable corporation law of the Commonwealth of Massachusetts, and the Corporation shall not be required to pay dividends on shares of Series A Preferred in Additional Shares of Series A Preferred to the extent such payment is prohibited by the then applicable corporation law of the Commonwealth of Massachusetts. (d) (i) No full cash dividends shall be declared or paid or set apart for payment on the preferred stock of any series ranking, as to dividends, on a parity with Series A Preferred for any period unless full cumulative dividends have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof set apart for such payment in cash on shares of Series A Preferred or unless such dividends shall have been paid by the issuance of Additional Shares of Series A Preferred, in any event, through the most recent Series A Dividend Payment Date. When dividends are not paid in full, as aforesaid, upon the shares of Series A Preferred and any other series of preferred stock ranking on a party as to dividends with Series A 5 Preferred, all dividends declared on Series A Preferred and any other series of preferred stock ranking on a parity as to dividends with Series A Preferred shall be declared and paid in cash or by the issuance of additional shares of such respective series of preferred stock pro rata so that the amount of dividends so declared per share on Series A Preferred and such other series of preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of Series A Preferred through the most recent Series A Dividend Payment Date and such other series of preferred stock through such date bear to each other. (ii) Subject to Section B.2(d)(iii), as long as any shares of Series A Preferred are outstanding, no dividend shall be declared or paid or set aside for payment or other distribution declared or made (in each case, other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities) upon the Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired by the Corporation for any consideration (except for shares of Junior Securities or options, warrants or rights to subscribe for or purchase shares of Junior Securities or by conversion into or exchange for Junior Securities), unless, in each case, (x) the full cumulative dividends on all outstanding shares of Series A Preferred shall have been paid (either in cash or by issuance of Additional Shares of Series A Preferred) through the most recent Series A Dividend Payment Date, (y) after giving effect to such dividend, distribution, redemption, purchase or acquisition Cumulative Net Income (as defined below) equals or exceeds $8,400,000 and (z) all amounts paid by the Corporation in respect of such dividends, distributions, redemptions, purchases or acquisitions during or subsequent or the most recent four full fiscal quarters of the Corporation does not exceed the Net Income (as defined below) for such four full fiscal quarters. For purposes of the foregoing, "Net Income" means the consolidated net income (including net losses) of the Corporation and its subsidiaries as reflected on the regularly prepared quarterly consolidated income statements of the Corporation and its subsidiaries which are provided to certain holders of the Preferred Stock pursuant to Section B.9 hereof, excluding gains, but including losses, from any sales, transfers or other dispositions of assets by the Corporation or any of its subsidiaries outside the ordinary course of business or from other extraordinary transactions, effected during the applicable period, and including income from non-consolidated subsidiaries only to the extent of cash dividends received by the Corporation or any of its consolidated subsidiaries during such period, and "Cumulative Net Income" means the cumulative Net Income of the Corporation and its subsidiaries for all full fiscal quarters completed subsequent to January 2, 1993, less all cash amounts paid and the fair market value, as determined in good faith by the Board of Directors, of all non-cash consideration paid or distributed, by the Corporation during or subsequent to such periods in respect of dividends, distributions, redemptions, purchases or acquisitions of any capital stock of the Corporation, excluding such dividends or distributions on such capital stock made in, or redemptions, purchases or acquisitions of such capital stock for, shares of capital stock ranking junior to such capital stock with respect to dividend rights and rights of liquidation, winding up and dissolution (or options, warrants or rights to subscribe for or purchase additional shares of such capital stock or shares of capital stock ranking junior to such capital stock). In connection with any declaration or payment of dividends upon Junior Securities, the making of any distribution on 6 Junior Securities or any purchase, redemption or other acquisition of Junior Securities by the Corporation, other than any such dividend, distribution, redemption, purchase or acquisition permitted by Section B.2(d)(iii), the Corporation shall furnish to each holder of shares of Series A Preferred a certificate signed by the chief financial officer or the chief executive officer of the Corporation setting forth the basis upon which such dividend, distribution, purchase, redemption or acquisition is permitted by the terms of this Section B.2(d)(ii). (iii) Nothing contained in this Section B of Article IV shall prevent (x) the purchase, redemption or other acquisition by the Corporation or any of its subsidiaries for any consideration of Junior Securities pursuant to Section 4.10 or 4.11 of the Shareholders Agreement, (y) the payment of dividends upon Junior Securities declared prior to the Series A Initial Issuance Date but which are payable after such date or (z) the payment of dividends upon Junior Securities declared after the Series A Initial Issuance Date, not to exceed $50,000 in the aggregate in any twelve-month period. (e) Any dividend payment made on shares of Series A Preferred shall first be credited against the dividends accrued with respect to the earliest periods for which dividends have not been paid. Holders of shares of Series A Preferred shall not be entitled to (i) any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series A Preferred, or (ii) any interest, or sum of money in lieu of interest, in respect of any dividend payment or payments on the Series A Preferred which may be in arrears. Notwithstanding the foregoing, any Additional Shares of Series A Preferred payable as dividends on the Series A Preferred which are not paid when due and payable (whether as a result of there not being sufficient authorized shares of the Series A Preferred Stock or for any other reason) shall, for purposes of determining the amount of dividends payable in any subsequent Annual Dividend Period or for any other purpose hereunder, including in connection with any redemption obligation of the Corporation relating to the Series A Preferred and any determination made with respect thereto, be deemed to be outstanding from and after the Series A Dividend Payment Date with respect to such dividends. The foregoing shall not relieve the Corporation from its obligation to pay any dividend on the Series A Preferred when due. (f) Certificates for Additional Shares of Series A Preferred or Section 7.7 Shares shall bear a legend identifying such shares as Additional Shares of Series A Preferred or Section 7.7 Shares, as applicable. Shares of Additional Shares of Series A Preferred and Section 7.7 Shares shall be identical in all respects to shares of Series A Preferred and shall be treated alike including, without limitation, with respect to the payment of dividends under Section 3.2 herein. 3. Redemption; Repurchase; Refinancing. Shares of Series A Preferred shall be redeemable by the Corporation as provided below (with all references in this Section B.3 to a redemption price per share to be adjusted proportionally in respect of partial shares): (a) Option Redemption. At the option of the Corporation, shares of Series A Preferred may be redeemed at any time in whole or in part from time to time, out of funds legally 7 available therefor, at a cash redemption price of $1,000 per share, plus, in each case, an amount in cash equal to accrued and unpaid dividends thereon (whether or not earned or declared), if any, to the date fixed for redemption. (b) Mandatory Redemption. On the earliest of (i) the seventh anniversary of the Series A Initial Issuance Date, (ii) the consummation of any merger of the Corporation with or into, or its consolidation with, another corporation if, immediately after such merger or consolidation, the holders of Common Stock immediately prior to the execution of a definitive agreement providing for such merger or consolidation own, in the aggregate, capital stock of the surviving or resulting corporation representing less than a majority of the total voting power of such corporation, (iii) the consummation of a primary or secondary sale of Common Stock to the public pursuant to a registered public offering under the Securities Act, as a result of which offering the public (including for this purpose, all purchasers in the underwriting irrespective of any relationship with the corporation) will own 20% or more of the Common Stock then issued and outstanding, or (iv) the consummation of a sale of all or substantially all of the assets of the Corporation, all of the outstanding shares of Series A Preferred shall be redeemed by the Corporation, to the extent of and out of funds legally available to do so, at a cash redemption price of $1000 per share, plus, in each case, an amount equal to accrued and unpaid dividends thereon (whether or not earned or declared), if any, to the date fixed for redemption. (c) Limitations on Redemption Obligations. The Corporation shall not be required to discharge its redemption obligations pursuant to Section B.3(a) or Section B.3(b) hereof to the extent such redemption is prohibited by the then applicable corporation law of the Commonwealth of Massachusetts; provided that any such redemption obligation shall be discharged as soon as such prohibition is no longer applicable. (d) Notice of Redemption; Other Redemption Procedures. (i) Whenever shares of Series A Preferred (including Additional Shares of Series A Preferred or Section 7.7 Shares) are to be redeemed pursuant to Section B.3(a) or Section B.3(b), a notice of such redemption shall be mailed, by first-class mail, postage prepaid, or delivered to each holder of the shares to be redeemed at such holder's address as the same appears on the stock transfer books of the Corporation. Such notice shall be mailed or delivered not less than 10 days and not more than 60 days prior to the date fixed for redemption. Each such notice shall state: (i) the date fixed for redemption; (ii) the number of shares of Series A Preferred to be redeemed; (iii) the redemption price; (iv) the place or places where such shares of Series A Preferred are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such date fixed for redemption; (vi) the provision of this Section B.3 under which the redemption is made; and (vii) the extent, if any, to which Additional Shares of Series A Preferred and/or Section 7.7 Shares are being redeemed. If fewer than all shares of Series A Preferred held by a holder are to be redeemed, the notice mailed to such holder shall specify the number of shares to be redeemed from such holder. Except as required by applicable law, no defect in the notice of redemption or in the mailing thereof shall affect the validity of the redemption proceedings. 8 (ii) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares called for redemption) dividends on the shares of Series A Preferred so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding and shall have the status of authorized but unissued shares of preferred stock, unclassified as to series, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price and any accrued and unpaid dividends to the redemption date) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificates are redeemed, a new certificate shall be redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (iii) In the event that fewer than all shares of Series A Preferred are redeemed, except as expressly provided herein, the Corporation may elect whether to redeem shares of Series A Preferred generally, only Additional Shares of Series A Preferred, only Section 7.7 shares, or any combination thereof. Any such redemption of Additional Shares of Series A Preferred, Section 7.7 Shares or other Series A Preferred shall be made pro rata among Additional Shares of Series A Preferred, Section 7.7 Shares or other Series A Preferred, as the case may be. (iv) Nothing contained herein shall limit any legal right of the Corporation or any Affiliate (as defined below) to purchase or otherwise acquire any shares of Series A Preferred at any price, whether higher or lower than the redemption price. 4. Liquidation. (a) Upon a liquidation, winding up or dissolution of the affairs of the Corporation, whether voluntary or involuntary, the holders of shares of Series A Preferred then outstanding shall be entitled, whether for capital or surplus before any assets of the Corporation shall be distributed among or paid over to the holders of Junior Securities but after distribution of such assets among, or payment thereof over to, creditors of the Corporation and to holders of any stock of the Corporation with liquidation rights senior to the Series A Preferred, to be paid $1,000 per share (pro rated for fractional shares), plus, in each such case, in an amount equal to all accrued and unpaid dividends thereon (whether or not earned or declared) to and including the date of final distribution. After any such payment in full, the holders of shares of the Series A Preferred shall not be entitled to any further participation in any distribution of assets of the Corporation. (b) Neither the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, 9 nor the sale of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, for the purposes of this Section B.4. (c) If, upon any such liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the assets of the Corporation shall be insufficient to make the full payments required by subsection (a) of this Section B.4, no such distribution shall be made on account of any shares of any other class or series of preferred stock ranking on a parity with the shares of Series A Preferred upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of Series A Preferred, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (d) Subject to the rights of the holders of shares of any series or class or classes of stock ranking on a parity with or prior to the shares of Series A Preferred upon liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the shares of Series A Preferred as provided in this Section B.4, but not prior thereto, any Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the shares of Series A Preferred shall not be entitled to share therein. 5. Voting. The holders of shares of Series A Preferred shall not be entitled to any voting rights except as specified in this Section B.5 and Section B.6 and except as otherwise provided by law. The affirmative vote of the holders of at least 75% in liquidation value of the outstanding shares of Series A Preferred, voting separately as a single class on a one vote per share (pro rated for fractional shares) basis, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, or by consent, shall be required (i) for purposes of implementing Section B.6, (ii) to amend, repeal or change any provisions of this Section B of Article IV of Series A Preferred in any manner which would materially and adversely affect, alter or change the powers, preferences or specific rights of any share of Series A Preferred or (iii) to create, issue, or increase or decrease the amount, of any class or series of capital stock of the Corporation ranking prior to or on a parity with the Series A Preferred as to dividends or upon liquidation, dissolution or winding up of the Corporation. 6. Board Representation. (a) In the event that the Series A Preferred is not redeemed by the Corporation as and when required by Section B.3(b) hereof, whether as permitted by Section B.3(c) hereof or otherwise, the number of directors constituting the Board of Directors of the Corporation shall, without further action, be increased by one and the holders of the Series A Preferred shall have the exclusive right, voting as a single class, to elect the director of the Corporation to fill such newly created directorship at each meeting of stockholders held for the purpose of electing directors. Such additional director shall continue as a director and such additional voting right 10 shall continue until such time as all of the issued and outstanding shares of Series A Preferred are redeemed by the Corporation in accordance with the terms hereof, at which time such additional director shall cease to be a director and such additional voting right of the holders of Series A Preferred Stock shall terminate. (b) At any time that the holders of the Series A Preferred have voting powers pursuant to Section B.6(a), the proper officers of the Corporation shall, upon written request of the holders of record of at least 20% of the Series A Preferred, addressed to the Clerk of the Corporation, call a special meeting of the holders of such Series A Preferred Stock for the purpose of electing such director. Such meeting shall be held at the earliest practicable date thereafter and shall be held at the place for the holding of annual meetings of the stockholders of the Corporation. If such meeting shall not be called by the officers of the Corporation within 25 days after personal service of the above request upon the Clerk of the Corporation, or within 30 days after mailing of same within the United States of America by registered mail addressed to the Clerk of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of at least 20% of the Series A Preferred in which voting power is vested pursuant to the preceding paragraphs then outstanding may designate in writing one of their number to call such meeting, and such meeting may be called by such person so designated upon the giving of notice to stockholders as provided in the Articles of Organization or By-Laws of the Corporation for a special meeting of stockholders. Any holder so designated shall have access to the stock books of the Corporation for the purposes of causing such meeting to be called pursuant to these provisions. Notwithstanding the provisions of this paragraph, no such special meeting shall be called by a holder designated pursuant to the second preceding sentence during the period within 30 days immediately preceding the date fixed for the next annual meeting of stockholders. (c) At any meeting held for the purpose of electing a director or directors at which the holders of the Series A Preferred shall have the right, voting separately as a class, to elect a director, the presence, in person or by proxy, of the holders of one-third of the Series A Preferred shares entitled to vote at such meeting shall be required to constitute a quorum. At any such meeting or adjournment thereof, (i) the absence of a quorum of holders of the Series A Preferred shall not prevent the election of directors other than such additional director and the absence of a quorum of holders of any other class of capital stock shall not prevent election of such additional director or directors, and (ii) in the absence of either or both such quorums, the holders of a majority of the shares present in person or by proxy of the class of stock or classes of stocks which lack a quorum shall have power to adjourn, until a quorum shall be present, the meeting for the election of the director or directors which they are entitled to elect from time to time without notice other than announcement at the meeting unless otherwise required by law. (d) Notwithstanding any provision hereof or of the Articles of Organization to the contrary, at any time that the holders of the Series A Preferred have voting powers pursuant to Section B.6(a), any action required or permitted to be taken by the holders of the Series A Preferred at any meeting of such holders may be taken without a meeting if all of the holders of 11 the Series A Preferred entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of the meetings of stockholders. Such consents shall be treated for all purposes as a vote at a meeting. 7. Restrictions on Transfer. (a) No sale, offer, assignment, transfer, pledge, hypothecation, encumbrance or other disposition (collectively, "Transfer") of any shares of Series A Preferred, or any interest therein, in whole or in part, shall be permitted without the prior written consent of the Corporation, which consent shall not be unreasonably withheld or delayed, provided, that no such consent shall be required with respect to a transfer of shares of Series A Preferred, or any interest therein, (i) by the holder thereof to any Affiliate or Affiliates of such holder or (ii) by will or the laws of descent. (b) The Series A Preferred has not been registered under the Securities Act or any applicable state securities or blue sky law and may not be sold, transferred or otherwise disposed of without such registration unless the sale, transfer or disposition can be effected without such registration and in compliance with the Securities Act and such laws. Without limiting Section B.7(a) or Section B.8 hereof, a holder of Series A Preferred shall not sell, transfer or otherwise dispose of all or any part of, any share of Series A Preferred, or any interest therein, other than pursuant to an effective registration statement under the Securities Act, without first notifying the Corporation prior to such sale, transfer or disposition and, if requested by the Corporation, delivering to the Corporation a written opinion of legal counsel experienced in Securities Act matters, in form and substance reasonably satisfactory to the Corporation, that an exemption from registration is available under the Securities Act and any applicable state securities or blue sky law. 8. No Registration Rights. No person shall at any time be entitled to registration or similar rights with respect to any shares of Series A Preferred. 9. Reports and Other Information. So long as any Series A Preferred Stock is outstanding, the Corporation shall furnish to each holder of shares of Series A Preferred representing 25% or more of the then outstanding Series A Preferred such financial and other information concerning the Corporation as is required to be furnished by the Corporation to a holder of shares of Common Stock representing 25% or more of the outstanding Common Stock pursuant to Sections 5.1(a) , (b) and (c) of the Shareholders Agreement. 10. Fractional Shares. The Corporation may issue fractional shares of Series A Preferred Stock or fractional interests in the Series A Preferred Stock, and if they are issued, they shall entitle the holder to receive dividends, participate in distributions and to have the benefit of all other rights of a holder of the Series A Preferred Stock in proportion to the fractional shares or interests held by such holder. 12 11. Additional Definitions. As used herein, the following terms have the meanings specified below: "Affiliate" shall have the meaning assigned to it by Rule 12b-2 under the Securities Exchange Act of 1934, as amended, as in effect on the date of these Restated Articles of Organization. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City. 13 ATTACHMENT 6 6. Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: 6A. LIMITATION OF DIRECTOR LIABILITY Except to the extent that Chapter 156B of the Massachusetts General Laws prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. 6B. INDEMNIFICATION 1. Actions, Suits and Proceedings. The corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was, or has agreed to become, a director or officer of the corporation, or is or was serving, or has agreed to serve, at the request of the corporation, as a director or officer of, or in a similar capacity with, another organization or in any capacity with respect to any employee benefit plan of the corporation (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments and fines incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, unless the Indemnitee shall be finally adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. Notwithstanding anything to the contrary in this Article, except as set forth in Section 5 below, the corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the corporation. 2. Settlements. The right to indemnification conferred in this Article shall include the right to be paid by the corporation for amounts paid in settlement of any such action, suit or proceeding and any appeal therefrom, and all expenses (including attorneys' fees) incurred in connection with such settlement, pursuant to a consent decree or otherwise, unless and to the extent it is determined pursuant to Section 5 below that the Indemnitee did not act in good faith 1 in the reasonable belief that his action was in the best interests of the corporation or, to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. 3. Notification and Defense of Claim, As a condition precedent to his right to be indemnified, the Indemnitee must notify the corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the corporation is so notified, the corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the corporation to the Indemnitee of its election so to assume such defense, the corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 3. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the corporation and the Indemnitee in the conduct of the defense of such action or (iii) the corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the corporation, except as otherwise expressly provided by this Article. The corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. 4. Advance of Expenses. Subject to the provisions of Section 5 below, in the event that the corporation does not assume the defense pursuant to Section 3 of this Article of any action, suit, proceeding or investigation of which the corporation receives notice under this Article, any expenses (including attorneys' fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the corporation in advance of the final disposition of such matter, provided, however, that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of the Indemnitee to make such repayment. 5. Procedure for Indemnification. In order to obtain indemnification or advancement of expenses pursuant to Section 1, 2 or 4 of this Article, the Indemnitee shall submit to the corporation a written request, including in such request documentation and information as is 2 reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the corporation of the written request of the Indemnitee, unless the corporation determines, by clear and convincing evidence, within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in such instance by (a) a majority vote of a quorum of the directors of the corporation, (b) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (e) independent legal counsel (who may be regular legal counsel to the corporation), or (d) a court of competent jurisdiction. 6. Remedies. The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnitee in any court of competent jurisdiction if the corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 5. Unless otherwise provided by law, the burden of proving that the Indemnitee is not entitled to indemnification or advancement of expenses under this Article shall be on the corporation. Neither the failure of the corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the corporation pursuant to Section 5 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The Indemnitee's expenses (including attorneys' fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the corporation. 7. Subsequent Amendment. No amendment, termination or repeal of this Article or of the relevant provisions of Chapter 156B of the Massachusetts General Laws or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 8. Other Rights. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the corporation is specifically 3 authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the corporation or other persons serving the corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article. 9. Partial Indemnification. If an Indemnitee is entitled under any provision of this Article to indemnification by the corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled. 10. Insurance. The corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another organization or employee benefit plan against any expense, liability or less incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under Chapter 156B of the Massachusetts General Laws. 11. Merger or Consolidation. If the corporation is merged into or consolidated with another corporation and the corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation. 12. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each indemnitee as to any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. 13. Subsequent Legislation. If the Massachusetts General Laws are amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the corporation shall indemnify such persons to the fullest extent permitted by the Massachusetts General Laws, as so amended. 4 6C. OTHER PROVISIONS 1. The directors may make, amend, or repeal the by-laws in whole or in part, except with respect to any provision of such by-laws which by law or these Articles or the by-laws requires action by the stockholders. 2. Meetings of the stockholders of the corporation may be held anywhere in the United States. 3. The corporation shall have the power to be a partner in any business enterprise which this corporation would have the power to conduct by itself. 5 We further certify that the foregoing restated articles of organization affect no amendments to the articles of reorganization of the corporation as heretofore amended, except amendments to the following articles 2, 3, 4 and 6. (*If there are no such amendments, state "None".) Briefly describe amendments in space below: Article 2: Amended to broaden and increase the powers of the corporation consistent with applicable law. Article 3: Amended to authorize 30,000 shares of Series A Cumulative Preferred Stock, $0.01 par value per share; change the par value of the voting Common Stock and Class 3 Common Stock from $100.00 par value per share to $.01 par value per share; change the name of the class of voting Common Stock to Class A Common Stock; and increase the authorized number of shares of Class A Common Stock to 2,000,000 shares and Class B Common Stock to 2,000,000 shares. Article 4: Amended to reflect the preferences, powers and privileges of the Series A Cumulative Preferred Stock; to set forth the preferences, powers and privileges of the Class A Common Stock and Class B Common Stock; to provide for mandatory conversion of the Class B Common Stock to Class A Common Stock upon the consummation of a sale of stock of the corporation to the public pursuant to a registered public offering under the Securities Act of 1933, as amended; and to provide for the mandatory conversion of Class A Common Stock to Class B Common Stock upon certain unauthorized transfers of Class A Common Stock. Article 6: Amended to (i) eliminate the liability of directors of the corporation to the corporation or its stockholders, except to the extent prohibited by Chapter 156B of the Massachusetts General Laws; (ii) provide for the Indemnification by the corporation of each person who was or is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is, was, or has agreed to become, a director or officer of the corporation or is or was serving, or has agreed to serve, in certain capacities at the request of the corporation; (iii) grant the directors authority to make, amend or repeal the bylaws, except as otherwise provided by law or the corporation's articles of organization or bylaws; (iv) permit meetings of the stockholders to be held anywhere in the United States; and (v) permit the corporation to be a partner in any business enterprise which the corporation would have the power to conduct by itself. IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 2nd day of December in the year 1992. /s/ Thomas A. Rodgers, III President Thomas A. Rodgers, III /s/ Lawrence R. Walsh Assistant Clerk Lawrence R. Walsh THE COMMONWEALTH OF MASSACHUSETTS RESTATED ARTICLES OF ORGANIZATION (General Laws, Chapter 156B, Section 74) I hereby approve the within restated articles of organization and, the filing fee in the amount of $4,130.00 having been paid, said articles are deemed to have been filed with me this 22nd day of December, 1992. /s/ Michael Joseph Connolly MICHAEL JOSEPH CONNOLLY Secretary of State TO BE FILLED IN BY CORPORATION PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT TO: John H. Chory, Esq. ------------------------------------------------------------ Hale and Dorr ------------------------------------------------------------ 60 State Street ------------------------------------------------------------ Boston, MA 02109 ------------------------------------------------------------ Telephone (617) 526-6000, Ext. 6674 ------------------------------------------------------------ EX-3.4 5 BYLAWS OF THE COMPANY Exhibit 3.4 AMENDED AND RESTATED BY-LAWS OF GLOBE MANUFACTURING CO.
By-Laws ------- Table of Contents ----------------- Page ---- ARTICLE 1 - Stockholders 1 Section 1.1 Place of Meetings.......................................... 1 Section 1.2 Annual Meeting............................................. 1 Section 1.3 Special Meetings........................................... 1 Section 1.4 Notice of Meetings......................................... 2 Section 1.5 Quorum..................................................... 2 Section 1.6 Adjournments............................................... 2 Section 1.7 Voting and Proxies......................................... 2 Section 1.8 Action at Meeting.......................................... 3 Section 1.9 Action without Meeting..................................... 3 ARTICLE 2 - Directors........................................................ 3 Section 2.1 Powers..................................................... 3 Section 2.2 Number, Election and Qualification......................... 3 Section 2.3 Enlargement of the Board................................... 4 Section 2.4 Tenure..................................................... 4 Section 2.5 Vacancies.................................................. 4 Section 2.6 Resignation................................................ 4 Section 2.7 Removal.................................................... 4 Section 2.8 Regular Meetings........................................... 4 Section 2.9 Special Meetings........................................... 4 Section 2.10 Meetings by Telephone Conference Calls..................... 4 Section 2.11 Notice of Special Meetings................................. 5 Section 2.12 Quorum..................................................... 5 Section 2.13 Action at Meeting.......................................... 5 Section 2.14 Action by Consent.......................................... 5 Section 2.15 Committees................................................. 5 Section 2.16 Compensation of Directors.................................. 6 ARTICLE 3 - Officers......................................................... 6 Section 3.1 Enumeration................................................ 6
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By-Laws ------- Table of Contents ----------------- Page ---- Section 3.2 Election................................................... 6 Section 3.3 Qualification.............................................. 6 Section 3.4 Tenure..................................................... 6 Section 3.5 Resignation and Removal.................................... 6 Section 3.6 Vacancies.................................................. 7 Section 3.7 Chairman of the Board and Vice-Chairman of the Board....... 7 Section 3.8 President.................................................. 7 Section 3.9 Vice Presidents............................................ 7 Section 3.10 Treasurer and Assistant Treasurers......................... 8 Section 3.11 Clerk and Assistant Clerks................................. 8 Section 3.12 Secretary and Assistant Secretaries........................ 8 Section 3.13 Salaries................................................... 9 ARTICLE 4 - Capital Stock.................................................... 9 Section 4.1 Issue of Capital Stock..................................... 9 Section 4.2 Certificate of Stock....................................... 9 Section 4.3 Transfers.................................................. 9 Section 4.4 Record Date................................................10 Section 4.5 Replacement of Certificates................................10 ARTICLE 5 - Miscellaneous Provisions.........................................11 Section 5.1 Fiscal Year................................................11 Section 5.2 Seal.......................................................11 Section 5.3 Voting of Securities.......................................11 Section 5.4 Corporate Records..........................................11 Section 5.5 Evidence of Authority......................................11 Section 5.6 Articles of Organization...................................11 Section 5.7 Severability...............................................11 Section 5.8 Pronouns...................................................11 ARTICLE 6 - Amendments.......................................................12
ii B Y - L A W S OF GLOBE MANUFACTURING CO. ARTICLE 1 - Stockholders 1.1 Place of Meetings. All meetings of stockholders shall be held within the Commonwealth of Massachusetts unless the Articles of Organization permit the holding of stockholders' meetings outside Massachusetts, in which event such meetings may be held either within or without Massachusetts. Meetings of stockholders shall be held at the principal office of the corporation unless a different place is fixed by the Board of Directors or the President and stated in the notice of the meeting. 1.2 Annual Meeting. The annual meeting of stockholders shall be held within six months after the end of each fiscal year of the corporation on a date to be fixed by the Board of Directors or the President (which date shall not be a legal holiday in the place where the meeting is to be held) at the time and place to be fixed by the Board of Directors or the President and stated in the notice of the meeting. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, by the Articles of Organization or by these By-Laws, may be specified by the Board of Directors or the President. If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting, and in such case all references in these By-Laws to the annual meeting of stockholders shall be deemed to refer to such special meeting. 1.3 Special Meetings. Special meetings of stockholders may be called by the President or by the Board of Directors. In addition, upon written application of one or more stockholders who are entitled to vote and who hold at least the Required Percentage (as defined below) of the capital stock entitled to vote at the meeting, special meetings shall be called by the Clerk, or in case of the death, absence, incapacity or refusal of the Clerk, by any other officer. For purposes of this Section 1.3, the "Required Percentage" shall be (i) 10% at any time at which the corporation shall not have a class of voting stock registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) 80% or such lesser percentage as shall constitute the maximum percentage permitted by law for this purpose at any time at which the corporation shall have a class of voting stock registered under the Exchange Act. Any request for a call of a special meeting of stockholders (a "Call") by the holders of the Required Percentage of the capital stock entitled to vote at the meeting shall be accompanied by a written statement setting forth the reason or reasons for the Call and the purpose or purposes of such special meeting. In the absence of a quorum at any special meeting called pursuant to a Call, such special meeting may be postponed or adjourned from time to time only by the officer of the corporation entitled to preside at such meeting. 1.4 Notice of Meetings. A written notice of each meeting of stockholders, stating the place, date and hour thereof, and the purposes for which the meeting is to be held, shall be given by the Clerk, Assistant Clerk or other person calling the meeting at least seven days before the meeting to each stockholder entitled to vote at the meeting and to each stockholder who by law, by the Articles of Organization or by these By-Laws is entitled to such notice, by leaving such notice with him or at his residence or usual place of business, or by mailing it postage prepaid and addressed to him at his address as it appears in the records of the corporation. Whenever any notice is required to be given to a stockholder by law, by the Articles of Organization or by these By-Laws, no such notice need be given if a written waiver of notice, executed before or after the meeting by the stockholder of his authorized attorney, is filed with the records of the meeting. 1.5 Quorum. Unless the Articles of Organization otherwise provide, the holders of a majority of the number of shares of the stock issued, outstanding and entitled to vote on any matter shall constitute a quorum with respect to that matter, except that if two or more classes of stock are outstanding and entitled to vote as separate classes, then in the case of each such class a quorum shall consist of the holders of a majority of the number of shares of the stock of that class issued, outstanding and entitled to vote. Shares owned directly or indirectly by the corporation shall not be counted in determining the total number of shares outstanding for this purpose. 1.6 Adjournments. Except as otherwise provided in Section 1.3 hereof, any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these By-Laws by the stockholders present or represented at the meeting, although less than a quorum, or by any officer entitled to preside or to act as clerk of such meeting, if no stockholder is present. It shall not be necessary to notify any stockholder of any adjournment. Any business which could have been transacted at any meeting of the stockholders as originally called may be transacted at any adjournment of the meeting. 1.7 Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by the Articles of Organization. Stockholders may vote either in person or by written proxy dated not more than six months before the meeting named in the proxy. Proxies shall be filed with the clerk of the meeting, or of any adjourned meeting, before being voted. Except as otherwise limited by their terms, a proxy shall entitle the persons 2 named in the proxy to vote at any adjournment of such meeting, but shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by any one of them, unless at or prior to exercise of the proxy the corporation receives a specific written notice to the contrary from any one of them. A proxy purported to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise. 1.8 Action at Meeting. When a quorum is present at any meeting, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter), shall decide any matter to be voted on by the stockholders, except when a larger vote is required by law, the Articles of Organization or these By-Laws. Any election by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. No ballot shall be required for such election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. The corporation shall not directly or indirectly vote any share of its own stock. 1.9 Action without Meeting. Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of the meetings of stockholders. Each such consent shall be treated for all purposes as a vote at a meeting. ARTICLE 2 - Directors 2.1 Powers. The business of the corporation shall be managed by a Board of Directors, who may exercise all the powers of the corporation except as otherwise provided by law, by the Articles of Organization or by these By-Laws. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2.2 Number, Election and Qualification. The number of Directors which shall constitute the whole Board of Directors shall be determined by vote of the stockholders or the Board of Directors, but shall consist of not less than three Directors (except that whenever there shall be only two stockholders the number of Directors shall be not less than two and whenever there shall be only one stockholder or prior to the issuance of any stock, there shall be at least one Director). The number of Directors may be decreased at any time and from time to time either by the stockholders or by a majority of the Directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more Directors. The Directors shall be elected at the annual meeting of stockholders by such 3 stockholders as have the right to vote on such election. No Director need be a stockholder of the corporation. 2.3 Enlargement of the Board. The number of Directors may be increased at any time and from time to time by the stockholders or by a majority of the Directors then in office. 2.4 Tenure. Each Director shall hold office until the next annual meeting of stockholders and until his successor is elected and qualified, or until his earlier death, resignation or removal. 2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may be filled by vote of a majority of the Directors present at any meeting of Directors at which a quorum is present. Each such successor shall hold office for the unexpired term of his predecessor and until his successor is chosen and qualified or until his earlier death, resignation or removal. 2.6 Resignation. Any Director may resign by delivering his written resignation to the corporation at its principal office or to the President or Clerk. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 2.7 Removal. A Director may be removed from office with or without cause by vote of the holders of a majority of the shares entitled to vote in the election of Directors. However, the Directors elected by the holders of a particular class or series of stock may be removed from office with or without cause only by vote of the holders of a majority of the outstanding shares of such class or series. In addition, a Director may be removed from office for cause by vote of a majority of the Directors then in office. A Director may be removed for cause only after reasonable notice and opportunity to be heard before the body proposing to remove him. 2.8 Regular Meetings. Regular meetings of the Directors may be held without call or notice at such places, within or without Massachusetts, and at such times, as the Directors may from time to time determine, provided that any Director who is absent when such determination is made shall be given notice of the determination. A regular meeting of the Directors may be held without a call or notice immediately after and at the same place as the annual meeting of stockholders. 2.9 Special Meetings. Special meetings of the Directors may be held at any time and place, within or without Massachusetts, designated in a call by the Chairman of the Board, President, Treasurer, two or more Directors or by one Director in the event that there is only a single Director in office. 4 2.10 Meetings by Telephone Conference Calls. Directors or members of any committee designated by the Directors may participate in a meeting of the Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. 2.11 Notice of Special Meetings. Notice of any special meeting of the Directors shall be given to each Director by the Secretary or Clerk or by the officer or one of the Directors calling the meeting. Notice shall be duly given to each Director (i) by notice given to such Director in person or by telephone at least 48 hours in advance of the meeting, (ii) by sending a telegram or telex, or by delivering written notice by hand, to his last known business or home address at least 48 hours in advance of the meeting, or (iii) by mailing written notice to his last known business or home address at least 72 hours in advance of the meeting. Notice need not be given, to any Director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior to the meeting or at its commencement the lack of notice to him. A notice or waiver of notice of a Directors' meeting need not specify the purposes of the meeting. If notice is given in person or by telephone, an affidavit of the Secretary, Clerk, officer or Director who gives such notice that the notice has been duly given shall, in the absence of fraud, be conclusive evidence that such notice was duly given. 2.12 Quorum. At any meeting of the Board of Directors, a majority of the Directors then in office shall constitute a quorum provided, however, that so long as Section 2.3 of the Shareholders' Agreement dated as of December ___, 1992 among the corporation and the Shareholders and all other individuals named on the signature pages thereto (the "Agreement") is in effect, a majority of the Directors then in office, including at least one Goldman Director and one Rodgers Director (as such terms are defined in the Agreement), shall constitute a quorum. Less than a quorum may adjourn any meeting from time to time without further notice. 2.13 Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, by the Articles of Organization or by these By-Laws. 2.14 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the Directors consent to the action in writing and the written consents are filed with the records of the Directors' meetings. Each such consent shall be treated for all purposes as a vote at a meeting. 2.15 Committees. The Board of Directors may, by vote of a majority of the Directors then in office, elect from their number an executive committee or other committees and may by like vote delegate to committees so elected some or all of their powers to the extent permitted by 5 law. Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided by these By-Laws for the Directors. The Board of Directors shall have the power at any time to fill vacancies in any such committee, to change its membership or to discharge the committee. 2.16 Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any Director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE 3 - Officers 3.1 Enumeration. The officers of the corporation shall consist of a President, a Treasurer, a Clerk and such other officers with such other titles as the Board of Directors may determine, including, but not limited to, a Chairman of the Board, a Vice Chairman of the Board, a Secretary and one or more Vice Presidents, Assistant Treasurers, Assistant Clerks and Assistant Secretaries. 3.2 Election. The President, Treasurer and Clerk shall be elected annually by the Board of Directors at their first meeting following the annual meeting of stockholders. Other officers may be chosen or appointed by the Board of Directors at such meeting or at any other meeting. 3.3 Qualification. Neither the President nor any other officer need be a director or stockholder. Any two or more offices may be held by the same person. The Clerk shall be a resident of Massachusetts unless the corporation has a resident agent appointed for the purpose of service of process. Any officer may be required by the Directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the Directors may determine. The premiums for such bonds may be paid by the corporation. 3.4 Tenure. Except as otherwise provided by law, by the Articles of Organization or by these By-Laws, the President, Treasurer and Clerk shall hold office until the first meeting of the Directors following the next annual meeting of stockholders and until their respective successors are chosen and qualified; and all other officers shall hold office until the first meeting of the Directors following the annual meeting of stockholders, unless a different term is specified in the vote choosing or appointing them, or until his earlier death, resignation or removal. 3.5 Resignation and Removal. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary. Such 6 resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Any officer may be removed at any time, with or without cause, by vote of a majority of the entire number of Directors then in office. An officer may be removed for cause only after reasonable notice and opportunity to be heard by the Board of Directors prior to action thereon. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the corporation. 3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Clerk. Each such successor shall hold office for the unexpired term of his predecessor and until his successor is chosen and qualified, or until he sooner dies, resigns or is removed. 3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of Directors may appoint a Chairman of the Board and may designate him as Chief Executive Officer. If the Board of Directors appoints a Chairman of the Board, he shall perform such duties and possess such powers as are assigned to him by the Board of Directors. If the Board of Directors appoints a Vice-Chairman of the Board, he shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties and possess such other powers as may from time to time be vested in him by the Board of Directors. 3.8 President. The President shall, subject to the direction of the Board of Directors, have general charge and supervision of the business of the corporation. Unless otherwise provided by the Board of Directors, he shall preside at all meetings of the stockholders and, if he is a Director, at all meetings of the Board of Directors. Unless the Board of Directors has designated the Chairman of the Board or another officer as Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The President shall perform such other duties and shall possess such other powers as the Board of Directors may from time to time prescribe. 3.9 Vice Presidents. Any Vice President shall perform such duties and possess such powers as the Board of Directors or the President may from time to time prescribe. In the event of the absence, inability or refusal to act of the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall 7 perform the duties of the President and when so performing shall have all the powers of and be subject to all the restrictions upon the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. 3.10 Treasurer and Assistant Treasurers. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned to him by the Board of Directors or the President. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these By-Laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation. The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer. 3.11 Clerk and Assistant Clerks. The Clerk shall perform such duties and shall possess such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Clerk shall perform such duties and have such powers as are incident to the office of the clerk, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents. Any Assistant Clerk shall perform such duties and possess such powers as the Board of Directors, the President or the Clerk may from time to time prescribe. In the event of the absence, inability or refusal to act of the Clerk, the Assistant Clerk (or if there shall be more than one, the Assistant Clerks in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Clerk. In the absence of the Clerk or any Assistant Clerk at any meeting of stockholders or Directors, the person presiding at meeting shall designate a temporary clerk to keep a record of the meeting. 8 3.12 Secretary and Assistant Secretaries. If a Secretary is appointed, he shall attend all meetings of the Board of Directors and shall keep a record of the meetings of the Directors. He shall, when required, notify the Directors of their meetings, and shall possess such other powers and shall perform such other duties as the Board of Directors or the President may from time to time prescribe. Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. 3.13 Salaries. Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors. ARTICLE 4 - Capital Stock 4.1 Issue of Capital Stock. Unless otherwise voted by the stockholders, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of the capital stock of the corporation held in its treasury may be issued or disposed of by vote of the Board of Directors, in such manner, for such consideration and on such terms as the Directors may determine. 4.2 Certificate of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the corporation in such form as may be prescribed from time to time by the Directors. The certificate shall be signed by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, but when a certificate is countersigned by a transfer agent or a registrar, other than a Director, officer or employee of the corporation, such signature may be a facsimile. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer pursuant to the Articles of Organization, the By-Laws, applicable securities laws or any agreement to which the corporation is a party, shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restrictions and a statement that the corporation will furnish a copy of the restrictions to the holder of such certificate upon written request and without charge. Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications and special and 9 relative rights of the shares of each class and series authorized to be issued or a statement of the existence of such preferences, powers, qualifications and rights and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. 4.3 Transfers. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Articles of Organization or by these By-Laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-Laws. It shall be the duty of each stockholder to notify the corporation of his post office address and of his taxpayer identification number. 4.4 Record Date. The Board of Directors may fix in advance a time not more than 60 days preceding the date of any meeting of stockholders or the date for the payment of any dividend or the making of any distribution to stockholders or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting, and any adjournment, or the right to receive such dividend or distribution or the right to give such consent or dissent. In such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Without fixing such record date the Directors may for any of such purposes close the transfer books for all or any part of such period. If no record date is fixed and the transfer books are not closed, the record date for determining the stockholders having the right to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, and the record date for determining the stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors acts with respect to such purpose. 4.5 Replacement of Certificates. In case of the alleged loss or destruction or the mutilation of a certificate of stock, a duplicate certificate may be issued in place of the lost, destroyed or mutilated certificate, upon such terms as the Directors may prescribe, including the presentation of reasonable evidence of such loss, destruction or mutilation and the giving of such 10 indemnity as the Directors may require for the protection of the corporation or any transfer agent or registrar. ARTICLE 5 - Miscellaneous Provisions 5.1 Fiscal Year. Except as otherwise set forth in the Articles of Organization or as otherwise determined from time to time by the Board of Directors, the fiscal year of the corporation shall in each year end on December 31. 5.2 Seal. The seal of the corporation shall, subject to alteration by the Directors, bear its name, the word "Massachusetts" and the year of its incorporation. 5.3 Voting of Securities. Except as the Board of Directors may otherwise designate, the President or Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at, any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation. 5.4 Corporate Records. The original, or attested copies, of the Articles of Organization, By-Laws and records of all meetings of the incorporators and stockholders, and the stock records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts at the principal office of the corporation, or at an office of its transfer agent or of the Clerk. These copies and records need not all be kept in the same office. They shall be available at all reasonable times for the inspection of any stockholder for any proper purpose, but not to secure a list of stockholders for the purpose of selling the list or copies of the list or of using the list for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation. 5.5 Evidence of Authority. A certificate by the Clerk or Secretary, or an Assistant Clerk or Assistant Secretary, or a temporary Clerk or temporary Secretary, as to any action taken by the stockholders, Directors, any committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith by conclusive evidence of such action. 5.6 Articles of Organization. All references in these By-Laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the corporation, as amended and in effect from time to time. 5.7 Severability. Any determination that any provision of these By-Laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-Laws. 11 5.8 Pronouns. All pronouns used in these By-Laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identify of the person or persons may require. ARTICLE 6 - Amendments These By-Laws may be amended by vote of the holders of a majority of the shares of each class of the capital stock at the time outstanding and entitled to vote at any annual or special meeting of stockholders, if notice of the substance of the proposed amendment is stated in the notice of such meeting. If authorized by the Articles of Organization, the Directors, by a majority of their number then in office, may also make, amend or repeal these By-Laws, in whole or in part, except with respect to (a) the provisions of these By-Laws governing (i) the removal of Directors and (ii) the amendment of these By-Laws and (b) any provision of these By-Laws which by law, the Articles of Organization or these By-Laws requires action by the stockholders. Not later than the time of giving notice of the meeting of stockholders next following the making, amending or repealing by the Directors of any By-Law, notice stating the substance of such change shall be given to all stockholders entitled to vote on amending the By-Laws. Any By-Law adopted by the Directors may be amended or repealed by the stockholders entitled to vote on amending the By-Laws. 12 EX-4.1 6 INDENTURE Exhibit 4.1 EXECUTION COPY ================================================================================ INDENTURE Dated as of August 6, 1998 Among GLOBE HOLDINGS, INC., as Issuer, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee ---------------------------------- $49,086,000 14% Senior Discount Notes due 2009 ================================================================================ CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- ---------- 310 (a)(1)........................................ 7.10 (a)(2)........................................ 7.10 (a)(3)........................................ N.A.** (a)(4)........................................ N.A. (a)(5)........................................ 7.08; 7.10 (b)........................................... 7.08; 7.10 (c)........................................... N.A. 311 (a)........................................... 7.11 (b)........................................... 7.11 (c)........................................... N.A. 312 (a)........................................... 2.05 (b)........................................... 13.03 (c)........................................... 13.03 313 (a)........................................... 7.06 (b)(1)........................................ 7.06 (b)(2)........................................ 7.06 (c)........................................... 7.06; 13.02 (d)........................................... 7.06 314 (a)(1),(2),(3)................................ 4.06; 4.08; 7.06; 13.02 (a)(4)........................................ 4.06 (b)........................................... N.A. (c)(1)........................................ 13.04 (c)(2)........................................ 13.04 (c)(3)........................................ N.A. (d)........................................... N.A. (e)........................................... 13.05 (f)........................................... N.A 315 (a)........................................... 7.01(b) (b)........................................... 7.05; 13.02 (c)........................................... 7.01(a) (d)........................................... 7.01(c) (e)........................................... 6.11 316 (a)(last sentence)............................ 2.09 (a)(1)(A)..................................... 6.05 (a)(1)(B)..................................... 6.04 (a)(2)........................................ N.A. (b)........................................... 6.07 317 (a)(1)........................................ 6.08
(a)(2)........................................ 6.09 (b)........................................... 2.04 318 (a)........................................... 13.01 (c)........................................... 13.01
- ------------------------ ** N.A. means Not Applicable This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture. TABLE OF CONTENTS
Page ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE............................ 1 SECTION 1.01. Definitions......................................... 1 SECTION 1.02. Incorporation by Reference of TIA................... 25 SECTION 1.03. Rules of Construction............................... 26 ARTICLE TWO THE SECURITIES........................................................ 26 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 Assets in Trust................ 29 SECTION 2.05. Securityholder Lists................................ 29 SECTION 2.06. Transfer and Exchange............................... 29 SECTION 2.07. Replacement Securities.............................. 30 SECTION 2.08. Outstanding Securities.............................. 30 SECTION 2.09. Treasury Securities................................. 31 SECTION 2.10. Temporary Securities................................ 31 SECTION 2.11. Cancellation........................................ 31 SECTION 2.12. Defaulted Interest.................................. 32 SECTION 2.13. CUSIP Number........................................ 32 SECTION 2.14. Deposit of Moneys................................... 33 SECTION 2.15. Book-Entry Provisions for Global Securities......... 33 SECTION 2.16. Special Transfer Provisions......................... 34 SECTION 2.17. Liquidated Damages under Registration Rights Agreement........................................... 37 ARTICLE THREE REDEMPTION............................................................ 37 SECTION 3.01. Optional Redemption................................. 37 SECTION 3.02. Applicability of Article............................ 38 SECTION 3.03. Election To Redeem; Notice to Trustee............... 39 SECTION 3.04. Selection by Trustee of Securities To Be Redeemed... 39 SECTION 3.05. Notice of Redemption................................ 39 SECTION 3.06. Deposit of Redemption Price......................... 40 SECTION 3.07. Securities Payable on Redemption Date............... 40
SECTION 3.08. Securities Redeemed in Part......................... 41 ARTICLE FOUR COVENANTS 41 SECTION 4.01. Payment of Securities............................... 41 SECTION 4.02. Maintenance of Office or Agency..................... 42 SECTION 4.03. Corporate Existence................................. 42 SECTION 4.04. Payment of Taxes and Other Claims................... 42 SECTION 4.05. Maintenance of Properties and Insurance............. 42 SECTION 4.06. Compliance Certificate; Notice of Default........... 43 SECTION 4.07. Compliance with Laws................................ 43 SECTION 4.08. Reports............................................. 44 SECTION 4.09. Waiver of Stay, Extension or Usury Laws............. 44 SECTION 4.10. Limitation on Restricted Payments................... 44 SECTION 4.11. Limitation on Transactions with Related Persons..... 47 SECTION 4.12. Limitation on Incurrence of Debt and Issuance of Preferred Stock..................................... 48 SECTION 4.13. Payment Restrictions Affecting Restricted Subsidiaries........................................ 51 SECTION 4.14. [Intentionally Omitted.]............................ 52 SECTION 4.15. Change of Control................................... 52 SECTION 4.16. Limitation on Asset Sales........................... 54 SECTION 4.17. Limitation on Liens................................. 56 SECTION 4.18. [Intentionally Omitted.]............................ 57 SECTION 4.19. Conduct of Business of the Issuer and Its Restricted Subsidiaries............................. 57 SECTION 4.20. [Intentionally Omitted.]............................ 57 SECTION 4.21. Rule 144A Information Requirement................... 57 SECTION 4.22. Issuance and Sale of Capital Stock of Restricted Subsidiaries........................................ 57 SECTION 4.23. Limitation on Sale and Lease-Back Transactions...... 57 SECTION 4.24. Payments for Consent................................ 58 ARTICLE FIVE SUCCESSOR CORPORATION................................................. 58 SECTION 5.01. Merger, Consolidation or Sale of Assets............. 58 SECTION 5.02. Successor Corporation Substituted................... 59
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ARTICLE SIX DEFAULT AND REMEDIES.................................................. 59 SECTION 6.01. Events of Default................................... 59 SECTION 6.02. Acceleration........................................ 61 SECTION 6.03. Other Remedies...................................... 62 SECTION 6.04. Waiver of Past Defaults............................. 62 SECTION 6.05. Control by Majority................................. 63 SECTION 6.06. Limitation on Suits................................. 63 SECTION 6.07. Rights of Holders To Receive Payment................ 63 SECTION 6.08. Collection Suit by Trustee.......................... 64 SECTION 6.09. Trustee May File Proofs of Claim.................... 64 SECTION 6.10. Priorities.......................................... 64 SECTION 6.11. Undertaking for Costs............................... 65 SECTION 6.12. Restoration of Rights and Remedies.................. 65 ARTICLE SEVEN TRUSTEE............................................................... 65 SECTION 7.01. Duties of Trustee................................... 65 SECTION 7.02. Rights of Trustee................................... 67 SECTION 7.03. Individual Rights of Trustee........................ 68 SECTION 7.04. Disclaimer of Trustee............................... 68 SECTION 7.05. Notice of Default................................... 68 SECTION 7.06. Reports by Trustee to Holders....................... 69 SECTION 7.07. Compensation and Indemnity.......................... 69 SECTION 7.08. Replacement of Trustee.............................. 70 SECTION 7.09. Successor Trustee by Merger, etc.................... 71 SECTION 7.10. Eligibility; Disqualification....................... 71 SECTION 7.11. Preferential Collection of Claims Against the Issuer 71 ARTICLE EIGHT DISCHARGE OF THIS INDENTURE; DEFEASANCE............................... 72 SECTION 8.01. Option to Effect Defeasance or Covenant Defeasance.. 72 SECTION 8.02. Defeasance and Discharge............................ 72 SECTION 8.03. Covenant Defeasance................................. 72 SECTION 8.04. Conditions to Defeasance or Covenant Defeasance..... 73 SECTION 8.05. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.......................................... 75 SECTION 8.06. Reinstatement....................................... 75
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ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS................................... 76 SECTION 9.01. Without Consent of Holders.......................... 76 SECTION 9.02. With Consent of Holders............................. 77 SECTION 9.03. Compliance with TIA................................. 78 SECTION 9.04. Revocation and Effect of Consents................... 78 SECTION 9.05. Notation on or Exchange of Securities............... 79 SECTION 9.06. Trustee To Sign Amendments, etc..................... 79 ARTICLE TEN [Intentionally Omitted.].............................................. 80 ARTICLE ELEVEN [Intentionally Omitted.].............................................. 80 ARTICLE TWELVE [Intentionally Omitted.].............................................. 80 ARTICLE THIRTEEN MISCELLANEOUS......................................................... 80 SECTION 13.01. TIA Controls........................................ 80 SECTION 13.02. Notices............................................. 80 SECTION 13.03. Communications by Holders with Other Holders........ 81 SECTION 13.04. Certificate and Opinion as to Conditions Precedent.. 81 SECTION 13.05. Statements Required in Certificate or Opinion....... 82 SECTION 13.06. Rules by Trustee, Paying Agent, Registrar........... 82 SECTION 13.07. Legal Holidays...................................... 83 SECTION 13.08. Governing Law....................................... 83 SECTION 13.09. No Adverse Interpretation of Other Agreements....... 83 SECTION 13.10. No Recourse Against Others.......................... 83 SECTION 13.11. Successors.......................................... 83 SECTION 13.12. Duplicate Originals................................. 83 SECTION 13.13. Severability........................................ 84 SIGNATURES................................................................. 85
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Exhibit A-1 - Form of Security Exhibit A-2 - Form of Exchange Security Exhibit B - Form of Legend for Global Security Exhibit C - Transferee Certificate for Institutional Accredited Investors Who Are Not QIBs Exhibit D - Form of Letter for Transfers to Non-U.S. Persons
This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture. v This INDENTURE, dated as of August 6, 1998, among Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), and Norwest Bank Minnesota, National Association, a national banking association, as trustee (the "Trustee"). Each party hereto agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the holders of the Issuer's 14% Senior Discount Notes due 2009: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acceleration Notice" has the meaning provided in Section 6.02. "Accounts Receivable Subsidiary" means any Subsidiary of the Issuer that is, directly or indirectly, wholly owned by the Issuer (other than director qualifying shares) and organized solely for the purpose of and engaged in (i) purchasing, financing and collecting accounts receivable obligations of customers of the Issuer or its Subsidiaries, (ii) the sale or financing of such accounts receivable or interest therein and (iii) other activities incident thereto. "Accreted Value" means for each $1,000 face amount of Securities, as of any date of determination prior to August 1, 2003, the sum of (i) the initial offering price of each Security ($509.31) and (ii) that portion of the excess of the principal amount at maturity of each Security over such initial offering price which shall have been accreted thereon through such date, such amount to be so accreted on a daily basis and compounded semi-annually on each August 1 and February 1 at the rate of 14% per anum from the date of issuance of the Security through the date of determination. "Acquired Debt" means, with respect to any specified Person, (i) Debt of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Debt incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and (ii) Debt secured by a Lien encumbering any asset acquired by such specified Person which, in each case, is not repaid at or within five days following the date of such acquisition. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, shall mean 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. Notwithstanding the foregoing, no Person (other than the Issuer or any Subsidiary of the Issuer) in whom a Securitization Entity makes an Investment in connection with a Qualified Securitization Transaction shall be deemed to be an Affiliate of the Issuer or any of its Subsidiaries solely by reason of such Investment. "Agent" means any Registrar, Paying Agent or co-Registrar. "Agent Members" has the meaning provided in Section 2.15. "Applicable Premium" means, with respect to a Security at any redemption date, the greater of (i) 1.0% of the Accreted Value of such Security to the date of redemption and (ii) the excess of (A) the present value at such time of the redemption price of such Security at August 1, 2003 (such redemption price being set forth in the table set forth in Section 3.01) computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (b) the Accreted Value of such Security as of the date of redemption. "Asset Sale" means (i) the sale, lease (other than operating leases entered into in the ordinary course of business), conveyance or other disposition of any assets or rights (including, without limitation, by way of a Sale and Lease-Back Transaction) other than in the ordinary course of business (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer and its Restricted Subsidiaries taken as a whole will be governed by the provisions of Section 4.15 and/or the provisions of Section 5.01 and not by the provisions of Section 4.16), and (ii) the issue or sale by the Issuer or any of its Restricted Subsidiaries of Equity Interests of any of the Issuer's Restricted Subsidiaries (to the extent such Equity Interests are held by the Issuer or another Restricted Subsidiary of the Issuer), in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions that (x) have a fair market value in excess of $1.0 million or (y) generate net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following shall not be deemed to constitute Asset Sales: (i) sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof as determined in accordance with GAAP; (ii) transfers of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" (or a fractional undivided interest therein) by a Securitization Entity in a Qualified 2 Securitization Transaction (for the purposes of this clause (ii), Purchase Money Notes shall be deemed to be cash); (iii) a transfer of assets by the Issuer to a Restricted Subsidiary or by a Restricted Subsidiary to the Issuer or to another Restricted Subsidiary; (iv) a disposition of inventory held for sale in the ordinary course of business or obsolete, worn out or damaged property or equipment in the ordinary course of business; (v) an issuance of Equity Interests by a Restricted Subsidiary to the Issuer or to another Restricted Subsidiary; (vi) a Restricted Payment or Permitted Investment that is permitted by Section 4.10; (vii) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (viii) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property; and (ix) sales of accounts receivable for cash at fair market value, and any sale, conveyance or transfer of accounts receivable in the ordinary course of business to an Accounts Receivable Subsidiary or to third parties that are not Affiliates of the Issuer or any Subsidiary of the Issuer. "Asset Sale Offer" has the meaning provided in Section 4.16(c). "Asset Sale Offer Date" has the meaning provided in Section 4.16(c). "Asset Sale Offered Price" has the meaning provided in Section 4.16(c). "Asset Sale Pari Passu Offer" has the meaning provided in Section 4.16(c). "Attributable Debt" in respect of a Sale and Lease-Back Transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net 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 or may, at the option of the lessor, be extended). "Authenticating Agent" has the meaning provided in Section 2.02. "Authorized Officer" means, with respect to any Person (other than any Agent), each of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer, the Secretary or Clerk or any Assistant Secretary or Assistant Clerk of such Person, or any other officer designated as an Authorized Officer by the Board of Directors (or similar governing body of such Person) in a writing delivered to the Trustee, or with respect to a Person (other than any Agent) organized as a partnership, limited liability partnership or limited liability limited partnership, the general partner or managing member of such Person, as the case may be. 3 "Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal, state or foreign law relating to bankruptcy, insolvency, receivership, winding up, liquidation, reorganization or relief of debtors, or any amendment to, succession to or change in any such law. "Board of Directors" means the board of directors, advisory committee, management committee or similar governing body or any authorized committee thereof responsible for the management of the business and affairs of any Person. "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 Issuer or a Restricted Subsidiary of the Issuer, as appropriate, and to be in full force and effect, and delivered to the Trustee. "Business Day" means a day that is not a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and Eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any lender party to the Senior Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within one year after the date of acquisition, (vi) marketable direct obligations issued by any state of the United States or any political subdivision, or public instrumentality of such state, 4 in each case having maturities of not more than one year from the date of acquisition and, at the time of acquisition thereof, having one of the two highest ratings obtainable from either Moody's Investors Service, Inc. or Standard & Poor's Corporation, and (vii) money market, mutual or similar funds which invest substantially all of their assets in securities of the type described in clauses (i) through (vi) above. "Certificated Securities" has the meaning provided in Section 2.01. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Issuer and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), or group of related persons, together with any Affiliates thereof (other than Permitted Holders); (ii) the adoption by the Issuer of a plan relating to the liquidation or dissolution of the Issuer; (iii) the first day on which a majority of the members of the Board of Directors of the Issuer are not Continuing Directors; or (iv) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) or group of related persons, together with any Affiliates thereof (other than Permitted Holders) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% (measured by voting power rather than number of shares) of the Voting Stock of the Issuer. "Change of Control Date" has the meaning provided in Section 4.15. "Change of Control Offer" has the meaning provided in Section 4.15. "Change of Control Payment" has the meaning provided in Section 4.15. "Change of Control Payment Date" has the meaning provided in Section 4.15. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, without duplication, (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income and without regard to the $1.0 million threshold in the definition thereof), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments 5 associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) the consolidated net interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (v) depreciation, amortization (including amortization of goodwill and other intangibles) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (vi) other non-recurring non-cash items increasing such Consolidated Net Income for such period (which will be added back to Consolidated Cash Flow in any subsequent period to the extent cash is received in respect of such item in such subsequent period), in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, "Consolidated Cash Flow" shall be calculated without giving effect to amortization or depreciation of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with any acquisition permitted under this Indenture) and 17 (including non-cash charges relating to intangibles and goodwill arising in connection with any such acquisition). "Consolidated Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Consolidated Fixed Charges of such Person for such period. In the event that the Issuer or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays or redeems any Debt (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Consolidated Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Consolidated Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Consolidated Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment or redemption of Debt, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four- quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions or Asset Sales that have been made by the Issuer or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued 6 operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Consolidated Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Consolidated Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. In calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (i) interest on Debt determined on a fluctuating basis as of the Calculation Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Debt in effect on the Calculation Date, (ii) if interest on any Debt actually incurred on the Calculation Date may be optionally determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate or other rates, then the interest rate in effect on the Calculation Date will be deemed to have been in effect during the relevant four-quarter period reference, and (iii) notwithstanding the foregoing, interest on Debt determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs (other than those debt issuance costs incurred on the Issue Date in connection with the Transactions) and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Debt of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries (whether or not such guarantee or Lien is called upon), and (iv) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries (other than dividend payments on Equity Interests payable solely in Equity Interests (other than Disqualified Stock) of the Issuer) paid or accrued during such period. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid 7 in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its shareholders, provided that such Net Income shall not be so excluded in calculating Consolidated Net Income (A) as a component of Consolidated Cash Flow for purposes of calculating the Consolidated Fixed Charge Coverage Ratio in determining whether (1) a Restricted Subsidiary can incur additional Debt or issue preferred stock pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a) or (2) the Issuer can incur $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a) for purposes of (x) clause (ii) of Section 4.10(a), (y) clause (iv) of Section 5.01 or (z) the definition of "Unrestricted Subsidiary" or (B) for purposes of clause (iii) of Section 4.10(a) in determining whether a Restricted Subsidiary may make a Restricted Investment, (iii) the Net Income (or loss) of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles adopted after the Issue Date shall be excluded, (v) any restoration to Net Income of any contingency reserve of an extraordinary, nonrecurring or unusual nature, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, shall be excluded, (vi) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets shall be excluded, (vii) non-cash compensation charges arising upon the issuance or exercise of employee stock options or Capital Stock (other than Disqualified Stock) shall be excluded and (viii) all extraordinary gains and extraordinary losses and any unusual or non-recurring charges recorded or accrued in connection with the Transactions (as defined in the Final Offering Memorandum) shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the ordinary shareholders of such Person and its consolidated Subsidiaries as of such date and (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (A) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of this Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (B) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments) 8 and (C) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Consulting Agreement" means the Consulting Agreement between Globe Manufacturing and Thomas Rodgers, Jr. as in effect on the date of this Indenture or as thereafter amended in a manner that is not adverse to the Issuer or the Holders of the Securities. "Continuing Director" means, as of any date of determination, any member of the Board of Directors of the Issuer who (i) was a member of such Board of Directors on the date of this Indenture, (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election or (iii) was nominated for election or elected to such Board of Directors by or with the approval of the Permitted Holders. "Credit Facilities" means, with respect to the Issuer or any Subsidiary, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities with banks or other lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), bankers acceptance or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. Debt under Credit Facilities outstanding on the date on which Securities are first issued and authenticated under this Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (i) of the definition of Permitted Debt. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Issuer or any Restricted Subsidiary of the Issuer against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Debt" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Debt of others 9 secured by a Lien on any asset of such Person (whether or not such Debt is assumed by such Person) and, to the extent not otherwise included, the guarantee by such Person of any Debt of any other Person (but excluding, with respect to Debt of a Securitization Entity, any Standard Securitization Undertakings that might be deemed to constitute guarantees). The amount of any Debt outstanding as of any date shall be (i) the accrued or accreted value thereof, in the case of any Debt that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Debt. For purposes of calculating the amount of Debt of a Securitization Entity outstanding as of any date, the face or notional amount of any interest in receivables or equipment that is outstanding as of such date shall be deemed to be Debt but any such interests held by Affiliates of such Securitization Entity shall be excluded for purposes of such calculation. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Depositary" means, with respect to the Securities issued in the form of one or more Global Securities, The Depository Trust Company or another Person designated as Depositary by the Issuer, which must be a clearing agency registered under the Exchange Act. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Issuer to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Issuer may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.10. "Employee Notes" has the meaning provided in Section 4.12. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means a bona fide underwritten sale to the public of Equity Interests (other than Disqualified Stock) of the Issuer pursuant to a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of the Issuer) that is declared effective by the Commission. 10 "Executive Securities Agreement" means each of the Executive Securities Agreements between the Issuer and the other signatory thereto as in effect on the date of this Indenture or as thereafter amended in a manner that is not adverse to the Holders of the Securities in any material respect. "Existing Debt" means up to $500,000 in aggregate principal amount of Debt of the Issuer and its Restricted Subsidiaries (other than Debt under the Senior Credit Facility or Debt evidenced by the Senior Subordinated Notes) in existence on the date of this Indenture, until such amounts are repaid. "Event of Default" has the meaning provided in Section 6.01. "Excess Proceeds" has the meaning provided in Section 4.16(b). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "Exchange Securities" means the 14% Senior Discount Notes due 2009 of the Issuer to be issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement or, with respect to Initial Securities issued under this Indenture subsequent to the Issue Date pursuant to Section 2.02 and Section 4.12, a registration rights agreement substantially similar to the Registration Rights Agreement. "Final Offering Memorandum" means the Offering Memorandum dated July 30, 1998, relating to the offering of the Securities on the Issue Date. "Foreign Subsidiary" means any Subsidiary not organized or validly existing under the laws of the United States or any state thereof or the District of Columbia. "Foreign Restricted Subsidiary" means any Foreign Subsidiary that is a Restricted Subsidiary. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. "Global Security" means a security evidencing all or a part of the Securities issued to the Depositary in accordance with Section 2.01 and bearing the legend prescribed in Exhibit B. 11 "Globe Manufacturing" means Globe Manufacturing Corp., an Alabama corporation, and its successors and assigns "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Debt. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under Interest Swap Agreements and Currency Agreements. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "IAI Securities" means Securities resold by the Initial Purchaser to an Institutional Accredited Investor. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Initial Purchaser" means BancAmerica Robertson Stephens. "Initial Securities" means the 14% Senior Discount Notes due 2009 of the Issuer issued on the Issue Date. "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) under the Securities Act. "interest" means interest payable on the Securities under this Indenture and interest payable under the Registration Rights Agreement. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Swap Agreements" means any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate collar agreement, treasury rate-lock agreement or other similar agreement or arrangement designed to protect the Issuer or any Restricted Subsidiary of the Issuer from fluctuations in interest rates. 12 "Interest Swap Obligations" means the obligations of any Person pursuant to any Interest Swap Agreement with any other Person. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Debt or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees and extensions of trade credit made in the ordinary course of business), purchases or other acquisitions for consideration of Debt, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Issue Date" means August 6, 1998, the date of original issuance of the Securities. "Issuer" has the meaning provided in the preamble. "Legal Holiday" has the meaning provided in Section 13.07. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Limited Originator Recourse" means a reimbursement obligation of the Issuer or a Restricted Subsidiary in connection with a drawing on a letter of credit, revolving loan commitment, cash collateral account or other such credit enhancement issue to support Debt of a Securitization Entity under a facility for the financing of trade receivables and the warehousing of equipment loans and leases; provided that the available amount of any such form of credit enhancement at any time shall not exceed 10.0% of the principal amount of such Debt at such time. "Management Agreement" means the Management Agreement between Globe Manufacturing and CHS Management III, L.P., dated as of July 31, 1998, as in effect on the date of this Indenture or as thereafter amended in a manner that is not adverse to the Issuer or the Holders of the Securities. "Maturity Date" means August 1, 2009. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock 13 dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to Sale and Lease-Back Transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Debt of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash and Cash Equivalents received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, (ii) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP, or against any liabilities associated with the Asset Sale, or the assets subject thereto, and retained by the Issuer or any Restricted Subsidiary, and (iv) amounts required to be applied to the repayment of Debt secured by a Lien on the asset or assets that were the subject of such Asset Sale, or to the satisfaction of contractual obligations either existing at the date of this Indenture, or entered into after the date of this Indenture in connection with the payment of deferred purchase price of the properties or assets that were the subject of such Asset Sale. "Non-Recourse Debt" means Debt (i) as to which neither the Issuer nor any of its Restricted Subsidiaries (A) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Debt), (B) is directly or indirectly liable (as guarantor or otherwise) or (C) constitutes the lender and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Debt (other than the Securities being offered hereby) of the Issuer or any of its Restricted Subsidiaries to declare a default on such other Debt or cause the payment thereof to be accelerated or payable prior to its Stated Maturity. "Non-U.S. Person" means a Person who is not a "U.S. Person." "Obligations" means any principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Debt. 14 "Officers' Certificate" means with respect to any Person, a certificate signed by the Chairman, Vice Chairman, Chief Executive Officer, the President or any Vice President and the Chief Financial Officer, Controller or the Treasurer of such Person that shall comply with applicable provisions of this Indenture. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee complying with the requirements of Section 13.05, as they relate to the giving of an Opinion of Counsel. "Pari Passu Debt" shall mean any Debt of the Issuer that is pari passu in right of payment to the Securities. "Pari Passu Debt Amount" shall have the definition set forth under Section 4.16(c). "Paying Agent" has the meaning provided in Section 2.03, except that, during the continuance of a Default or Event of Default and for the purposes of Articles Three and Eight and Sections 4.15 and 4.16, the Paying Agent shall not be the Issuer or any Affiliate of the Issuer. "Payment Blockage Notice" has the meaning provided in Section 10.02(a). "Payment Blockage Period" means a period commencing on the date of receipt by the Trustee of a Payment Blockage Notice and ending on the earliest of the dates referred to in clauses (1), (2), (3) or (4) of clause (B) of the second sentence of Section 10.02(a). "Payment Default" has the meaning provided in Section 6.01. "Permitted Debt" has the meaning provided in Section 4.12(b). "Permitted Holders" means (i) Code, Hennessy & Simmons, Inc., (ii) Code Hennessy & Simmons LLC, (iii) Code, Hennessy & Simmons III, L.P. and (iv) their respective affiliates. "Permitted Investments" means: (i) any Investment in the Issuer or in a Restricted Subsidiary of the Issuer that is engaged in the same or a similar line of business as the Issuer and its Restricted Subsidiaries (or reasonable extensions or expansions thereof); (ii) any Investment in Cash Equivalents; (iii) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a Person, if as a result of such Investment (A) such Person becomes a Restricted Subsidiary of the Issuer that is engaged in the same or a similar line of business as the Issuer and its Restricted Subsidiaries (or reasonable extensions or expansions thereof) or (B) such Person is merged, consolidated or 15 amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary of the Issuer that is engaged in the same or a similar line of business as the Issuer and its Restricted Subsidiaries (or reasonable extensions or expansions thereof); (iv) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.16; (v) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Issuer; (vi) Investments made in exchange for accounts receivable arising in the ordinary course of business which have not been collected for 180 days and which are, in the good faith of the Issuer, substantially uncollectible; provided that any such Investments in excess of $500,000 shall be approved by the Board of Directors (evidenced by a Board Resolution set forth in an Officers' Certificate delivered to the Trustee); (vii) loans and advances to employees of the Issuer and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not to exceed $1.0 million in the aggregate at any one time outstanding; (viii) Investments in Permitted Joint Ventures and Investments in suppliers to the Issuer and its Restricted Subsidiaries in an aggregate amount when taken together with all other Investments pursuant to this clause (viii) does not exceed the greater of $10.0 million or 10% of Total Assets at any one time outstanding; (ix) Hedging Obligations entered into in the ordinary course of business and otherwise in compliance with this Indenture; (x) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (x) that are at the time outstanding, not to exceed $10.0 million; (xi) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (xii) guarantees by the Issuer or any Restricted Subsidiary of Debt otherwise permitted to be incurred under this Indenture; (xiii) any Investment by the Issuer or a Wholly Owned Subsidiary of the Issuer in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a Purchase Money Note or an Equity Interest; and (xiv) Investments received by the Issuer or its Restricted Subsidiaries as consideration for asset sales, including Asset Sales; provided that in the case of an Asset Sale, such Asset Sale is effected in compliance with Section 4.16; and (xv) Investments by Foreign Subsidiaries of the Issuer in currencies of countries in which such subsidiaries conduct business, provided that such currencies are freely convertible into United States dollars. For purposes of calculating the aggregate amount of Permitted Investments permitted to be outstanding at any one time pursuant to clauses (viii) and (x) of the preceding sentence, (i) to the extent the consideration for any such Investment consists of Equity Interests (other than Disqualified Stock) of the Issuer, the value of the Equity Interests so issued will be ignored in determining the amount of such Investment and (ii) the aggregate amount of such Investments made by the Issuer and its Restricted Subsidiaries on or after the date of this Indenture will be decreased (but not below zero) by an amount equal to the lesser of (A) the cash return of capital to the Issuer or a Restricted Subsidiary with respect to such Investment that is sold for cash or otherwise liquidated or repaid for 16 cash (less the cost of disposition, including applicable taxes, if any) and (B) the initial amount of such Investment. "Permitted Joint Venture" means any Person which is, directly or indirectly through its Subsidiaries or otherwise, engaged principally in the principal business of the Issuer, or a reasonably related business, and the Capital Stock of which is owned by the Issuer and one or more Persons other than the Issuer or any Affiliate of the Issuer. "Permitted Liens" means (i) Liens to secure obligations in respect of workers compensation, unemployment, social security, statutory obligations, surety or appeal bonds or other obligations of a like nature incurred in the ordinary course of business, (ii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, (iii) Liens in favor of the Issuer, (iv) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations not overdue for a period in excess of 30 days or which are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted; provided that any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor, (v) Liens securing the Senior Credit Facility, (vi) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Issuer; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Issuer, (vii) Liens on property existing at the time of acquisition thereof by the Issuer; provided that such liens were in existence prior to the contemplation of such acquisition, (viii) purchase money Liens to finance property or assets of the Issuer acquired in the ordinary course of business; provided, however, that (A) the related Purchase Money Obligations shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Issuer other than the property or assets so acquired and (B) the Lien securing such Debt shall be created within 90 days of such acquisition, (ix) Liens existing on the date of this Indenture, (x) judgment Liens not giving rise to an Event of Default, (xi) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred or imposed, as applicable, in the ordinary course of business and consistent with industry practices which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto (as such property is used by the Issuer) or interfere with the ordinary conduct of business of the Issuer; provided, however, that any such Liens are not incurred in connection with any borrowing of money or commitment to loan any money to or to extend any credit, (xii) Liens on assets transferred to a Securitization Entity or on assets of a Securitization Entity, in either case incurred in connection with a Qualified Securitization Transaction, (xiii) Liens incurred in the ordinary course of business of the Issuer with respect to obligations that do not exceed $5.0 million at any one time outstanding and that (A) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade 17 credit in the ordinary course of business) and (B) do not in the aggregate materially detract from the value of property or materially impair the use thereof in the operation of business by the Issuer, (xiv) any interest or title of a lessor under any Capital Lease Obligation, (xv) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods, (xvi) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof, (xvii) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer, including rights of offset and set-off, (xviii) Liens securing Hedging Obligations, (xix) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Issuer, (xx) Liens arising from filing Uniform Commercial Code financing statements regarding operating leases entered into in the ordinary course of business and (xxi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customer duties in connection with the importation of goods. "Permitted Refinancing Debt" means any Debt of the Issuer or any of its Restricted Subsidiaries or any Disqualified Stock issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Debt of the Issuer or any of its Restricted Subsidiaries; provided that: (i) the principal amount (or accrued value, if applicable) of such Permitted Refinancing Debt does not exceed the principal amount of (or accrued value, if applicable), plus accrued interest on, the Debt so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable fees and expenses incurred in connection therewith); (ii) such Permitted Refinancing Debt has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Debt being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Debt being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Securities, such Permitted Refinancing Debt has a final maturity date later than the final maturity date of, and is subordinated in right of payment to the Securities on terms at least as favorable to the Holders of Securities, as applicable, as those contained in the documentation governing the Debt being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Debt is incurred either by the Issuer or by the Restricted Subsidiary who is the obligor on the Debt being extended, refinanced, renewed, replaced, defeased or refunded or is Disqualified Stock. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. 18 "Preferred Stock" of any Person means any Equity Interest of such Person that has preferential rights to any other Equity Interest of such Person with respect to dividends or redemptions or upon liquidation. "principal" of any Debt (including the Securities) means the principal amount of such Debt plus the premium, if any, on such Debt. "Private Exchange Securities" shall have the meaning provided in the Registration Rights Agreement. "Private Placement Legend" means the legend initially set forth on the Securities in the form set forth in Exhibit A-1. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act, as in effect on the Issue Date. "Purchase Money Notes" means a promissory note of a Securitization Entity evidencing a line of credit, which may be irrevocable, from the Issuer or any Subsidiary of the Issuer in connection with a Qualified Securitization Transaction to a Securitization Entity which note shall be repaid from cash available to the Securitization Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables or newly acquired equipment. "Purchase Money Obligations" of a Person means Debt of such Person incurred in connection with the purchase, construction or improvement of property, plant or equipment used in the business of such Person (whether through the direct purchase of the assets or the Equity Interests of any Person owning such assets). "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "Qualified Securitization Transaction" means any transaction or series of transactions pursuant to which the Issuer or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to (i) a Securitization Entity (in the case of a transfer by the Issuer or any of its Restricted Subsidiaries) and (ii) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in, any receivables or equipment loans (whether now existing or arising or acquired in the future) of the Issuer or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such receivables and equipment 19 loans, all contracts and contract rights and all guarantees or other obligations in respect of such receivables and equipment loans, proceeds of such receivables and equipment loans and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transaction involving receivables and equipment (collectively, "transferred assets"); provided that in the case of any such transfer by the Issuer or any of its Restricted Subsidiaries, the transferor receives cash or Purchase Money Notes in an amount which (when aggregated with the cash and Purchase Money Notes received by the Issuer and its Restricted Subsidiaries upon all other such transfers of transferred assets during the ninety days preceding such transfer) is at least equal to 75.0% of the aggregate face amount of all receivables so transferred during such day and the ninety preceding days. "Redemption Date" means, with respect to any Securities, the Maturity Date of such Security or the earlier date on which such Security is to be redeemed by the Issuer pursuant to the terms of the Securities. "Redemption Price" shall have the meaning provided in Section 3.01. "Registrar" has the meaning provided in Section 2.03. "Registration Agreement" means the Registration Agreement among the Issuer and the other signatories thereto as in effect on the date of this Indenture or as thereafter amended in a manner that is not disadvantageous to the Holders of the Securities in any material respect. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof among the Issuer and the Initial Purchaser. "Regulation S" means Regulation S under the Securities Act. "Related Person" means with respect to any Person (i) any Affiliate of such Person, (ii) any individual or other Person who directly or indirectly is the registered or beneficial owner of 5% or more of any class of Capital Stock of such Person or warrants, rights, options or other rights to acquire more than 5% of any class of Capital Stock of such Person, (iii) any relative of such individual by blood, marriage or adoption not more remote than first cousin and (iv) any officer or director of such Person. "Related Person Transaction" has the meaning provided in Section 4.11. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at 20 all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt. "Required Filing Dates" has the meaning provided in Section 4.08. "Restricted Domestic Subsidiary" means a Restricted Subsidiary organized and validly existing under the laws of the United States or any state thereof or the District of Columbia. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payment" means: (i) any dividend or any other payment or distribution on account of the Issuer's or any of its Restricted Subsidiaries' Equity Interests or to the direct or indirect holders of the Issuer's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than (A) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Issuer or such Restricted Subsidiary or (B) dividends or distributions payable to the Issuer or any Wholly Owned Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Issuer, any direct or indirect parent of the Issuer or any Restricted Subsidiary of the Issuer (other than any Equity Interests owned by the Issuer or any Wholly Owned Restricted Subsidiary); (iii) any payment to purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Debt of the Issuer or a Restricted Subsidiary, except a payment of interest or principal at Stated Maturity; (iv) any payment in respect of Employee Notes other than payments in the form of additional Employee Notes or Equity Interests (other than Disqualified Stock) of the Issuer; and (v) any Restricted Investment. "Restricted Security" has the meaning set forth in Rule 144(a)(3) under the Securities Act; provided, that the Trustee or the Registrar shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Security is a Restricted Security. "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. "Sale and Lease-Back Transaction" means any arrangement with any Person providing for the leasing by the Issuer or any Restricted Subsidiary of the Issuer of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to such Person in contemplation of such leasing. "SEC" means the Securities and Exchange Commission. 21 "Securities" means the Issuer's 14% Senior Discount Notes due 2009, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Securitization Entity" means a Wholly Owned Subsidiary of the Issuer (or another Person in which the Issuer or any Restricted Subsidiary of the Issuer makes an Investment and to which the Issuer or any Restricted Subsidiary of the Issuer transfers receivables or equipment and related assets) that engages in no activities other than in connection with the financing of receivables or equipment and that is designated by the Board of Directors of the Issuer (as provided below) as a Securitization Entity (i) no portion of the Debt or any other Obligations (contingent or otherwise) of which (A) is guaranteed by the Issuer or any Restricted Subsidiary of the Issuer (other than the Securitization Entity) in any way other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse, (B) is recourse to or obligates the Issuer or any Restricted Subsidiary of the Issuer (other than the Securitization Entity) in any way other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse or (C) subjects any property or asset of the Issuer or any Restricted Subsidiary of the Issuer (other than the Securitization Entity), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings or Limited Originator Recourse, (ii) with which neither the Issuer nor any Restricted Subsidiary of the Issuer has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Issuer or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Issuer, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity and (iii) to which neither the Issuer nor any Restricted Subsidiary of the Issuer has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Issuer shall be evidenced by the filing with the Trustee a Board Resolution of the Issuer giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions. "Security Amount" has the meaning provided in Section 4.16(c). "Securityholder" or "Holder" means the Person in whose name a Security is registered on the Registrar's books. "Securityholders Agreement" means the Securityholders Agreement among the Issuer and the other signatories thereto as in effect on the date of this Indenture or as thereafter amended in a manner that is not disadvantageous to the Holders of the Securities in a material respect. 22 "Senior Credit Facility" means the Credit Agreement dated as of July 31, 1998, among the Issuer, Globe Manufacturing, the lenders party thereto in their capacity as such, Bank of America National Trust and Savings Association, as administrative agent, Merrill Lynch, Pierce, Fenner & Smith, Inc., as syndication agent, and BancAmerica Robertson Stephens, as arranger, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including, without limitation, increasing the amount of available borrowings thereunder or adding Subsidiaries of the Issuer as additional borrowers or guarantors thereunder) all or any portion of the indebtedness under such agreement or any successor or replacement agreement, whether by the same or any other agent, lender or group of lenders, whether contained in one or more agreements. "Senior Debt" means, with respect to any Person, the principal of, premium (if any) and accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of such Person, regardless of whether or not a claim for post-filing interest is allowed in such proceedings) on, and fees and other amounts owing in respect of, Debt of such Person, whether outstanding on the Issue Date or thereafter incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are subordinated in right of payment to the Securities; provided, however, that Senior Debt shall not include (i) any obligation of the Issuer to any Subsidiary, (ii) any liability for Federal, state, local or other taxes owed or owing by the Issuer, (iii) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (iv) any Debt or obligation of the Issuer (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate or junior in any respect to any other Debt or obligation of the Issuer, including any Subordinated Debt, (v) any payment obligations with respect to any Equity Interests, or (vi) any Debt incurred in violation of this Indenture. "Significant Subsidiary" means any Restricted Subsidiary of the Issuer that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the Issue Date. Any group of Restricted Subsidiaries of the Issuer that, taken together, would constitute a Significant Subsidiary, shall be deemed to be a Significant Subsidiary for purposes of Article Six. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnitees entered into by the Issuer or any Subsidiary of the Issuer that are reasonably customary in receivables or equipment loan transactions. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Debt, the date on which such payment of interest or principal was scheduled to be paid 23 in the original documentation governing such Debt, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Debt" means any Debt of the Issuer which is by its terms subordinated in right of payment to the Securities. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (A) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (B) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). Unless otherwise indicated, references in this Indenture to a Subsidiary shall mean a Subsidiary of the Issuer. "Tax Sharing Agreement" means the Tax Sharing Agreement between the Issuer and Globe Manufacturing as in effect on the date of this Indenture or as thereafter amended in a manner that is not adverse to the Issuer or the Holders of Securities. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (SS) 77aaa- 77bbbb), as amended, as in effect on the date on which this Indenture is qualified under the TIA, except as otherwise provided in Section 9.03. "Total Assets" means, with respect to any date of determination, the total assets of the Issuer and its Restricted Subsidiaries shown on the Issuer's consolidated balance sheet prepared in accordance with GAAP on the last day of the fiscal quarter prior to the date of determination. "Transfer Amount" has the meaning provided in Section 2.16. "Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled by, and published in, the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two Business Days prior to the date fixed for redemption of the Securities following a Change of Control (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to August 1, 2003; provided, however, that if the period from the redemption date to August 1, 2003 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from 24 the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the redemption date to August 1, 2003 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trust Officer" means any officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters or, in the case of a successor trustee, an officer assigned to the department, division or group performing the corporate trust work of such successor. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Unrestricted Securities" means one or more Securities that do not and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such Person that as of the time of determination shall be or continue to be designated an Unrestricted Subsidiary in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Issuer may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of the Issuer or any Restricted Subsidiary or holds any Lien on any property of the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so designated; provided that (i) the Issuer certifies to the Trustee that such designation complies with the provisions of Section 4.10 and (ii) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to, any indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any of its Restricted Subsidiaries. The Board of Directors of the Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (i) immediately after giving effect to such designation, the Issuer is able to incur at least $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a) and (ii) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations of, and obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged. 25 "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "U.S. Person" has the meaning given in Regulation S under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors, managers, trustees or other governing body, as applicable, of such Person. "Weighted Average Life to Maturity" means, when applied to any Debt at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Debt. "Wholly Owned Restricted Subsidiary" of any Person means any Restricted Subsidiary of such Person that is a Wholly Owned Subsidiary of such Person. "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person, by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02. Incorporation by Reference of TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "SEC" means the SEC. "indenture securities" means the Securities. "indenture securityholder" means a Holder or a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. 26 "obligor" on the indenture securities means the Issuer or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP as in effect on the Issue Date; (c) "or" is not exclusive; (d) words in the singular include the plural, and words in the plural include the singular; (e) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (f) all references to Articles, Sections and Exhibits shall mean, unless the clearly indicates otherwise, the Articles and Sections hereof and the Exhibits attached hereto, the terms of which Exhibits are hereby incorporated into this Indenture; (g) all references herein to payments of principal, premium, if any, and interest on the Securities shall be deemed to include any applicable Liquidated Damages that may become payable in respect of the Securities. 27 ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. The Securities and the Exchange Securities, and the notation relating to the Trustee's certificate of authentication shall be substantially in the form of Exhibits A-1 and A-2, respectively. The Securities may have notations, legends or endorsements required by law, stock exchange rule, depository rule or usage. The Issuer and the Trustee shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its issuance and shall show the date of its authentication. The terms and provisions contained in the Securities, annexed hereto as Exhibits A-1 and A-2, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Securities offered and sold in reliance on Rule 144A or in reliance on any other exemption from registration under the Securities Act may be issued initially in the form of one or more permanent Global Securities in registered form, substantially in the form set forth in Exhibit A-1 ("Global Securities"), deposited with, or on behalf of, the Depositary and registered in the name of Cede & Co. or such other nominee, as nominee of the Depositary, and shall bear the legend set forth on Exhibit B-1. The aggregate principal amount of any Global Security may from time to time be increased or decreased by adjustments made on the records of the Depositary and the Registrar, as the custodian for the Depositary. Securities issued in exchange for interests in a Global Security pursuant to Section 2.15 and Securities offered and sold in reliance on any exemption from registration under the Securities Act may be issued in the form of certificated securities in registered form in substantially the form set forth in Exhibit A-1 (the "Certificated Securities"). SECTION 2.02. Execution and Authentication. Two Authorized Officers shall sign, or one Authorized Officer shall sign and one Authorized Officer (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Securities for the Issuer by manual or facsimile signature. 28 If an Authorized Officer whose signature is on a Security was an Authorized Officer at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Security, the Security shall nevertheless be valid. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Securities for original issue in the aggregate principal amount at maturity not to exceed $49,086,000 in one or more series, (ii) Private Exchange Securities from time to time for issue only in exchange for a like principal amount of Initial Securities and (iii) Unrestricted Securities from time to time only in exchange for a like principal amount of Initial Securities in each case upon a written order of the Issuer in the form of an Officers' Certificate of the Issuer. Each such written order shall specify the amount of Securities to be authenticated and the date on which the Securities are to be authenticated, whether the Securities are to be Initial Securities, Private Exchange Securities or Unrestricted Securities and whether the Securities are to be issued as Certificated Securities or Global Securities and such other information as the Trustee may reasonably request. The aggregate principal amount at maturity of Securities outstanding at any time may not exceed $49,086,000, except as provided in Section 2.07. In the event that the Issuer shall issue and the Trustee shall authenticate any Securities issued under this Indenture subsequent to the Issue Date pursuant to clauses (i) and (iii) of the first sentence of the immediately preceding paragraph, the Issuer shall use its reasonable efforts to obtain the same "CUSIP" number for such Securities as is printed on the Securities outstanding at such time; provided, however, that if any series of Securities issued under this Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of the Issuer in a form reasonably satisfactory to the Trustee, to be a different class of security than the Securities outstanding at such time for federal income tax purposes, the Issuer may obtain a "CUSIP" number for such Securities that is different than the "CUSIP" number printed on the Securities then outstanding. Notwithstanding the foregoing, all Securities issued under this Indenture shall vote and consent together on all matters (as to which any of such Securities may vote or consent) as one class and no series of Securities will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent (an "Authenticating Agent") reasonably acceptable to the Issuer to authenticate Securities. Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An Authenticating Agent has the same rights as an Agent to deal with the Issuer and Affiliates of the Issuer. 29 The Securities shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof. SECTION 2.03. Registrar and Paying Agent. The Issuer shall maintain an office or agency in the county where the principal corporate office of the Trustee is located or in such other locations as the Issuer shall determine, where (a) Securities may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) Securities may be presented or surrendered for payment ("Paying Agent") and (c) notices and demands to or upon the Issuer in respect of the Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Issuer, upon notice to the Trustee, may have one or more co-Registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional paying agent. The Issuer upon notice to the Trustee may change any Registrar or Paying Agent without notice to any Holder. The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall incorporate the provisions of the TIA and implement the provisions of this Indenture that relate to such Agent. The Issuer shall notify the Trustee, in advance, of the name and address of any such Agent. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Issuer initially appoints the Trustee as Registrar, Paying Agent and agent for service of demands and notices in connection with the Securities, until such time as the Trustee has resigned or a successor has been appointed. Any of the Registrar, the Paying Agent or any other Agent may resign upon 30 days' notice to the Issuer. SECTION 2.04. Paying Agent To Hold Assets in Trust. The Issuer shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, premium or Liquidated Damages, if any, or interest on, the Securities (whether such assets have been distributed to it by the Issuer or any other obligor on the Securities), and the Issuer and the Paying Agent shall notify the Trustee of any default by the Issuer (or any other obligor on the Securities) in making any such payment. The Issuer, upon written direction to the Paying Agent, at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any Payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Issuer 30 (or any other obligor on the Securities) to the Paying Agent and the completion of any accounting required to be made hereunder, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee five Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list as of the applicable record date and in such form as the Trustee may reasonably require of the names and addresses of the Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. Transfer and Exchange. Subject to the provisions of Sections 2.15 and 2.16, when Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Securities surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registration of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's written request. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other governmental charge payable upon exchanges or transfers pursuant to Sections 2.02, 2.10, 3.01(ii), 3.08, 4.15, 4.16, or 9.05). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part and (iii) during a Change of Control Offer or an Asset Sale Offer if such Security is tendered pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn. Prior to the registration of any transfer by a Holder, the Issuer, the Trustee and any agent of the Issuer shall treat the person in whose name the Security is registered as the owner thereof for all purposes whether or not the Security shall be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. Any Holder of the Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in 31 such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security (or its agent), and that ownership of a beneficial interest in the Global Security shall be required to be reflected in a book-entry system. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met. Such Holder must provide an indemnity bond or other indemnity sufficient, in the judgment of the Issuer and the Trustee, to protect the Issuer, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Issuer may charge such Holder for its reasonable out-of-pocket expenses in replacing a Security, including reasonable fees and expenses of counsel. Every replacement Security issued pursuant to this Section 2.07 shall constitute an obligation of the Issuer. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all the Securities that have been authenticated by the Trustee or the Authenticating Agent except those canceled by the Trustee, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to Section 2.09, a Security does not cease to be outstanding because the Issuer or any of its Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If the principal amount of any Security is considered paid under Section 4.01, it ceases to be outstanding and interest ceases to accrue. If on a Redemption Date, a Change of Control Payment Date, an Asset Sale Offer Date or the Maturity Date, the Paying Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal, premium, if any, and interest due on the Securities payable on that date and is not prohibited from paying such U.S. Legal Tender or U.S. Government Obligations to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. 32 SECTION 2.09. Treasury Securities. In determining whether the Holders of the required aggregate principal amount at maturity of Securities have concurred in any direction, waiver, consent or notice, and for purposes of determining the amount of Securities outstanding at the time of a redemption made in accordance with paragraph 6(a)(ii) of the Securities, Securities owned by the Issuer or an Affiliate of the Issuer shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any direction, waiver or consent, only Securities which the Trustee actually knows are so owned shall be so considered. The Issuer shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Securities, of the aggregate principal amount at maturity of such Securities so repurchased or otherwise acquired. The Trustee may require an Officers' Certificate listing Securities owned by the Issuer, a Subsidiary of the Issuer or any Affiliate of the Issuer. SECTION 2.10. Temporary Securities. Until definitive Securities are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Securities upon receipt of a written order of the Issuer in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Securities to be authenticated and the date on which the temporary Securities are to be authenticated. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Issuer considers appropriate for temporary Securities. Without unreasonable delay, the Issuer shall prepare and execute, and the Trustee shall authenticate upon receipt of a written order of the Issuer pursuant to Section 2.02, definitive Securities in exchange for temporary Securities. SECTION 2.11. Cancellation. The Issuer at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Issuer, shall dispose of and deliver evidence of such disposal of (but shall not be required to destroy) all Securities surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.07, the Issuer may not issue new Securities to replace Securities that the Issuer has paid or delivered to the Trustee for cancellation. If the Issuer shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Debt represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. 33 SECTION 2.12. Defaulted Interest. The Issuer will pay interest on overdue principal or Accreted Value, as applicable, from time to time on demand at the rate of interest then borne by the Securities. The Issuer shall, to the extent lawful, pay interest on overdue installments of interest, (without regard to any applicable grace periods) from time to time on demand at the rate of interest then borne by the Securities. Interest will be computed on the basis of a 360-day year comprised of twelve 30- day months, and, in the case of a partial month, the actual number of days elapsed. If the Issuer defaults in a payment of interest on the Securities, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Issuer for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. Prior to such subsequent special record date, the Issuer shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments due on such day in a timely manner which permits the Paying Agent to remit payment to the Holders on such day. At least 15 days before the subsequent special record date, the Issuer shall mail to each Holder, with a copy to the Trustee and the Agents, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest and interest payable on such defaulted interest, if any, to be paid. Notwithstanding the foregoing, the Issuer may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange. SECTION 2.13. CUSIP Number. The Issuer in issuing the Securities may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that no representation is hereby deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Issuer shall promptly notify the Trustee of any change in the CUSIP number. SECTION 2.14. Deposit of Moneys. Prior to 11:00 a.m. (New York City time) on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Asset Sale Offer Date, the Issuer 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, Maturity Date, Redemption Date, Change of Control Payment Date or Asset Sale Offer Date, as the case may be, in a timely manner which 34 permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date or Asset Sale Offer Date, as the case may be. SECTION 2.15. Book-Entry Provisions for Global Securities. (a) The Global Securities initially shall (i) be registered in the name of Cede & Co., as the nominee of The Depository Trust Company, (ii) be delivered to the Registrar as custodian for such Depositary and (iii) bear the legend set forth in Exhibit B. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary, or the Registrar as its custodian, or under the Global Security, and the Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Securities may be transferred or exchanged for Certificated Securities in accordance with the rules and procedures of the Depositary and the provisions of Section 2.16. In addition, Certificated Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Securities if (i) the Issuer notifies the Registrar that the Depositary is unwilling or unable to continue as Depositary for any Global Security and a successor depositary is not appointed by the Issuer within 90 days of such notice or (ii) the Issuer, at its option, notifies the Registrar in writing that it elects to cause the issuance of Securities in definitive form under this Indenture. (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Security to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Certificated Securities are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Issuer shall execute, and the Trustee shall authenticate and cause to be delivered, one or more Certificated Securities of like tenor and amount. 35 (d) In connection with the transfer of Global Securities as an entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global Securities shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and the Trustee shall authenticate and cause to be delivered to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the Global Securities, an equal aggregate principal amount of Certificated Securities of authorized denominations. (e) Any Certificated Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to paragraph (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (z) of Section 2.16, bear the Private Placement Legend. (f) The Holder of any Global Security 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 Securities. SECTION 2.16. Special Transfer Provisions. (a) Transfers to Non-QIB Institutional Accredited Investors and Non- U.S. Persons and other Transfers Exempt under the Securities Act. The following provisions shall apply (x) with respect to the registration of any proposed transfer of a Security constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person and (y) with respect to the registration of any proposed transfer pursuant to another available exemption from the registration requirements of the Securities Act: (i) the Registrar shall register the transfer of any Securities constituting a Restricted Security, whether or not such Security bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the original issue date with respect thereto; provided, however, that neither the Issuer nor any Affiliate of the Issuer has held any beneficial interest in such security, or portion thereof, at any time on or prior to the second anniversary of such issue date 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 C hereto or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D or (3) in the case of a transfer pursuant to another available exemption from the registration requirements of the Securities Act, the proposed transferee has delivered to the Registrar a certificate in form and substance reasonably acceptable to the Issuer and the Registrar in connection with such transfer, together, in the case of clause (1), clause (2) or clause (3) with such other certifications, legal opinions or other information as the Issuer, the Trustee or the Registrar may reasonably 36 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 Securities Act, or (z) the Trustee and Registrar have received both an Opinion of Counsel and an Officers' Certificate directing transfer without a Private Placement Legend; and (ii) the Registrar shall register the transfer of any Securities constituting a Restricted Security, whether or not such Security bears the Private Placement Legend, if the proposed transferor is an Agent Member holding a beneficial interest in a Global Security, upon, receipt by the Registrar of (x) the certificate, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depositary'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 Certificated Securities) a decrease in the principal amount of the Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred (the "Transfer Amount"), (b) if the Securities to be transferred are to be evidenced by Certificated Securities, the Issuer shall execute and the Trustee shall authenticate upon receipt of a written order of the Issuer in the form of an Officers' Certificate, and cause to be delivered one or more Certificated Securities in an aggregate principal amount equal to the Transfer Amount and (c) if the Securities to be transferred are to be evidenced by an interest in a Global Security, upon receipt of instructions given in accordance with the Depositary'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 Security in which the transferee will hold its beneficial interest in an amount equal to the Transfer Amount. If the Securities to be transferred consist of IAI Securities, the following shall apply: (x) if such IAI Securities are proposed to be transferred to an Institutional Accredited Investor which is not a QIB, (i) upon the registration of such transfer such Securities shall continue to be IAI Securities, and (ii) the Certificated Securities authenticated and delivered in connection with such transfer shall be in denominations of $100,000 and any integral multiple of $1,000 above that amount; and (y) if such IAI Securities are proposed to be transferred to a Non-U.S. Person, (i) upon the registration of such transfer such Securities shall cease to be IAI Securities, (ii) the Certificated Securities authenticated and delivered in connection with such transfer shall not contain the restriction on minimum denominations of $100,000 and (iii) such Certificated Securities shall be in denominations of $1,000 and any integral multiple thereof. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Security constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): 37 (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 the form of Security stating, or has otherwise advised the Issuer 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 the form of Security stating, or has otherwise advised the Issuer and the Registrar in writing, that it is purchasing the Security 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 Issuer as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the Issuer and the transferor are relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; if the Trustee or the Issuer shall so request, such proposed transferor shall have delivered an Opinion of Counsel, an Officers' Certificate and such other information as the Trustee or the Issuer may reasonably require in connection with such proposed transfer; and (ii) if the proposed transferee is an Agent Member, and the Securities to be transferred consist of Certificated Securities which after transfer are to be evidenced by an interest in the Global Security, upon receipt by the Registrar of instructions given in accordance with the Depositary'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 Security in an amount equal to the principal amount of the Certificated Securities to be transferred, and the Trustee shall cancel the Certificated Securities so transferred; and (iii) if the proposed transferee is an Agent Member, and the Securities to be transferred consist of a beneficial interest in a Global Security which after transfer is to continue to be evidenced by an interest in a Global Security, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records (A) the date, (B) a decrease in the principal amount of the Global Security in which the transferor owns the beneficial interest to be transferred in an amount equal to the principal amount of the beneficial interest to be transferred and (C) an increase in the principal amount of the Global Security in which the transferee will hold its beneficial interest in a like amount; and (iv) if the Securities to be transferred consist of IAI Securities, upon the registration of such transfer according to this Section 2.16 such Securities shall cease to be IAI Securities and may be evidenced by Certificated Securities or interests in a Global Security in denominations of $1,000 and any integral multiple thereof. 38 (c) Private Placement Legend. Upon the transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless (i) the circumstances contemplated by paragraph (a)(i) of this Section 2.16 exist, (ii) there is delivered to the Issuer, the Registrar and the Trustee an Opinion of Counsel reasonably satisfactory to the Issuer, the Registrar 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 Securities have been sold pursuant to an effective registration statement under the Securities Act. (d) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture and such Security. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16. The Issuer 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 written notice to the Registrar. SECTION 2.17. Liquidated Damages under Registration Rights Agreement. Under certain circumstances, the Issuer shall be obligated to pay certain Liquidated Damages to the Holders, all as set forth in Section 4 of the Registration Rights Agreement (or, with respect to any additional registration rights agreement entered into in connection with Initial Securities issued subsequent to the Issue Date pursuant to Section 2.02, the applicable section). The terms thereof are incorporated herein by reference. ARTICLE THREE REDEMPTION SECTION 3.01. Optional Redemption. Optional Redemption. (i) The Securities will be redeemable at the option of the Issuer, in whole or in part, at any time and from time to time on or after August 1, 2003, upon not less than 30 nor more than 60 days notice, at the Redemption Prices (expressed as percentages of principal amount at maturity) set forth below (the "Redemption Price"), plus accrued and unpaid 39 interest and Liquidated Damages, if any, thereon to the applicable Redemption Date, if redeemed during the 12-month period beginning on August 1 of the years indicated below:
Redemption Year Price ---- ---------- 2003 ................................... 107.000% 2004 ................................... 104.667% 2005 ................................... 102.333% 2006 and thereafter........................ 100.000%
(ii) At any time prior to August 1, 2001, the Issuer may on any one or more occasions redeem from the net proceeds of one or more Equity Offerings up to an aggregate of 35.0% in aggregate principal amount at maturity of the Securities at a redemption price of 114% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date; provided that at least 65% of the aggregate principal amount at maturity of the Securities remains outstanding immediately after the occurrence of such redemption. (iii) At any time prior to August 1, 2003, the Securities may be redeemed, in whole but not in part, at the option of the Issuer at any time within 180 days after a Change of Control, at a redemption price equal to the sum of (i) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date, plus (ii) the Applicable Premium. If less than all of the Securities are to be redeemed at any time, selection of Securities for redemption will be made by the Trustee on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Securities of $1,000 or less shall be redeemed in part. Notices 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 Securities to be redeemed at its registered address. Notices of redemption may not be conditional. If any Security is to be redeemed in part only, the notice of redemption that relates to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. Securities called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on the Securities or portions of them called for redemption. SECTION 3.02. Applicability of Article. Redemption of Securities at the election of the Issuer or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. 40 SECTION 3.03. Election To Redeem; Notice to Trustee. The election of the Issuer to redeem any Securities pursuant to Section 3.01(a) shall be evidenced by an Officers' Certificate. In case of any redemption at the election of the Issuer pursuant to Section 3.01(a), the Issuer shall, at least 45 days prior to the Redemption Date fixed by the Issuer (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Securities to be redeemed. SECTION 3.04. Selection by Trustee of Securities To Be Redeemed. In the event that less than all of the Securities are to be redeemed at any time, selection of such Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities 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 that no Securities of a principal amount of $1,000 or less shall be redeemed in part. If any Security is to be redeemed in part only, a new Security 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 Security. On and after the Redemption Date, if the Issuer does not default in the payment of the Redemption Price, interest will cease to accrue on Securities or portions thereof called for redemption. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 3.05. Notice of Redemption. Notice of redemption shall be mailed by first-class mail, postage prepaid, mailed at least 30 but no more than 60 days before the Redemption Date. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all outstanding Securities are to be redeemed, the identification of the particular Securities to be redeemed; 41 (d) in the case of a Security to be redeemed in part, the principal amount at maturity of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, a new Security or Securities in the aggregate principal amount at maturity equal to the unredeemed portion thereof will be issued; (e) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (f) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that (unless the Issuer shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (g) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (h) the CUSIP number, if any, relating to such Securities; and (i) the paragraph or section of the Securities or this Indenture pursuant to which the Securities are being redeemed. Notice of redemption of Securities to be redeemed shall be given by the Issuer or, as otherwise requested by the Issuer in writing, by the Trustee in the name and at the expense of the Issuer. The notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. SECTION 3.06. Deposit of Redemption Price. On or prior to 11:00 a.m. (New York City time) on any Redemption Date, the Issuer shall deposit or cause to be deposited with the Trustee or with a Paying Agent (or, if the Issuer is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.04) an amount of money in same day funds sufficient to pay the Redemption Price of, and Liquidated Damages, if any, and accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. 42 SECTION 3.07. Securities Payable on Redemption Date. Notice of Redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Issuer at the Redemption Price; provided, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more predecessor Securities, registered as such on the relevant record dates according to the terms and the provisions of the Securities. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium and Liquidated Damages, if any, shall, until paid, bear interest from the Redemption Date at the rate then borne by such Security. SECTION 3.08. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered to the Paying Agent at the office or agency maintained for such purpose pursuant to Section 2.03 (with, if the Issuer, the Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to, the Issuer, the Registrar or the Trustee duly executed by the Holder thereof or such Holder's attorney duly authorized in writing), and the Issuer shall execute, and the Trustee shall authenticate and cause to be delivered to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount at maturity equal to, and in exchange for, the portion of the principal of the Security so surrendered that is not redeemed. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. The Issuer shall pay the principal of and premium, if any, and interest on the Securities on the dates and in the manner provided in this Indenture and in the Securities. An installment of principal of or premium, if any, or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent holds at 11:00 a.m. (New York City time) on that date U.S. Legal Tender designated for and sufficient to pay the installment in full and is not 43 prohibited from paying such money to the Holders pursuant to the terms of this Indenture or otherwise. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Issuer shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. SECTION 4.02. Maintenance of Office or Agency. The Issuer shall maintain the office or agency required under Section 2.03. The Issuer shall give prior notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.02. SECTION 4.03. Corporate Existence. Except as otherwise permitted by Article Four or Article Five, the Issuer shall do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its corporate or other existence and the corporate or other existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the material rights (charter and statutory) and franchises of the Issuer and each of its Restricted Subsidiaries; except for any such existence, material right or franchise which are not in the aggregate reasonably likely to have a material adverse effect on the financial condition or results of operations of the Issuer and its Restricted Subsidiaries, taken as a whole. SECTION 4.04. Payment of Taxes and Other Claims. The Issuer shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Restricted Subsidiaries or properties of it or any of its Restricted Subsidiaries and (ii) all material lawful claims for labor, materials, supplies and services that, if unpaid, might by law become a Lien upon the property of it or any of its Restricted Subsidiaries; provided, however, that there shall not be required to be paid or discharged any such tax, assessment, claim or charge, the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate provision has been made or where the failure to effect such payment or discharge would not result in a material adverse effect on the financial condition or results of operations of the Issuer and its Restricted Subsidiaries, taken as a whole. 44 SECTION 4.05. Maintenance of Properties and Insurance. (a) The Issuer shall, and shall cause each of its Restricted Subsidiaries to, maintain its material properties in normal condition (subject to ordinary wear and tear) and make all reasonably necessary repairs, renewals or replacements thereto as in the judgment of the Issuer may be reasonably necessary to the conduct of the business of the Issuer and its Restricted Subsidiaries; provided, however, that nothing in this Section 4.05 shall prevent the Issuer or any of its Restricted Subsidiaries from discontinuing the operation and maintenance of any of its properties, if such properties are no longer reasonably necessary in the conduct of their respective businesses. (b) The Issuer shall provide or cause to be provided, for itself and each of its Restricted Subsidiaries, insurance (including appropriate self- insurance) against loss or damage of the kinds that, in the reasonable, good faith opinion of the Issuer are reasonably adequate and appropriate for the conduct of the business of the Issuer and its Restricted Subsidiaries. SECTION 4.06. Compliance Certificate; Notice of Default. (a) The Issuer shall deliver to the Trustee, within 120 days after the end of the Issuer's fiscal year, an Officers' Certificate (provided, however, that one of the signatories to each such Officers' Certificate shall be the Issuer's principal executive officer, principal financial officer or principal accounting officer) stating that a review of its activities and the activities of its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether a Default or Event of Default has occurred and further stating, as to each such officer signing such certificate, that to the best of his knowledge, no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default that has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe the Default or Event of Default and its status with particularity. The Officers' Certificate shall also notify the Trustee should the Issuer elect to change the manner in which it fixes its fiscal year end. (b) (i) If any Default or Event of Default has occurred and is continuing or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a claimed Default under this Indenture or the Securities, the Issuer shall deliver to the Trustee by registered or certified mail or by facsimile transmission followed by hard copy by registered or certified mail an Officers' Certificate specifying such event, notice or other action within five Business Days of the actual knowledge by an Authorized Officer of such occurrence. 45 SECTION 4.07. Compliance with Laws. The Issuer shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America and each other country in which the Issuer or any of its Subsidiaries conducts business, all states and municipalities thereof, and the SEC and any other governmental department, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as are not in the aggregate reasonably likely to have a material adverse effect on the financial condition or results of operations of the Issuer and its Restricted Subsidiaries, taken as a whole. SECTION 4.08. Reports. Whether or not the Issuer is then subject to Section 13 or 15(d) of the Exchange Act, the Issuer will file with the SEC, so long as any Securities are outstanding, the annual reports (including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual financial statements, a report thereon by the Issuer's independent accountants), quarterly reports (including a "Management's Discussion and Analysis of Financial Condition and Results of Operations") and other periodic reports which the Issuer would have been required to file with the SEC pursuant to such Section 13 or 15(d) if the Issuer were so subject, and such documents shall be filed with the SEC on or prior to the respective dates (the "Required Filing Dates") by which the Issuer would have been required so to file such documents if the Issuer were so subject. The Issuer will also in any event, so long as any Securities are outstanding and whether or not the filing of such documents by the Issuer with the SEC is prohibited under the Exchange Act, within 15 days of each Required Filing Date, (a) transmit by mail to all Holders of Securities, as their names and addresses appear in the Registrar's books, without cost to such Holders and (b) file with the Trustee, copies of the annual reports, quarterly reports and other periodic reports which the Issuer would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if the Issuer were subject to such Section 13 or 15(d). The Issuer will also comply with any other periodic reporting provisions pursuant to TIA (S) 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). 46 SECTION 4.09. Waiver of Stay, Extension or Usury Laws. The Issuer will not (to the extent that it may lawfully do so) at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Issuer from paying all or any portion of the principal of, premium or Liquidated Damages, if any, or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the obligations or the performance of this Indenture; and (to the extent that it may lawfully do so) the Issuer 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 4.10. Limitation on Restricted Payments. (a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment, unless, at the time of and immediately after giving effect to the proposed Restricted Payment, (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Issuer would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a); and (iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (i) and (v) of Section 4.10(b) and excluding the Restricted Payments permitted by the other clauses therein), is less than or equal to the sum of (A) 50% of the Consolidated Net Income of the Issuer (or if Consolidated Net Income shall be a loss, minus 100% of such loss) earned during the period beginning on the first day of the first fiscal quarter immediately following the Issue Date and ending on the last day of the fiscal quarter immediately preceding the date the Restricted Payment is made (the "Reference Date") (treating such period as a single accounting period) plus (B) 100% of the aggregate net proceeds (including the fair market value of property other than cash) received by the Issuer from any Person (other than a Subsidiary of the Issuer) from the issuance and sale subsequent to the Issue Date of Equity Interests of the Issuer (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of the Issuer that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Issuer); plus (C) without duplication of any amounts included in clause (B) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Issuer from a holder of the Issuer's Capital Stock (excluding, in the case of clauses (B) and (C), any net cash proceeds from an Equity Offering to the extent used to redeem the Securities and any net cash proceeds received by 47 the Issuer from the sale of Equity Interests of the Issuer or equity contribution which has been financed, directly or indirectly using funds (1) borrowed from the Issuer or any of its Subsidiaries, unless and until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the Issuer or by any of its Subsidiaries), plus (D) to the extent that any Restricted Investment that was made after the Issue Date is sold by Issuer or any Restricted Subsidiary for cash or otherwise liquidated or repaid for cash, the lesser of (1) the fair market value of such Restricted Investment as of the date of such Restricted Investment or (2) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any), to the extent any such amount was not otherwise included in Consolidated Net Income, plus (E) 50% of any dividends received by the Issuer or a Restricted Subsidiary after the Issue Date from an Unrestricted Subsidiary of the Issuer, to the extent that such dividends were not otherwise included in Consolidated Net Income of the Issuer for such period, plus (F) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the fair market value of the Investment made by the Issuer or any of its Restricted Subsidiaries in such Subsidiary as of the date of such redesignation, plus (G) $2.0 million. For purposes of this Section 4.10(a), the fair market value of property other than cash shall be determined in good faith by the Board of Directors and evidenced by an Officers' Certificate filed with the Trustee, except that in the event the value of any non-cash consideration shall be $10.0 million or more, the value shall be determined based on an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing. (b) The provisions of Section 4.10(a) will not prohibit (i) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration thereof or giving of irrevocable redemption notice, if at said date of declaration or giving of notice such payment or redemption would have complied with the provisions of this Indenture; (ii) if no Default or Event of Default shall have occurred and be continuing, the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Issuer or any Restricted Subsidiary of the Issuer or any Subordinated Debt of the Issuer or any Restricted Subsidiary, in each case in exchange for, or out of the net proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Issuer) of other Equity Interests of the Issuer (other than any Disqualified Stock); provided, however, that the amount of any such net proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clauses (iii) (B) and (iii) (C) of Section 4.10(a); (iii) the redemption, repurchase, refinancing or defeasance of Subordinated Debt in exchange for, or with the net cash proceeds from, an incurrence of Permitted Refinancing Debt; (iv) if no Default or Event of Default shall have occurred and be continuing, the payment in an amount up to $1.0 million in any period of four consecutive quarters to fund repurchases of Equity Interests therein or Debt of the Issuer issued in connection with such Equity Interests (including, without limitation, any payments of principal, premium or interest in respect of Employee Notes) held by Persons who have ceased to be bona fide officers or employees of the 48 Issuer or one of its Restricted Subsidiaries, provided that any unused amount thereof may be carried forward to subsequent periods so long as the total amount of such Restricted Payments shall not exceed $5.0 million in the aggregate (and shall be increased by the amount of any net cash proceeds (after deducting any premiums) to the Issuer from (A) sales of Equity Interests of the Issuer to management employees subsequent to the Issue Date and (B) any ''key-man'' life insurance policies which are used to make such redemptions and repurchases); (v) repurchases of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price thereof; and (vi) payments to the Issuer to fund the Transactions (as such term is defined in and as described in the Final Offering Memorandum). (c) The Board of Directors of the Issuer may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default or an Event of Default. For purposes of making such determination, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under Section 4.10(a). All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greater of (i) the net book value of such Investments at the time of such designation and (ii) the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. SECTION 4.11. Limitation on Transactions with Related Persons. The Issuer will not, nor will it permit any of its Restricted Subsidiaries to, directly or indirectly (i) sell, lease, transfer or otherwise dispose of any of its property to, (ii) purchase any property from, (iii) make any Investment in, or (iv) enter into or amend any contract, agreement or understanding with, or for the benefit of, any of its Related Persons (each a "Related Person Transaction"), other than Related Person Transactions that are no less favorable to the Issuer or such Restricted Subsidiary than those that could be obtained in a comparable arm's length transaction by the Issuer or such Restricted Subsidiary from an unrelated party; provided that the Issuer delivers to the Trustee (A) with respect to any Related Person Transaction (or series of Related Person Transactions which are similar or part of a common plan) involving aggregate payments in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Related Person Transaction complies with the preceding sentence and such Related Person Transaction was approved by a majority of the disinterested members of the Board of Directors of the Issuer and (B) with respect to any Related Person Transaction (or series of Related Person Transactions which are similar or part of a common plan) involving aggregate payments in excess of $10.0 million, an affirmative opinion as to the fairness to the Issuer or such Restricted Subsidiary, as the case may be, from a financial point of view issued by a nationally recognized accounting, 49 appraisal, investment banking or consulting firm that is, in the judgment of the Board of Directors of the Issuer, independent and qualified to render such opinion. The foregoing restrictions shall not apply to: (i) any transactions between Wholly Owned Restricted Subsidiaries of the Issuer, or between the Issuer and any Wholly Owned Restricted Subsidiary of the Issuer, if such transaction is not otherwise prohibited by the terms of this Indenture; (ii) Restricted Payments permitted under Section 4.10; (iii) customary directors' fees, indemnification and similar arrangements, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of the Issuer or any Restricted Subsidiary entered into in the ordinary course of business (including customary benefits thereunder); (iv) transactions undertaken pursuant to the Executive Securities Agreement, Registration Agreement, Securityholders Agreement or any similar agreement entered into after the date of this Indenture to the extent the terms of any such new agreement are not disadvantageous to the Holders of the Securities in any material respect; (v) the issue and sale by the Issuer to its shareholders of Equity Interests other than Disqualified Stock; (vi) the incurrence of intercompany Debt permitted pursuant to Section 4.12; (vii) the pledge of Equity Interests of Unrestricted Subsidiaries to support the Debt thereof; (viii) transactions that are permitted by Section 5.01; (ix) transactions effected as a part of a Qualified Securitization Transaction; (x) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of this Indenture which are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; (xi) payments made pursuant to the Consulting Agreement and the Tax Sharing Agreement; (xii) subject to the limitation set forth in the following sentence, payments made pursuant to the Management Agreement; and (xiii) transactions undertaken pursuant to the Asset Drop Down (as defined in the Final Offering Memorandum). Without limiting the foregoing after the occurrence and during the continuance of an Event of Default, the Issuer will not, nor will it permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to any Related Person in respect of management, advisory or similar services, including, without limitation, any payment pursuant to the Management Agreement; provided, that the foregoing shall not limit the ability of the Issuer or any Restricted Subsidiary to enter into transactions described in clauses (iii), (iv) and (xi) above. SECTION 4.12. Limitation on Incurrence of Debt and Issuance of Preferred Stock. (a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Debt (including Acquired Debt) and the Issuer will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time or as a consequence thereof, the Issuer may incur Debt (including Acquired Debt) or issue shares of Disqualified Stock 50 and any Restricted Subsidiary may incur Debt (including Acquired Debt) or issue preferred stock if the Consolidated Fixed Charge Coverage Ratio for the Issuer's most recently ended four full fiscal quarters for which financial statements are available immediately preceding the date on which such additional Debt is incurred or such Disqualified Stock or preferred stock is issued would have been at least 1.75 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Debt had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. (b) The provisions of Section 4.12(a) will not apply to the incurrence of any of the following items of Debt (collectively, "Permitted Debt"): (i) the incurrence by the Issuer or any of the Restricted Subsidiaries of Debt under the Senior Credit Facility (or if the Senior Credit Facility has matured or been terminated or repaid in whole or in part, any other Credit Facility) in an aggregate principal amount at any time outstanding not to exceed $165.0 million, which amount shall be reduced by (A) any required permanent repayments pursuant to the provisions of Section 4.16 (which are accompanied by a corresponding permanent commitment reduction thereunder), (B) the aggregate amount of any Debt constituting Limited Originator Recourse outstanding pursuant to clause (xi) below and (C) the principal amount of Debt outstanding pursuant to clause (x) below; (ii) (A) the incurrence by the Issuer and its Restricted Subsidiaries of Existing Debt and (B) the incurrence by Globe Manufacturing of Debt represented by the Senior Subordinated Notes outstanding on the Issue Date (and any notes issued in exchange therefore) and any guarantee by any Restricted Subsidiary of such notes; (iii) the incurrence by the Issuer of Debt represented by the Securities; (iv) the incurrence by the Issuer or any of its Restricted Subsidiaries of Permitted Refinancing Debt in exchange for, or the net proceeds of which are used to refund, refinance or replace, Debt that was permitted by this Indenture to be incurred; (v) the incurrence by the Issuer or any of its Restricted Subsidiaries of intercompany Debt between or among the Issuer and any of its Restricted Subsidiaries; provided, however, that (A) if the Issuer is the obligor on such Debt, such Debt is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Securities and (B) (1) any subsequent issuance or transfer (other than any bona fide pledge under the Senior Credit Facility) of Equity 51 Interests that results in any such Debt being held by a Person other than the Issuer or a Restricted Subsidiary and (2) any sale or other transfer (other than any bona fide pledge under the Senior Credit Facility) of any such Debt to a Person that is not either the Issuer or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Debt by the Issuer or such Subsidiary, as the case may be; (vi) the incurrence by the Issuer or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Debt that is permitted by the terms of this Indenture to be outstanding or for the purpose of fixing or hedging currency exchange risk with respect to any currency exchanges; (vii) Capitalized Lease Obligations and Purchase Money Obligations of the Issuer and its Restricted Subsidiaries not to exceed $5.0 million in aggregate principal amount (or accrued value, as applicable) at any time outstanding; (viii) Guarantees by the Issuer of Debt of any Restricted Subsidiaries otherwise permitted by this Section 4.12 and guarantees by any of the Issuer's Restricted Subsidiaries of Debt of the Issuer or any of the Issuer's Restricted Subsidiaries; (ix) Debt of the Issuer or any Restricted Subsidiary in respect of performance bonds, bankers' acceptances, trade letters of credit, workers' compensation or self-insurance, surety bonds and guarantees provided by the Issuer or any Restricted Subsidiary in the ordinary course of business; (x) Debt of Foreign Restricted Subsidiaries incurred for working capital purposes in an aggregate principal amount outstanding at any one time not to exceed the sum of 85% of the net book value of such Subsidiaries' accounts receivable determined in accordance with GAAP and 60% of the net book value of their inventory determined in accordance with GAAP and guarantees by Foreign Restricted Subsidiaries of such Debt (which Debt shall reduce the aggregate Debt permitted pursuant to clause (i) above in the manner contemplated thereby); (xi) the incurrence by (A) a Securitization Entity of Debt in a Qualified Securitization Transaction that is Non-Recourse Debt with respect to the Issuer and its other Restricted Subsidiaries (except for Standard Securitization Undertakings and Limited Originator Recourse) or (B) the Issuer or any Restricted Subsidiary of Debt 52 constituting Limited Originator Recourse (which Debt shall reduce the aggregate Debt permitted pursuant to clause (i) above in the manner contemplated thereby); (xii) Debt arising from agreements of the Issuer or a Restricted Subsidiary of the Issuer providing for indemnification, adjustment of purchase price, earn-out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Issuer, other than guarantees of Debt incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; (xiii) the incurrence by the Issuer of Subordinated Debt to repurchase Equity Interests in the Issuer from Persons who have ceased to be bona fide officers or employees of the Issuer or one or more of its Restricted Subsidiaries ("Employee Notes"); provided that the instrument governing any such Employee Note shall expressly provide that any payments in respect of such note may be made only to the extent permitted in accordance with Section 4.10; and (xiv) the incurrence by the Issuer or any of its Restricted Subsidiaries of additional Debt in an aggregate principal amount (or accrued value, as applicable) at any time outstanding, including all Permitted Refinancing Debt incurred to refund, refinance or replace any other Debt incurred pursuant to this clause (xiv), not to exceed $40.0 million (which amount may, but need not, be incurred in whole or in part under the Senior Credit Facility). (c) For purposes of determining compliance with this Section 4.12, in the event that an item of Debt meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xiii) of Section 4.12(b) or is entitled to be incurred pursuant to Section 4.12(a), the Issuer shall, in its sole discretion, classify such item of Debt in any manner that complies with this Section 4.12 and such item of Debt will be treated as having been incurred pursuant to only one of such clauses of Section 4.12(b) or pursuant to Section 4.12(a). Accrual of interest, the accretion of accrued value and the payment of interest in the form of additional Debt will not be deemed to be an incurrence of Debt for purposes of this Section 4.12. SECTION 4.13. Payment Restrictions Affecting Restricted Subsidiaries. The Issuer 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 (i) (A) pay dividends or make any other distributions to the Issuer or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with 53 respect to any other interest or participation in, or measured by, its profits, or (B) pay any indebtedness owed to the Issuer or any of its Restricted Subsidiaries, (ii) make loans or advances to the Issuer or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (A) Existing Debt, (B) the Senior Credit Facility as in effect on the date of this Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive taken as a whole with respect to such dividend and other payment restrictions than those contained in the Senior Credit Facility as in effect on the date of this Indenture (as determined by the Board of Directors of the Issuer in its reasonable and good faith judgment), (C) (1) this Indenture and the Securities and (2) the Senior Subordinated Note Indenture and the Senior Subordinated Notes, (D) applicable law, (E) any instrument governing Debt or Capital Stock of a Person acquired by the Issuer or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Debt was incurred or such encumbrance or restriction was established in connection with or in contemplation of such acquisition), 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, so acquired, provided that, in the case of Debt, such Debt was permitted by the terms of this Indenture to be incurred, (F) customary non-assignment provisions in leases and other agreements entered into in the ordinary course of business and consistent with past practices, restricting assignment or restricting transfers of non-cash assets, (G) Purchase Money Obligations for property acquired in the ordinary course of business and other Liens permitted by this Indenture, in each case that impose restrictions of the nature described in clause (iii) above on the property so acquired (or subject to such Liens), (H) Debt permitted under clause (x) of Section 4.12(b), (I) Permitted Refinancing Debt, provided that the restrictions contained in the agreements governing such Permitted Refinancing Debt are not materially more restrictive taken as a whole than those contained in the agreements governing the Debt being refinanced (as determined by the Board of Directors of the Issuer in its reasonable and good faith judgment), (J) contracts for the sale of assets or Equity Interests to the extent that any such contract imposes restrictions of the nature described in clause (iii) above on the property to be sold, (K) any pledge by the Issuer or a Restricted Subsidiary of the Equity Interests of an Unrestricted Subsidiary to support the Debt thereof, (L) secured Debt otherwise permitted to be incurred pursuant to Section 4.17 that limits the right of the debtor to dispose of the assets securing such Debt, (M) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business, (N) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, (O) any Debt or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided that such restrictions apply only to such Securitization Entity, (P) other Debt of a Restricted Subsidiary that is permitted to be incurred subsequent to the date of this Indenture pursuant to Section 4.12; provided that any 54 such restrictions are ordinary and customary with respect to the type of Debt or preferred stock being incurred or issued (under the relevant circumstances), or (Q) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (A) through (P) above, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Board of Directors of the Issuer, not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. SECTION 4.14. [Intentionally Omitted.] SECTION 4.15. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Securities may require the Issuer to repurchase all or a portion of such Holder's Securities pursuant to the offer described in Section 4.15(b) (the "Change of Control Offer") at an offer price in cash on or prior to August 1, 2003, equal to 101% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of repurchase and thereafter at a price in cash equal to 101% of the aggregate principal amount at maturity thereof plus accrued and unpaid interest thereon, if any, to the date of repurchase (the "Change of Control Payment"). Prior to the mailing of the notice referred to in Section 4.15(b), but in any event within 90 days following the date on which a Change of Control occurs, the Issuer covenants to (i) repay in full in cash all outstanding Senior Debt under the Senior Credit Facility (and terminate all commitments thereunder) and all other Senior Debt the terms of which require repayment upon a Change of Control, or (ii) obtain the requisite consents under the Senior Credit Facility and all such other Senior Debt to permit the repurchase of the Securities as provided in this Section 4.15. The Issuer shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase the Securities pursuant to the provisions described in this Section 4.15; provided that the Issuer's failure to comply with such covenant resulting in a failure to mail the notice referred to in Section 4.15(b) shall constitute an Event of Default under Section 6.01(3) and not under Section 6.01(2). (b) Within 30 days following the date upon which a Change of Control occurs (the "Change of Control Date"), the Issuer shall send, by first class mail, a notice to each Holder of the Securities, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender the Securities pursuant to the Change of Control Offer. Such notice shall state: 55 (1) that a Change of Control has occurred and that such Holder has the right to require the Issuer to repurchase all or a portion (equal to $1,000 principal amount or an integral multiple thereof) of such Holder's Securities at a purchase price in cash, on or prior to August 1, 2003, equal to 101% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of repurchase and thereafter at a price in cash equal to 101% of the aggregate principal amount at maturity thereof, plus accrued and unpaid interest to the date of purchase (the "Change of Control Payment Date"), which shall be a Business Day, specified in such notice, that is not earlier than 30 days or later than 60 days from the date such notice is mailed; (2) the amount of Liquidated Damages or accrued and unpaid interest, as the case may be, as of the Change of Control Payment Date; (3) that any Security not tendered will continue to accrete or accrue interest, as the case may be; (4) that, unless the Issuer defaults in the payment of the purchase price for the Securities payable pursuant to the Change of Control Offer, any Securities accepted for payment pursuant to the Change of Control Offer shall cease to accrete or accrue interest, as the case may be, after the Change of Control Payment Date; (5) that Holders electing to have Securities purchased pursuant to a Change of Control Offer will be required to surrender the Securities, with the forms entitled "Option of Holder to Elect Purchase" on the reverse of the Securities completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than five Business Days prior to the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount and certificate number of the Security or Securities the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security or Securities purchased; (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered, provided that each new Security will be in a principal amount of $1,000 or an integral multiple thereof; and 56 (8) such other information as may be required by applicable laws and regulations. (c) On the Change of Control Payment Date, the Issuer will, to the extent lawful, (i) accept for payment all Securities or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Trustee an amount equal to the Change of Control Payment in respect of all Securities or portions thereof so tendered , and (iii) deliver or cause to be delivered to the Trustee the Securities so accepted pursuant to such Change of Control Offer together with an Officers' Certificate stating the aggregate principal amount of Securities or portions thereof being purchased by the Issuer. The Paying Agent shall promptly mail to each Holder of Securities or portions thereof accepted for payment an amount equal to the Change of Control Payment for such Securities or portion thereof, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to such Holder of Securities accepted for payment in part a new Security or Securities equal in principal amount to any unpurchased portion of such Holder's Securities, provided that each such new Security will be in a principal amount of $1,000 or an integral multiple thereof, and any Security not accepted for payment in whole or in part shall be promptly returned to the Holder of such Security. On and after a Change of Control Payment Date, value will cease to accrete or interest will cease to accrue, as the case may be, on the Securities or portions thereof accepted for payment, unless the Issuer defaults in the payment of the purchase price therefor. The Issuer will announce the results of the Change of Control Offer to Holders of the Securities on or as soon as practicable after the Change of Control Payment Date. (d) The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (i) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 applicable to a Change of Control Offer made by the Issuer and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer or (ii) all of the Securities have been called for redemption pursuant to the provisions of Section 3.01. (e) The Issuer will comply with the requirements of Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Securities pursuant to a Change of Control Offer. To the extent the provisions of any such rule conflict with the provisions of this Section 4.15, the Issuer shall comply with the provisions of such rule and be deemed not to have breached its obligations under this Section 4.15. SECTION 4.16. Limitation on Asset Sales. (a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Issuer (or the Restricted Subsidiary, as the case may be) 57 receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors of the Issuer set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary is in the form of cash, Cash Equivalents or properties and assets to be used in the Issuer's business or Equity Interests in a Person that becomes a Restricted Subsidiary and is received at the time of such disposition; provided that the amount of any Senior Debt (as shown on the most recent consolidated balance sheet of the Issuer) of the Issuer or any Restricted Subsidiary that is assumed by the transferee of any such assets pursuant to a customary novation agreement or other agreement that releases or indemnifies the Issuer or such Restricted Subsidiary from further liability shall be deemed to be cash for purposes of this Section 4.16(a). (b) Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Issuer or such Restricted Subsidiary may apply such Net Proceeds at its option, (i) to permanently repay, reduce, or secure letters of credit in respect of, indebtedness under the Senior Credit Facility or Senior Debt of the Issuer or any Wholly Owned Restricted Subsidiary (and to correspondingly reduce commitments with respect thereto in the case of revolving borrowings), and/or (ii) to the acquisition of a controlling interest in another business, the making of a capital expenditure or Permitted Investment or the acquisition of other assets, in each case, for use in the same or a similar line of business as the Issuer or any Restricted Subsidiary was engaged in on the date of such Asset Sale or reasonable extensions thereof. Pending the final application of any such Net Proceeds, the Issuer or such Restricted Subsidiary may temporarily reduce indebtedness under the Senior Credit Facility (or any alternative or subsequent revolving credit agreement where borrowings thereunder constitute Senior Debt) or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this Section 4.16(b) will be deemed to constitute "Excess Proceeds." (c) Within 15 days after the date on which the aggregate amount of Excess Proceeds exceeds $10.0 million, the Issuer will be required to make an offer (an "Asset Sale Offer") to all Holders of Securities and holders of any other Pari Passu Debt outstanding with provisions requiring the Issuer to make an offer to purchase or redeem such indebtedness with the proceeds from any Asset Sale as follows: (i) the Issuer will make a written offer to purchase from all Holders of the Securities in accordance with the procedures set forth in this Indenture in the maximum principal amount (expressed as a multiple of $1,000) of Securities that may be purchased out of an amount (the "Security Amount") equal to the product of such Excess Proceeds multiplied by a fraction, the numerator of which is the outstanding principal amount of the Securities, and the denominator of which is the sum of the outstanding principal amount of the Securities and such Pari Passu Debt (subject to proration in the event such amount is less than the aggregate Asset Sale Offered Price of all Securities tendered), and (ii) to the extent required by such Pari Passu Debt to permanently reduce the principal amount of such Pari Passu Debt, the Issuer will make an offer to 58 purchase or otherwise repurchase or redeem Pari Passu Debt (an "Asset Sale Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the excess of the Excess Proceeds over the Security Amount; provided that in no event will the Issuer be required to make an Asset Sale Pari Passu Offer in a Pari Passu Debt Amount exceeding the principal amount of such Pari Passu Debt plus the amount of any premium required to be paid to repurchase such Pari Passu Debt. The offer price for the Securities will be payable in cash in an amount equal to (a) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, at the date such Asset Sale Offer is consummated, if consummated on or prior to August 1, 2003 and (b) 100% of the principal amount of the Securities, plus accrued and unpaid interest, if any, to the date such Asset Sale Offer is consummated, if consummated after August 1, 2003, in each case, in accordance with the procedures set forth in this Indenture. The date on which any Asset Sale is consummated is herein referred to as the "Asset Sale Offer Date" and the offer price applicable to any Asset Sale Offer is herein referred to as the "Asset Sale Offer Price." To the extent that the aggregate Asset Sale Offered Price of the Securities tendered pursuant to the Asset Sale Offer is less than the Security Amount relating thereto or the aggregate amount of Pari Passu Debt that is purchased in an Asset Sale Pari Passu Offer is less than the Pari Passu Debt Amount, the Issuer may use any remaining Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Securities and Pari Passu Debt surrendered by holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Securities to be purchased on a pro rata basis. Upon the completion of the purchase of all the Securities tendered pursuant to an Asset Sale Offer and the completion of a Pari Passu Offer, the amount of Excess Proceeds, if any, shall be reset at zero. (d) If the Issuer becomes obligated to make an Asset Sale Offer pursuant to Section 4.16(c), the Securities and the Pari Passu Debt shall be purchased by the Issuer, at the option of the holders thereof, in whole or in part in integral multiples of $1,000, on a date that is not earlier than 30 days and not later than 60 days from the date the notice of the Asset Sale Offer is given to holders, or such later date as may be necessary for the Issuer to comply with the requirements under the Exchange Act. (e) The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws or regulations in connection with an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.16, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.16 by virtue thereof. SECTION 4.17. Limitation on Liens. The Issuer will not directly or indirectly create, incur, assume or suffer to exist any Lien (other than Permitted Liens) that secures Debt or trade payables unless (i) in the case of Liens securing Subordinated Debt, the Securities are secured on a senior basis to the obligations so secured 59 until such time as such obligations are no longer secured by a Lien and (ii) in the case of Liens securing obligations under Pari Passu Debt, the Securities are equally and ratably secured with the obligations so secured until such time as such obligations are no longer secured by a Lien. SECTION 4.18. [Intentionally Omitted.] SECTION 4.19. Conduct of Business of the Issuer and Its Restricted Subsidiaries. The Issuer and its Restricted Subsidiaries will not engage in any businesses which are not the same, similar or related to the businesses in which the Issuer and its Restricted Subsidiaries are engaged as of the Issue Date (or any reasonable extension or expansion thereof), except to such extent as would not be material to the Issuer and its Restricted Subsidiaries taken as a whole. SECTION 4.20. [Intentionally Omitted.] SECTION 4.21. Rule 144A Information Requirement. The Issuer will furnish to the Holders or beneficial holders of the Securities and prospective purchasers of Securities designated by the Holders of Securities, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act for so long as is required for an offer or sale of the Securities to qualify for an exemption under Rule 144A. SECTION 4.22. Issuance and Sale of Capital Stock of Restricted Subsidiaries. The Issuer (i) will not, and will not permit any of its Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than to the Issuer or a Wholly Owned Restricted Subsidiary) and (ii) will not permit any Restricted Subsidiary to issue any of its Capital Stock to any Person other than to the Issuer or a Wholly Owned Restricted Subsidiary, in each case unless the Net Proceeds from such transfer, sale or other disposition are applied in accordance with Section 4.16. SECTION 4.23. Limitation on Sale and Lease-Back Transactions. The Issuer will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Lease-Back Transaction; provided that the Issuer or any Restricted Subsidiaries may enter into a Sale and Lease-Back Transaction if: (i) the Issuer, or such Restricted Subsidiary, if applicable, could have (A) incurred Debt in an amount equal to the Attributable Debt relating to such Sale and Lease-Back Transaction pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a) and (B) incurred a Lien to secure such Debt pursuant to Section 4.17; (ii) 60 the gross cash proceeds of such Sale and Lease-Back Transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors pursuant to a Board Resolution) of the property that is the subject of such Sale and Lease-Back Transaction; and (iii) the transfer of assets in such Sale and Lease-Back Transaction is permitted by, and the Issuer applies the proceeds of such transaction in compliance with, Section 4.16. SECTION 4.24. Payments for Consent. Neither the Issuer 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, to any Holder of any Securities for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid or agreed to be paid to all Holders of the Securities that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement, which solicitation documents must be mailed to all Holders of the Securities a reasonable length of time prior to the expiration of the solicitation. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation or Sale of Assets. The Issuer will not consolidate or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Issuer's consolidated properties or assets in one or more related transactions, to another corporation or other Person unless: (i) the Issuer is the surviving corporation or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or the Person that acquires by conveyance, transfer or lease substantially all of the properties and assets of the Issuer (the "Surviving Entity") shall be a corporation organized and validly existing under the laws of the United States or any state thereof or the District of Columbia; (ii) if the Issuer is not the surviving corporation, the Surviving Entity assumes all the obligations of the Issuer under the Securities and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction, no Default or Event of Default exists; (iv) except in the case of a merger of the Issuer with or into a Wholly Owned Restricted Subsidiary of the Issuer or a merger entered into solely for the purpose of reincorporating the Issuer in another jurisdiction, the Issuer or the Surviving Entity, as the case may be, (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Issuer immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred 61 at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Debt pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in Section 4.12(a); and (v) the Issuer or the Surviving Entity, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. SECTION 5.02. Successor Corporation Substituted. Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Issuer in accordance with Section 5.01, in which the Issuer is not the continuing corporation, the successor Person formed by such consolidation or into which the Issuer is merged or to which such sale, assignment, transfer or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture and the Securities with the same effect as if such successor had been named as the Issuer herein. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. Each of the following shall be an "Event of Default": (1) the failure to pay interest on any Securities when such interest becomes due and payable and the default continues for a period of 30 days; (2) the failure to pay the principal of or premium, if any, on any Securities when such principal or premium, if any, becomes due and payable, at maturity, upon acceleration, upon optional or mandatory redemption, upon required repurchase or otherwise (including the failure to make a payment to repurchase Securities tendered pursuant to a Change of Control Offer or an Asset Sales Offer) (whether or not such payment shall be prohibited by Article Ten); (3) the failure by the Issuer or any of its Restricted Subsidiaries to conform or comply with any covenant, agreement or warranty contained in Sections 4.15 or 4.16 or Article Five, or the corresponding provisions of the Securities, for 30 days after notice 62 thereof has been given to the Issuer by the Trustee or by the Holders of at least 25% in aggregate principal amount at maturity of the then outstanding Securities; (4) the failure by the Issuer or any of its Restricted Subsidiaries to conform or comply with any other covenant, agreement or warranty in the Securities or this Indenture for 60 days after notice thereof has been given to the Issuer by the Trustee or by the Holders of at least 25% in aggregate principal amount at maturity of the then outstanding Securities; (5) [Intentionally Omitted.] (6) a default under any mortgage, indenture, agreement or instrument under which there may be issued or by which there may be secured or evidenced any Debt for money borrowed by the Issuer or any of its Restricted Subsidiaries (other than a Securitization Entity) (or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries (other than a Securitization Entity)) whether such Debt or guarantee now exists, or is created after the date of this Indenture, which default (a) is caused by a failure to pay the principal amount of such Debt at the final Stated Maturity thereof (giving effect to any applicable grace periods and any extensions thereof) (a "Payment Default") or (b) results in the acceleration of such Debt prior to its final Stated Maturity and, in the case of either clause (a) or (b), the principal amount of any such Debt, together with the principal amount of any other such Debt under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $7.5 million or more; (7) the failure by the Issuer or any of its Significant Subsidiaries to pay final judgments aggregating in excess of $7.5 million (to the extent not covered by third party insurance as to which the insurance company has acknowledged coverage), which judgments are not paid, discharged or stayed for a period of 60 days after their entry; (8) there shall have been the entry by a court of competent jurisdiction of (a) a decree or order for relief in respect of the Issuer or any of its Significant Subsidiaries in an involuntary case or proceeding under any applicable Bankruptcy Law or (b) a decree or order adjudging the Issuer or any of its Significant Subsidiaries bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer or any of its Significant Subsidiaries under any applicable federal, state or foreign law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuer or any of its Significant Subsidiaries or of substantially all of their respective properties, or ordering the winding up or liquidation of their affairs, and any such decree or order for relief shall continue to be in effect, or any such other decree or order shall be unstayed and in effect, for a period of 60 days, provided that if any order is dismissed on appeal then such Event of Default shall be deemed cured; or 63 (9) (a) the Issuer or any of its Significant Subsidiaries commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (b) the Issuer or any of its Significant Subsidiaries consents to the entry of a decree or order for relief in respect of the Issuer or such Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (c) the Issuer or any of its Significant Subsidiaries files a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign bankruptcy law, (d) the Issuer or any of its Significant Subsidiaries (x) consents to the filing of such petition or the appointment of or taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or such Significant Subsidiary or of substantially all of their respective property, or (y) makes an assignment for the benefit of creditors or (e) the Issuer or any of its Significant Subsidiaries takes any corporate action in furtherance of any such actions in this paragraph (9). In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuer with the intention of avoiding payment of the premium that the Issuer would have had to pay if the Issuer then had elected to redeem the Securities pursuant to the optional redemption provisions of this Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Securities. If an Event of Default occurs by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuer with the intention of avoiding the prohibition on redemption of the Securities, then the premium specified in this Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Securities. If an Event of Default occurs prior to August 1, 2003, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuer with the intention of avoiding the prohibition on redemption of the Securities prior to such date, then the amount payable for purposes of this paragraph shall be the amount that would otherwise be due but for the provisions of this sentence, plus the Applicable Premium determined as of the date of payment. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in paragraph (8) or (9) of Section 6.01 with respect to the Issuer, any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) occurs and is continuing and has not been waived pursuant to Section 6.04, the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of the Securities then outstanding may declare (a) the Accreted Value of all the Securities, together with Liquidated Damages, if any, if on or prior to August 1, 2003 or (b) the principal of, and accrued but unpaid interest, if any, on all of the Securities, if after August 1, 2003, to be due and payable by notice in writing to the Issuer and the Trustee 64 specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same shall become immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in paragraph (6) of Section 6.01 has occurred and is continuing, such declaration of acceleration shall be automatically annulled if (i) the missed payments in respect of the applicable Debt have been paid or if the holders of the Debt that is subject to acceleration have rescinded their declaration of acceleration, in each case within 30 days thereof and (ii) all existing Events of Default, except non-payment of principal or interest which have become due solely because of the acceleration of the Securities, have been cured or waived. If an Event of Default specified in paragraph (8) or (9) of Section 6.01 occurs and is continuing with respect to the Issuer, any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, (a) the Accreted Value of all the Securities, together with Liquidated Damages, if any, if on or prior to August 1, 2003 or (b) the principal of and accrued but unpaid interest on all of the Securities if after August 1, 2003, 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. The Holders of a majority in aggregate principal amount at maturity of the Securities then outstanding (by written notice to the Trustee and the Issuer) may rescind and cancel a declaration of acceleration and its consequences if (i) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, (ii) all existing Events of Default have been cured or waived, except non-payment of the principal or interest on the Securities which have become due solely by such declaration of acceleration, (iii) to the extent the payment of such interest is lawful, interest (at the same rate as specified in the Securities) on overdue installments of interest and overdue payments of principal and premium, if any, which has become due otherwise than by such declaration of acceleration, has been paid, and (iv) in the event of the cure or waiver of a Default or Event of Default of the type described in paragraphs (8) and (9) of Section 6.01, the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Default or Event of Default has been cured or waived and the Trustee shall be entitled to conclusively rely upon such Officers' Certificate and Opinion of Counsel. No such rescission shall affect any subsequent Default or impair any right consequent thereto. 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, premium or Liquidated Damages, if any, or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder 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. No 65 remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. Prior to the declaration of acceleration of the Securities and subject to Sections 6.07 and 9.02, the Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except (i) a Default or Event of Default specified in Section 6.01(1) or (2) (which may only be waived with the consent of each Holder of Securities affected) or (ii) in respect of any covenant or provision hereunder which cannot be modified or amended without the consent of the Holder of each Security outstanding. SECTION 6.05. Control by Majority. The Holders of a majority in aggregate principal amount at maturity of the outstanding Securities 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 it, including, without limitation, any remedies provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may, in its discretion, refuse to follow any direction that conflicts with any law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of another Securityholder, or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee, in its discretion, which is not inconsistent with such direction. SECTION 6.06. Limitation on Suits. A Holder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee notice of a continuing Event of Default; (2) Holders of at least 25% in aggregate principal amount at maturity of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holders offer to the Trustee indemnity or security against any loss, liability or expense to be incurred in compliance with such request which is reasonably satisfactory to the Trustee; (4) the Trustee does not comply with the request within 45 days after receipt of the request and the offer of satisfactory indemnity or security; and 66 (5) during such 45-day period the Holders of a majority in aggregate principal amount at maturity of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, premium and Liquidated Damages, if any, and interest on such Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal, premium or interest specified in paragraphs (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any other obligor on the Securities for the whole amount of principal, premium and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest at the rate set forth in the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee 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, taxes, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relating to the Issuer or any other obligor upon the Securities, any of their respective creditors or any of their respective 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, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder 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 Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. The Issuer's payment obligations under this Section 67 6.09 shall be secured in accordance with the provisions of Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. Subject to Article Ten, if the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee for amounts due under Sections 6.09 and 7.07; Second: if the Holders are forced to proceed against the Issuer directly without the Trustee, to Holders for their collection costs; Third: to Holders for amounts due and unpaid on the Securities for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium and Liquidated Damages, if any, and interest, respectively; and Fourth: to the Issuer or any other obligor on the Securities, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior notice to the Issuer, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as 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 and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in aggregate principal amount at maturity of the outstanding Securities. SECTION 6.12. Restoration of Rights and Remedies. 68 If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Security 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 such case the Issuer, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If a Default or an Event of Default actually known to the Trustee 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 its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of its own affairs. (b) Except during the continuance of a Default or an Event of Default actually known to the Trustee: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and the TIA and no duties, covenants, responsibilities or obligations shall be implied in this Indenture that are adverse to the Trustee. (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 (including Officers' Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. However, as to any certificates or opinions which are required by any provision of this Indenture to be delivered or provided to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but not to verify the contents thereof. (c) Notwithstanding anything to the contrary herein contained, 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: 69 (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 Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Issuer. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may request and rely and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Sections 13.04 and 13.05. The Trustee shall not be liable for and shall be fully protected in respect of any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. 70 (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action that it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Issuer, to examine the books, records, and premises of the Issuer, personally or by agent or attorney. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders of the Securities pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred by it in compliance with such request, order or direction. (g) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability with respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Issuer, any Subsidiary of the Issuer, or their respective Affiliates, with the same rights it would have if it were not Trustee, subject to Section 7.10. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. 71 SECTION 7.04. Disclaimer of Trustee. The Trustee does not make any representation as to the validity, effectiveness or adequacy of this Indenture or the Securities, and it shall not be accountable for the Issuer's use of the proceeds from the Securities, the Trustee shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement of the Issuer in this Indenture, the Securities other than the Trustee's certificate of authentication or any document issued in connection with the sale of the Securities. SECTION 7.05. Notice of Default. If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Holder notice of the uncured Default or Event of Default within 90 days after such Default or Event of Default occurs. Except in the case of a Default or an Event of Default in payment of principal of, or premium or Liquidated Damages, if any, or interest on, any Security, including an accelerated payment and the failure to make payment on the Change of Control Payment Date pursuant to a Change of Control Offer or on the Asset Sale Offer Date pursuant to an Asset Sale Offer, and, except in the case of a failure to comply with Article Five, the Trustee may withhold the notice if and so long as its Board of Directors, the executive committee of its Board of Directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Holders. This Section 7.05 shall be in lieu of the proviso to (S)315(b) of the TIA and such proviso to (S)315(b) of the TIA is hereby expressly excluded from this Indenture and the Securities, as permitted by the TIA. The Trustee shall not be deemed to have knowledge of a Default or Event of Default other than (i) any Event of Default occurring pursuant to Section 6.01(1), 6.01(2) or 4.01; or (ii) any Default or Event of Default of which a Trust Officer shall have received written notification or obtained actual knowledge. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after May 15 of each year beginning with May 15, 1999, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and 313(c). A copy of each report at the time of its mailing to Holders shall be mailed to the Issuer and filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Issuer shall promptly notify the Trustee if the Securities become listed on any stock exchange and the Trustee shall comply with TIA (S) 313(d). 72 SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to the Trustee in its capacity as such from time to time such compensation as may be agreed upon in writing by the Issuer and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. Subject to the limitations set forth in the following paragraph, the Issuer shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by it in connection with the performance of its duties and the discharge of its obligations under this Indenture. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Issuer shall indemnify the Trustee and its agents, employees, officers, stockholders and directors for and hold them harmless against any loss, liability, damage, claim or expense incurred by them except for such loss, liability, damage, claims or expenses or actions to the extent caused by any negligence, bad faith or willful misconduct on any of their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder. The Trustee shall notify the Issuer promptly of any claim asserted against the Trustee, its agents, employees, officers, stockholders or directors for which indemnity may be sought. The Issuer shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Issuer shall pay the reasonable fees and expenses of one such counsel. The Issuer need not pay for any settlement made without its written consent, which consent shall not be unreasonably withheld. The Issuer need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee, its agents, employees, officers, stockholders or directors through its negligence, bad faith or willful misconduct. To secure the Issuer's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all assets or money held or collected by the Trustee, in its capacity as Trustee, as the case may be, except assets or money held in trust to pay principal of or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(8) or (9) occurs, such expenses and the compensation for such services shall be paid to the extent allowed under any Bankruptcy Law. The provisions of this Section 7.07 shall survive the resignation or removal of the Trustee, the discharge of the Issuer's obligations under Article Eight or any rejection or the termination of this Indenture under any Bankruptcy Law or otherwise. 73 SECTION 7.08. Replacement of Trustee. The Trustee may resign by so notifying the Issuer in writing. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Issuer in writing and the Trustee and may appoint a successor trustee. The Issuer may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Promptly after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, 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 Securityholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of at least 10% in aggregate principal amount at maturity of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. 74 SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another Person, the resulting, surviving or transferee Person without any further act shall, if such resulting, surviving or transferee Person is otherwise eligible hereunder, be the successor Trustee; provided that such Person shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee (or in the case of a corporation included in a bank holding company system, the related bank holding company) 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. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S) 310(b); provided, however, that there shall be excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuer are outstanding, if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Issuer and any other obligor of the Securities. SECTION 7.11. Preferential Collection of Claims Against the Issuer. The Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The provisions of TIA (S) 311 shall apply to the Issuer and any other obligor of the Securities. ARTICLE EIGHT DISCHARGE OF THIS INDENTURE; DEFEASANCE SECTION 8.01. Option to Effect Defeasance or Covenant Defeasance. The Issuer may, at its option, at any time, with respect to the Securities, elect to have either Section 8.02 or Section 8.03 be applied to all Securities upon compliance with the conditions set forth below in this Article Eight. 75 SECTION 8.02. Defeasance and Discharge. Upon the Issuer's exercise under Section 8.01 of the option applicable to this Section 8.02, the Issuer shall be deemed to have been discharged from its obligations with respect to all Securities on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Issuer shall be deemed to have paid and discharged the entire amount of Debt represented by the Securities, which shall thereafter be deemed to be "outstanding" until paid in full in cash only for the purposes of Section 8.05 and the other Sections of this Indenture referred to in clauses (A) and (B) below, and to have satisfied all its other obligations under such Securities and this Indenture (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following which shall survive until the Securities are paid in full in cash or otherwise terminated or discharged hereunder: (A) the rights of Holders of Securities to receive solely from the trust fund described in Section 8.04 and as more fully set forth in such Section, payments in respect of the principal of, and premium and Liquidated Damages, if any, and interest on such Securities when such payments are due, (B) the Issuer's obligations with respect to such Securities under Sections 2.03 through and including 2.11 and 2.14, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuer's obligations in connection therewith and (D) this Article Eight. Subject to compliance with this Article Eight, the Issuer may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 with respect to the Securities. SECTION 8.03. Covenant Defeasance. Upon the Issuer's exercise under Section 8.01 of the option applicable to this Section 8.03, the payment of the Securities may not be accelerated pursuant to Section 6.02 upon, or as a result of, an Event of Default set forth in Sections 6.01(3), (4), (5) or (6) with respect to the Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed to be not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed outstanding for financial accounting purposes). Except as specified above, the remainder of this Indenture and the Securities shall be unaffected by a covenant defeasance. SECTION 8.04. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 8.02 or Section 8.03 to the Securities: 76 (a) The Issuer shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 who shall agree to comply with the provisions of this Article Eight applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) cash in U.S. Dollars 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 one day before the due date of any payment, cash in U.S. Dollars 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, (i) the principal of and premium and Liquidated Damages, if any, and interest on the Securities on the Stated Maturity of such principal or installment of principal and premium and Liquidated Damages, if any, or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of the Securities; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely 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 the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (b) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or would occur as a consequence thereof (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or, insofar as Section 6.01(8) or 6.01(9) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). 77 (c) No event or condition shall exist that, pursuant to the provisions of Section 10.02 or 10.03, would prevent the Issuer from making payments of the principal of and premium and Liquidated Damages, if any, or interest on the Securities on the date of such deposit or at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (d) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Issuer or any of its Restricted Subsidiaries is a party or by which the Issuer or any of its Restricted Subsidiaries is bound. (e) In the case of an election under Section 8.02, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (x) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (y) otherwise since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such 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 defeasance had not occurred. (f) In the case of an election under Section 8.03, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the Securities 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. (g) In the case of an election under either Section 8.02 or 8.03, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that after the 91st day following the date of such deposit, such trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally. (h) In the case of an election under either Section 8.02 or 8.03, the Issuer shall represent to the Trustee that the deposit made by the Issuer pursuant to its election under Section 8.02 or 8.03 was not made by the Issuer with the intent of preferring the Holders 78 over other creditors of the Issuer or with the intent of defeating, hindering, delaying or defrauding creditors of the Issuer or others. (i) The Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the defeasance under Section 8.02 or the covenant defeasance under Section 8.03 (as the case may be) have been complied with. SECTION 8.05. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of Section 12 of the Securities, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent, to the Holders of such Securities of all sums due and to become due thereon in respect of principal and premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. Money and U.S. Government Obligations so held in trust are not subject to Article Ten or Article Twelve hereof. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or U.S. Government Obligations deposited pursuant to Section 8.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Securities. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon Issuer's request together with an Officers' Certificate any money or U.S. Government Obligations held by it as provided in Section 8.04 which are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. If any money or U.S. Government Obligations held by the Trustee for the payment of principal, premium or Liquidated Damages, if any, or interest remains unclaimed on the first anniversary of the Maturity Date of the Securities, the Trustee shall promptly, or shall cause the prompt, return of such money or U.S. Government Obligations. After the return of such money or U.S. Government Obligations, all liability of the Trustee with respect to such money or U.S. Government Obligations shall cease. SECTION 8.06. Reinstatement. 79 If the Trustee or Paying Agent is unable to apply any money in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03, as the case may be; provided, however, that, if the Issuer makes any payment of principal of or premium or Liquidated Damages, if any, or interest on any Security following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Issuer, when authorized by a Board Resolution, and the Trustee, together, may amend or supplement this Indenture or the Securities without notice to or consent of any Holder: (1) to cure any ambiguity, defect or inconsistency; provided that such amendment or supplement does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect; (2) to comply with Article V of this Indenture; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; (4) to make any change that would provide any additional rights or benefits to the Holders of the Securities or that does not adversely affect the legal rights under this Indenture of any such Holder; (5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; (6) to provide for the issuance of the Exchange Securities (which will have terms identical in all material respects to the Securities issued on the Issue Date except that the transfer restrictions contained in the Securities issued on the Issue Date will be modified or 80 eliminated, as appropriate), and which will be treated together with any outstanding Securities issued on the Issue Date, as a single issue of Securities; (7) to surrender any right or power conferred on the Issuer in accordance with the terms of this Indenture; or (8) to secure the Securities in accordance with Section 4.17; provided that the Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. Subject to Section 6.07, the Issuer, when authorized by a Board Resolution, and the Trustee, together, with the written consent of the Holder or Holders of at least a majority in aggregate principal amount at maturity of the outstanding Securities may amend or supplement this Indenture or the Securities, without notice to any other Holders. Subject to Sections 6.04 and 6.07, the Holder or Holders of a majority in aggregate principal amount at maturity of the outstanding Securities may waive compliance by the Issuer with any provision of this Indenture or the Securities without notice to any other Holders. Notwithstanding any other provision of this Indenture or the Securities, no amendment, supplement or waiver, including a waiver pursuant to Section 6.04, shall, directly or indirectly, without the consent of each Holder of each Security affected thereby: (1) reduce the principal amount of the Securities whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Security, or alter the provisions with respect to the redemption or repurchase of the Securities in a manner adverse to the Holders of the Securities (other than provisions relating to Section 4.15); (3) reduce the rate of or change the time for payment of interest on any Security; (4) waive a Default or Event of Default in the payment of principal of, premium or Liquidated Damages, if any, or interest on, the Securities (except that Holders of at least a majority in aggregate principal amount at maturity of the then outstanding Securities may (a) rescind an acceleration of the Securities that resulted from a non-payment default, and (b) waive the payment default that resulted from such acceleration); 81 (5) make any Security payable in money other than that stated in the Securities; (6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Securities to receive payments of principal of, or premium or Liquidated Damages, if any, or interest on, the Securities; (7) waive a redemption payment with respect to any Security (other than a payment required by Section 4.15); (8) make any change to the subordination provisions of this Indenture that adversely affects Holders; or (9) make any change in the foregoing amendment and waiver provisions. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective (as provided in Section 9.04), the Issuer shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. SECTION 9.03. Compliance with TIA. Every amendment, waiver or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. No amendment of this Indenture shall adversely affect in any material respect the rights of any holder of Senior Debt under Article Ten without the consent of such holder. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by notice to the Trustee or the Issuer received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite aggregate principal amount at maturity of 82 Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver (at which time such amendment, supplement or waiver shall become effective). The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (1) through (6) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of, premium or Liquidated Damages, if any, and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Issuer or the Trustee so determine, the Issuer in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. Trustee To Sign Amendments, etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to and adopted in accordance with this Article Nine; provided that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine 83 is authorized or permitted by this Indenture. Such Opinion of Counsel shall not be an expense of the Trustee. ARTICLE TEN [Intentionally Omitted.] ARTICLE ELEVEN [Intentionally Omitted.] ARTICLE TWELVE [Intentionally Omitted.] ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.01. TIA 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 13.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telecopier or first class mail, postage prepaid, addressed as follows: if to the Issuer: Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: Lawrence R. Walsh 84 Facsimile: (508) 679-9458 with a copy to: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Stephen L. Ritchie Facsimile: (312) 861-2200 if to the Trustee: Norwest Bank Minnesota, National Association Norwest Center Sixth & Marquette Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Services Facsimile: (612) 667-9825 The Issuer and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Issuer or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if faxed; and five Business Days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Holder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communications by Holders with Other Holders. Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Issuer, the Trustee, the Registrar and any other Person shall have the protection of TIA (S) (S) 312(c). 85 SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, other than with respect to the authentication of the Securities for original issuance on the Issue Date, the Issuer shall furnish to the Trustee upon the Trustee's request: (1) an Officers' Certificate, in form and substance reasonably satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed by the Issuer, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent to be performed by the Issuer, if any, provided for in this Indenture relating to the proposed action have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.06, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is reasonably necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 13.06. Rules by Trustee, Paying Agent, Registrar. 86 The Trustee may make reasonable rules in accordance with the Trustee's customary practices for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 13.07. Legal Holidays. A "Legal Holiday" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York or at such place of payment are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 13.08. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW. SECTION 13.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Issuer or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. No Recourse Against Others. A past, present or future director, officer, employee, incorporator, shareholder or limited or general partner, as such, of the Issuer or any of its Subsidiaries shall not have any liability for any obligations of the Issuer or any of its Subsidiaries under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creations. Each Holder by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. SECTION 13.11. Successors. All agreements of the Issuer in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. 87 SECTION 13.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. SECTION 13.13. Severability. In case any one or more of the provisions in this Indenture or in the Securities shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. [signature page follows] 88 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. ISSUER: Globe Holdings, Inc., a Massachusetts corporation By /s/ Thomas A. Rodgers, III ----------------------------------------------- Name: Thomas A. Rodgers, III Title: President TRUSTEE: Norwest Bank Minnesota, National Association By /s/ Curtis D. Schwegman ----------------------------------------------- Name: Curtis D. Schwegman Title: Assistant Vice President 89 EXHIBIT A-1 [Form of Security] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED THAT IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (d) SUCH TRANSFER IS EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND IS SUBJECT TO THE RECEIPT BY THE REGISTRAR (AND THE ISSUER, IF ITS SO REQUESTS) OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (ii) TO THE ISSUER OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITIES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" FOR FEDERAL INCOME TAX PURPOSES. FOR THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THIS SECURITY FOR FEDERAL INCOME TAX PURPOSES, HOLDERS MAY CONTACT THE COMPANY'S REPRESENTATIVE, LAWRENCE R. WALSH, VICE PRESIDENT, FINANCE AND ADMINISTRATION, AT (508) 674-3585. THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF 14% SENIOR DISCOUNT NOTES DUE 2009 OF THE COMPANY AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.4155 SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (I) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE OFFER (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE SECURITIES, (III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE SECURITIES IS DECLARED EFFECTIVE, (IV) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (V) SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE, THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATE FROM. BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS. A-1-2 Globe Holdings, Inc. 14% Senior Discount Note Due 2009 CUSIP No. _______ No. $ Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), for value received, promises to pay to __________ or registered assigns, the principal sum of __________ Dollars (which amount includes amortization of the original issue discount) on August 1, 2009. Interest Payment Dates: February 1 and August 1, commencing on February 1, 2004 Record Dates: January 15 and July 15 Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Issuer has caused this security to be signed manually or by facsimile by its duly authorized officers. Globe Holdings, Inc., a Massachusetts corporation By -------------------------------------- Name: Title: By -------------------------------------- Name: Title: A-1-3 Trustee's Certificate of Authentication This is one of the 14% Senior Discount Notes due 2009 referred to in the within-mentioned Indenture. Date of Authentication: Norwest Bank Minnesota, National Association, as Trustee By ------------------------------------- Authorized Signatory A-1-4 (REVERSE OF SECURITY) 14% Senior Discount Note Due 2009 1. Accreted Value and Interest. (a) The Securities will accrete in value until August 1, 2003 at a rate of 14% per annum, compounded semi-annually on February 1 and August 1 of each year to an aggregate principal amount of $49,086,000. (b) Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), promises to pay interest on the principal amount at maturity of this Security at the rate per annum shown above. Interest will not accrue or be payable on this Security prior to August 1, 2003. From August 1, 2003, interest on this Security will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from August 1, 2003. The Issuer will pay interest semi- annually in arrears on each Interest Payment Date, commencing February 1, 2004. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuer shall pay interest on overdue principal and on overdue installments of interest from time to time in accordance with Section 2.12 of the Indenture at the rate borne by the Securities to the extent lawful. 2. Method of Payment. The Issuer shall pay interest on the Securities (except defaulted interest) to the Persons who are the registered Holders at the close of business on the record date immediately preceding the Interest Payment Date even if the Securities are canceled on registration of transfer or registration of exchange after such record date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Issuer shall pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Issuer may pay principal, premium, if any, and interest by its check payable in such U.S. Legal Tender unless a Holder of Securities has given wire transfer instructions in which case the Issuer will be required to make payment of principal, premium, if any, and interest by wire transfer of immediately available funds to the accounts specified by such Holder. The Issuer may deliver any such payments to the Paying Agent or to a Holder at the Holder's registered address. All references herein to payments of principal, premium, if any, and interest on the Securities shall be deemed to include any applicable Liquidated Damages that may become payable in respect of the Securities. 3. Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Issuer may change any Paying Agent, Registrar or co- Registrar without notice to the A-1-5 Holders. The Issuer or any of its Subsidiaries may, subject to certain exceptions, act as Registrar or co-Registrar. 4. Indenture. The Issuer issued the Securities under an Indenture dated as of August 6, 1998 (the "Indenture"), between the Issuer and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). This Security is one of a duly authorized issue of Securities of the Issuer designated as its 14% Senior Discount Notes due 2009 issued on the Issue Date (the "Initial Securities"), limited (except as otherwise provided in the Indenture) in aggregate principal amount to $49,086,000, which may be issued under the Indenture. The Securities include the Initial Securities, the Private Exchange Securities and the Unrestricted Securities, as defined below, issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement. The Initial Securities, the Private Exchange Securities and the Unrestricted Securities are treated as a single class of securities under the Indenture. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are general unsecured obligations of the Issuer. Each Holder, by accepting a Security, agrees to be bound by all terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms. 5. Optional Redemption. (i) The Securities will be redeemable at the option of the Issuer, in whole or in part, at any time and from time to time on or after August 1, 2003, at the Redemption Prices (expressed as percentages of principal amount at maturity) set forth below, plus accrued and unpaid interest thereon to the applicable Redemption Date, if redeemed during the 12-month period beginning on August 1, of the years indicated below: Redemption Year Price ---- ---------- 2003 .......................................... 107.000% 2004 .......................................... 104.667% 2005 .......................................... 102.333% 2006 and thereafter............................ 100.000% (ii) At any time prior to August 1, 2001, the Issuer may on any one or more occasions redeem from the net proceeds of one or more Equity Offerings up to an aggregate of 35.0% in aggregate principal amount at maturity of the Securities at a redemption price of 114% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date; provided that at least 65% of the aggregate principal amount at maturity of Securities remains outstanding immediately after the occurrence of such redemption. A-1-6 (iii) At any time prior to August 1, 2003, the Securities may be redeemed, in whole but not in part, at the option of the Issuer at any time within 180 days a Change of Control, at a redemption price equal to the sum of (i) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date, plus (ii) the Applicable Premium. 6. Notice of Redemption. Notice of redemption shall be mailed by first- class mail, postage prepaid, mailed to such Holder's registered address, at least 30 but not more than 60 days before the Redemption Date. Securities in denominations larger than $1,000 may be redeemed in part. 7. Change of Control Offer. In the event of a Change of Control, upon the satisfaction of the conditions set forth in the Indenture, the Issuer shall be required to offer to repurchase all or a portion of the then outstanding Securities pursuant to a Change of Control Offer at a purchase price, on or prior to August 1, 2003, equal to 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of repurchase, and thereafter, equal to 101% of the principal amount at maturity thereof, plus accrued interest to the date of repurchase. Holders of Securities which are the subject of such an offer to repurchase shall receive an offer to repurchase and may elect to have such Securities repurchased in accordance with the provisions of the Indenture pursuant to and in accordance with the terms of the Indenture. 8. Limitation on Disposition of Assets. Under certain circumstances the Issuer is required to apply the net cash proceeds from Asset Sales to offer to repurchase Securities at a price equal to (a) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, at the date such Asset Sale Offer is consummated, if consummated on or prior to August 1, 2003, and (b) 100% of the aggregate principal amount thereof, plus accrued interest to the date of repurchase, if consummated after August 1, 2003. 9. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three of the Indenture, except the unredeemed portion of any Security being redeemed in part and (iii) during a Change of Control Offer or an Asset Sale Offer if such Security is tendered pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn. A-1-7 10. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 11. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Issuer. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 12. Discharge Prior to Redemption or Maturity. If the Issuer at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Securities to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Issuer will be discharged from certain provisions of the Indenture and the Securities (including certain covenants, but excluding its obligation to pay the principal of and interest on the Securities). 13. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities, provide for the assumption of the Issuer's obligations to Holders of the Securities in the event of any Disposition involving the Issuer in which the Issuer is not a Surviving Person, comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under TIA, provide for the issuance of Exchange Securities or make any other change that does not adversely affect in any material respect the legal rights under the Indenture of any Holder of a Security. 14. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Issuer and its Restricted Subsidiaries to, among other things, incur additional Debt, make payments in respect of its Equity Interests or certain Debt, enter into transactions with Related Persons, create dividend or other payment restrictions affecting Restricted Subsidiaries and merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Issuer must annually report to the Trustee on compliance with such limitations. 15. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. A-1-8 16. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of Securities then outstanding may declare all the Securities to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has been offered indemnity or security reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount at maturity of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines in good faith that withholding notice is in their interest. 17. Defeasance. The Indenture contains provisions (which provisions apply to this Security) which provide that (a) the Issuer will be discharged from any and all obligations in respect of the Securities and (b) the payment of the Securities may not be accelerated upon certain Events of Default, in each case upon compliance by the Issuer with certain conditions set forth therein. 18. Trustee Dealings with Issuer. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer, Subsidiaries of the Issuer or their respective Affiliates as if it were not the Trustee. 19. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, stockholder or limited or general partner of the Issuer or any of its Subsidiaries shall have any liability for any obligations of the Issuer or any of its Subsidiaries under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creations. Each Holder of a Security by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. 20. Authentication. This Security shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on this Security. 21. Governing Law. The laws of the State of New York shall govern this Security and the Indenture, without regard to principles of conflict of law other than Section 5-1401 of the New York General Obligations Law. 22. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). A-1-9 23. CUSIP Numbers. Pursuant to a recommendation promulgated by the committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 24. Registration Rights. Pursuant to the Registration Rights Agreement among the Issuer and the Initial Purchaser on behalf of the Holders of the Securities, the Issuer will be obligated to consummate an exchange offer pursuant to which the Holder of this Security shall have the right to exchange this Security for the Issuer's 14% Senior Discount Notes due 2009 (the "Unrestricted Securities") which will be registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Initial Securities. The Holders of the Initial Securities shall be entitled to receive certain Liquidated Damages 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. Liquidated Damages which may be payable pursuant to the Registration Rights Agreement shall be payable in the same manner as set forth herein with respect to the stated interest. The provisions of the Registration Rights Agreement relating to such Liquidated Damages are incorporated herein by reference and made a part hereof as if set forth herein in full. 25. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Issuer will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture, which has the text of this Security in larger type. Requests may be made to: Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: President Facsimile: (508) 679-9458 A-1-10 ASSIGNMENT FORM I or we assign to and transfer this Security to - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- (please print or type name and address) - ----------------------------------------------------------------------- (insert Social Security number or other identifying number of assignee) and irrevocably appoint _____________ agent to transfer this Security on the books of the Issuer. The agent may substitute another to act for him. In connection with any transfer of this Security occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Act") covering resales of this Security (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) July 31, 2000 (or such later date which is two years following the last date on which the Issuer or an affiliate of the Issuer held this Security or any predecessor Security), the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that: [Check One] [ ] (a) this Security is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder. [ ] (b) this Security 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 Security and the Indenture. A-1-11 If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Security 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. Dated: ______________ Signed: ___________________________ (Signed exactly as name appears on the other side of this Security) Signature Guarantee: __________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Security 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 Issuer 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 the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: --------------------- -------------------------------------- NOTICE: To be executed by an executive officer A-1-12 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Security purchased by the Issuer pursuant to Section 4.15 or 4.16 of the Indenture, check the appropriate Box: Section 4.15 [ ] Section 4.16 [ ] If you wish to have a portion of this Security purchased by the Issuer pursuant to Section 4.15 or 4.16 of the Indenture, state the amount you wish to have purchased: US$_________ Date: ________________ Your Signature: ________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ____________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) A-1-13 EXHIBIT A-2 THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE ISSUE PRICE IS $509.31 FOR EACH $1,000 OF PRINCIPAL AMOUNT AT MATURITY. THE ORIGINAL ISSUE DISCOUNT IS $496.72 OF PRINCIPAL AMOUNT AT MATURITY. THE ISSUE DATE IS AUGUST 6, 1998. THE YIELD TO MATURITY IS ___%, COMPOUNDED SEMI-ANNUALLY. Globe Holdings, Inc. 14% Senior Discount Note Due 2009 CUSIP No. _______ No. $ Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), for value received, promises to pay to __________ or registered assigns, the principal sum of __________ Dollars (which amount includes amortization of the original issue discount) on August 1, 2009. Interest Payment Dates: February 1 and August 1, commencing on February 1, 2004 Record Dates: January 15 and July 15 IN WITNESS WHEREOF, the Issuer has caused this security to be signed manually or by facsimile by its duly authorized officers. Globe Holdings, Inc., a Massachusetts corporation By ________________________________________ Name: Title: By ________________________________________ Name: Title: Trustee's Certificate of Authentication This is one of the 14% Senior Discount Notes due 2009 referred to in the within-mentioned Indenture. Date of Authentication: Norwest Bank Minnesota, National Association, as Trustee By _______________________________ Authorized Signatory A-2-2 (REVERSE OF SECURITY) 14% Senior Discount Note Due 2009 1. Accreted Value and Interest. (a) The Securities will accrete in value until August 1, 2003 at a rate of 14% per annum, compounded semi-annually on February 1 and August 1 of each year to an aggregate principal amount of $49,086,000. (b) Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), promises to pay interest on the principal amount at maturity of this Security at the rate per annum shown above. Interest will not accrue or be payable on this Security prior to August 1, 2003. From August 1, 2003, interest on this Security will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from August 1, 2003. The Issuer will pay interest semi- annually in arrears on each Interest Payment Date, commencing February 1, 2004. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuer shall pay interest on overdue principal and on overdue installments of interest from time to time in accordance with Section 2.12 of the Indenture at the rate borne by the Securities to the extent lawful. 2. Method of Payment. The Issuer shall pay interest on the Securities (except defaulted interest) to the Persons who are the registered Holders at the close of business on the record date immediately preceding the Interest Payment Date even if the Securities are canceled on registration of transfer or registration of exchange after such record date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Issuer shall pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Issuer may pay principal, premium, if any, and interest by its check payable in such U.S. Legal Tender unless a Holder of Securities has given wire transfer instructions in which case the Issuer will be required to make payment of principal, premium, if any, and interest by wire transfer of immediately available funds to the accounts specified by such Holder. The Issuer may deliver any such payments to the Paying Agent or to a Holder at the Holder's registered address. All references herein to payments of principal, premium, if any, and interest on the Securities shall be deemed to include any applicable Liquidated Damages that may become payable in respect of the Securities. A-2-3 3. Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Issuer may change any Paying Agent, Registrar or co- Registrar without notice to the Holders. The Issuer or any of its Subsidiaries may, subject to certain exceptions, act as Registrar or co-Registrar. 4. Indenture. The Issuer issued the Securities under an Indenture dated as of August 6, 1998 (the "Indenture"), between the Issuer and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). This Security is one of a duly authorized issue of Securities of the Issuer designated as its 14% Senior Discount Notes due 2009 issued on the Issue Date (the "Initial Securities"), limited (except as otherwise provided in the Indenture) in aggregate principal amount to $49,086,000, which may be issued under the Indenture. The Securities include the Initial Securities, the Private Exchange Securities and the Unrestricted Securities, as defined below, issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement. The Initial Securities, the Private Exchange Securities and the Unrestricted Securities are treated as a single class of securities under the Indenture. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are general unsecured obligations of the Issuer. Each Holder, by accepting a Security, agrees to be bound by all terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms. 5. Optional Redemption. (i) The Securities will be redeemable at the option of the Issuer, in whole or in part, at any time and from time to time on or after August 1, 2003, at the Redemption Prices (expressed as percentages of principal amount at maturity) set forth below, plus accrued and unpaid interest thereon to the applicable Redemption Date, if redeemed during the 12-month period beginning on August 1, of the years indicated below: Redemption Year Price ---- ---------- 2003 ............................... 107.000% 2004 ............................... 104.667% 2005 ............................... 102.333% 2006 and thereafter................. 100.000% (ii) At any time prior to August 1, 2001, the Issuer may on any one or more occasions redeem from the net proceeds of one or more Equity Offerings up to an aggregate of 35.0% in aggregate principal amount at maturity of the Securities at a redemption price of 114% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date; A-2-4 provided that at least 65% of the aggregate principal amount at maturity of Securities remains outstanding immediately after the occurrence of such redemption. (iii) At any time prior to August 1, 2003, the Securities may be redeemed, in whole but not in part, at the option of the Issuer at any time within 180 days a Change of Control, at a redemption price equal to the sum of (i) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the redemption date, plus (ii) the Applicable Premium. 6. Notice of Redemption. Notice of redemption shall be mailed by first- class mail, postage prepaid, mailed to such Holder's registered address, at least 30 but not more than 60 days before the Redemption Date. Securities in denominations larger than $1,000 may be redeemed in part. 7. Change of Control Offer. In the event of a Change of Control, upon the satisfaction of the conditions set forth in the Indenture, the Issuer shall be required to offer to repurchase all or a portion of the then outstanding Securities pursuant to a Change of Control Offer at a purchase price, on or prior to August 1, 2003, equal to 100% of the Accreted Value thereof, together with Liquidated Damages, if any, to the date of repurchase, and thereafter, equal to 101% of the principal amount at maturity thereof, plus accrued interest to the date of repurchase. Holders of Securities which are the subject of such an offer to repurchase shall receive an offer to repurchase and may elect to have such Securities repurchased in accordance with the provisions of the Indenture pursuant to and in accordance with the terms of the Indenture. 8. Limitation on Disposition of Assets. Under certain circumstances the Issuer is required to apply the net cash proceeds from Asset Sales to offer to repurchase Securities at a price equal to (a) 100% of the Accreted Value thereof, together with Liquidated Damages, if any, at the date such Asset Sale Offer is consummated, if consummated on or prior to August 1, 2003, and (b) 100% of the aggregate principal amount thereof, plus accrued interest to the date of repurchase, if consummated after August 1, 2003. 9. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three of the Indenture, except the unredeemed portion of any Security being redeemed in part and (iii) during a Change of A-2-5 Control Offer or an Asset Sale Offer if such Security is tendered pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn. 10. Persons Deemed Owners. The registered Holder of a Security shall be treated as the owner of it for all purposes. 11. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Issuer. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 12. Discharge Prior to Redemption or Maturity. If the Issuer at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Securities to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Issuer will be discharged from certain provisions of the Indenture and the Securities (including certain covenants, but excluding its obligation to pay the principal of and interest on the Securities). 13. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities, provide for the assumption of the Issuer's obligations to Holders of the Securities in the event of any Disposition involving the Issuer in which the Issuer is not a Surviving Person, comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under TIA, provide for the issuance of Exchange Securities or make any other change that does not adversely affect in any material respect the legal rights under the Indenture of any Holder of a Security. 14. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Issuer and its Restricted Subsidiaries to, among other things, incur additional Debt, make payments in respect of its Equity Interests or certain Debt, enter into transactions with Related Persons, create dividend or other payment restrictions affecting Restricted Subsidiaries and merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Issuer must annually report to the Trustee on compliance with such limitations. A-2-6 15. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. 16. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of Securities then outstanding may declare all the Securities to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has been offered indemnity or security reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount at maturity of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines in good faith that withholding notice is in their interest. 17. Defeasance. The Indenture contains provisions (which provisions apply to this Security) which provide that (a) the Issuer will be discharged from any and all obligations in respect of the Securities and (b) the payment of the Securities may not be accelerated upon certain Events of Default, in each case upon compliance by the Issuer with certain conditions set forth therein. 18. Trustee Dealings with Issuer. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer, Subsidiaries of the Issuer or their respective Affiliates as if it were not the Trustee. 19. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, stockholder or limited or general partner of the Issuer or any of its Subsidiaries shall have any liability for any obligations of the Issuer or any of its Subsidiaries under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creations. Each Holder of a Security by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. 20. Authentication. This Security shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on this Security. 21. Governing Law. The laws of the State of New York shall govern this Security and the Indenture, without regard to principles of conflict of law other than Section 5-1401 of the New York General Obligations Law. A-2-7 22. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 23. CUSIP Numbers. Pursuant to a recommendation promulgated by the committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 24. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Issuer will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture, which has the text of this Security in larger type. Requests may be made to: Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: President Facsimile: (508) 679-9458 A-2-8 [FORM OF ASSIGNMENT] I or we assign to PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER _________________________________ _________________________________________________________________ (please print or type name and address) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ the within Security and all rights thereunder, hereby irrevocably constituting and appointing _________________________________________________________________ attorney to transfer the Security on the books of the Issuer with full power of substitution in the premises. Date: ________________ Your Signature: ________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Security in every particular without alteration or enlargement or any change whatsoever and be guaranteed by the endorser's bank or broker. Signature Guarantee: _____________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) A-2-9 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Security purchased by the Issuer pursuant to Section 4.15 or 4.16 of the Indenture, check the appropriate Box: Section 4.15 [ ] Section 4.16 [ ] If you wish to have a portion of this Security purchased by the Issuer pursuant to Section 4.15 or 4.16 of the Indenture, state the amount you wish to have purchased: US$_________ Date: ________________ Your Signature: ________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ____________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) A-2-10 Exhibit B Form of Legend For Global Securities Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY OR A SUCCESSOR. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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. TRANSFERS OF GLOBAL SECURITIES SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO THE DEPOSITARY, ITS SUCCESSORS OR THEIR RESPECTIVE NOMINEES. INTERESTS OF BENEFICIAL OWNERS IN THE GLOBAL SECURITIES MAY BE TRANSFERRED OR EXCHANGED FOR CERTIFICATED SECURITIES IN ACCORDANCE WITH THE RULES AND PROCEDURES OF THE DEPOSITARY AND THE PROVISIONS OF SECTION 2.16 OF THE INDENTURE. IN ADDITION, CERTIFICATED SECURITIES SHALL BE TRANSFERRED TO ALL BENEFICIAL OWNERS IN EXCHANGE FOR THEIR BENEFICIAL INTERESTS IN GLOBAL SECURITIES IF (i) THE ISSUER NOTIFIES THE REGISTRAR THAT THE DEPOSITARY IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITARY FOR ANY GLOBAL SECURITY AND A SUCCESSOR DEPOSITARY IS NOT APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE OR (ii) THE ISSUER, AT ITS OPTION, NOTIFIES THE REGISTRAR IN WRITING THAT IT ELECTS TO CAUSE THE ISSUANCE OF SECURITIES IN DEFINITIVE FORM UNDER THE INDENTURE. B-2 EXHIBIT C Transferee Certificate for Institutional Accredited Investors Who Are Not QIBs __________, ____ Norwest Bank Minnesota, National Association, as Registrar Norwest Center Sixth & Marquette Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Services Facsimile: (612) 667-9825 Re: Globe Holdings, Inc. 14% Senior Discount Notes due 2009 ---------------------------------- Dear Sir or Madam: In connection with our proposed purchase of 14% Senior Discount Notes due 2009 (the "Securities") of Globe Holdings, Inc., a Massachusetts corporation (the "Issuer"), we confirm that: 1. We are an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an "Institutional Accredited Investor"). 2. Any purchase of Securities by us will be for our own account or for the account of one or more other Institutional Accredited Investors over which we have sole investment discretion and authority to deliver this certificate and to purchase the Securities. 3. In the event that we purchase any Securities, we will acquire Securities having a minimum purchase price of as least $100,000 for our own account and for each separate account for which we are acting. 4. We have such knowledge and experience in financial and business matters that we are capable of evaluation the merits and risks of purchasing Securities and we and any accounts for which we are acting are each able to bear the economic risks for our or their investment. 5. We have received a copy of the Offering Memorandum dated July 30, 1998, and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Issuer and receive answers thereto, as we deem necessary in connection with our decision to purchase Securities. 6. We are not purchasing Securities for or on behalf of, and will not transfer Securities to, any pension or welfare plan (as defined in Section 3 of ERISA), except as may be permitted under ERISA and as described under "Notice to Investors" in the Offering Memorandum. We understand that the Securities are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Securities have not been registered under the Securities Act or any securities laws of any State of the United States, and we agree on our own behalf and on behalf of each account for which we acquire any Securities, that such Securities may be offered, resold, pledged or otherwise transferred only (i) to a person whom we reasonably believe to be a qualified institutional buyer (as defined in Rule 144A under the Securities Act), in a transaction meeting the requirements of Rule 144 under the Securities Act, outside the United States to a non-U.S. person in a transaction meeting the requirements of Rule 904 under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Issue so requests), (ii) to the Issuer or (iii) pursuant to an effective registration statement and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. We understand that the Registrar will not be required to accept for registration any Securities, except upon presentation of evidence satisfactory to the Issuer that the foregoing restrictions on transfer have been complied with. We further understand and agree that the Securities purchased by us will bear a legend reflecting the substances of this paragraph. We agree to notify any subsequent purchasers of the Securities from us of the resale restrictions set forth above. We acknowledge that you, the Issuer and others will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. C-2 THIS CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Very truly yours, [Name of Purchaser] By_________________________________ Name: Title: C-3 EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S _______________, _______ Norwest Bank Minnesota, National Association, as Registrar Norwest Center Sixth & Marquette Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Services Facsimile: (612) 667-9825 Re: Globe Holdings, Inc. (the "Issuer") 14% Senior Secured Notes due 2009 Ladies and Gentlemen: In connection with our proposed sale of $________ aggregate principal amount of the 14% Senior Discount Notes due 2009 (the "Securities"), 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 the transfer restrictions set forth in the Securities and, accordingly, we represent that: 1. The offer of the Securities was not made to a person in the United States; 2. Either (a) at the time the buy order 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" (as defined in Rule 904 of the Securities Act) 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 Securities. You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this certificate 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_____________________________ Name: Title: D-2 EX-4.2 7 PURCHASE AGREEMENT Exhibit 4.2 Globe Holdings, Inc. 49,086 Units Consisting of $49,086,000 14% Senior Discount Notes due 2009 and Warrants to Purchase Shares of Common Stock PURCHASE AGREEMENT July 31, 1998 BANCAMERICA ROBERTSON STEPHENS 231 South LaSalle Street, 17th Floor Chicago, Illinois 60697 Ladies and Gentlemen: Globe Holdings, Inc., a Massachusetts corporation (the "Company"), hereby confirms its agreement with you (the "Initial Purchaser"), as set forth below. 1. The Units. Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Initial Purchaser 49,086 Units (the "Units") consisting of an aggregate of $49,086,000 principal amount at maturity of its 14% Senior Discount Notes due 2009 (the "Notes") and Common Stock Purchase Warrants (the "Warrants") initially entitling the holders thereof to purchase an aggregate of 69,481 shares of the Company's Class A Common Stock $.01 par value per share (the "Common Stock"). The Units are to be issued under a Unit Agreement (the "Unit Agreement") to be dated as of August 6, 1998 between the Company and Norwest Bank Minnesota, National Association, as unit agent (in such capacity, the "Unit Agent"), as trustee under the Indenture (as defined below) and as warrant agent under the Warrant Agreement (as defined below). The Notes are to be issued under an indenture (the "Indenture") to be dated as of August 6, 1998, by and between the Company and Norwest Bank Minnesota, National Association, as trustee (in such capacity, the "Trustee"). The Warrants are to be governed by a Warrant Agreement (the "Warrant Agreement") to be dated as of August 6, 1998 between the Company and Norwest Bank Minnesota, National Association, as warrant agent (in such capacity, the "Warrant Agent"). Shares of Common Stock issuable upon exercise of the Warrants are collectively referred to herein as the "Warrant Shares." The Units, the Notes, the Warrants and the Warrant Shares are sometimes collectively referred to herein as the "Securities." The Units will be offered and sold to the Initial Purchaser without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance on exemptions therefrom. In connection with the sale of the Units, the Company will prepare a final offering memorandum dated July 30, 1998 (the "Final Memorandum"), setting forth or including a description of the terms of the Units, the terms of the offering of the Units, a description of the Company and the Company's subsidiaries listed in Schedule 1 attached hereto (the "Subsidiaries") and any material developments relating to the Company and the Subsidiaries occurring after the date of the most recent historical financial statements included therein. Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Final Memorandum. The Initial Purchaser and its direct and indirect transferees of the Units and the Notes will be entitled to the benefits of the Registration Rights Agreement, substantially in the form attached hereto as Exhibit A (the "Registration Rights Agreement"), pursuant to which the Company has agreed, among other things, to file a registration statement (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") in order to register the Notes or the Exchange Notes (as defined in the Registration Rights Agreement) under the Securities Act. Holders of the Warrants will have the registration rights set forth in the Warrant Agreement. The Warrants issued to the Initial Purchasers as part of the Units will, when executed and exercised in accordance with the terms thereof, entitle the holders thereof to purchase 3% of the Company's outstanding Common Stock on a fully-diluted basis as of the Closing Date (as defined in Section 3 below). 2. Representations and Warranties. The Company represents and warrants to, and agrees with, the Initial Purchaser on the date hereof that: (a) Neither the Final Memorandum nor any amendment or supplement thereto as of the date thereof and at all times subsequent thereto up to the Closing Date contained or contains any untrue statement of a material fact or omitted or omits 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 2(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 Company in writing by or on behalf of the Initial Purchaser expressly for use in the Final Memorandum or any amendment or supplement thereto. 2 (b) The Company has the authorized capitalization set forth in the Final Memorandum. The Subsidiaries are the only subsidiaries of the Company (as the term "subsidiary" is defined in the Final Memorandum); all of the outstanding Equity Interests (as defined below) of the Company and the Subsidiaries have been, and as of the Closing Date will be, duly authorized and validly issued, are fully paid and non-assessable and were not issued in violation of any preemptive or similar rights; as of the Closing Date, the Company will own of record all of the outstanding Equity Interests of Globe Manufacturing; as of the Closing Date, all of the outstanding Equity Interests of each of the Company and the Subsidiaries will be free and clear of all liens, encumbrances, equities and claims or restrictions on voting or transferability (other than those imposed by the Senior Credit Facility (as defined in the Final Memorandum) or by the Securities Act and the securities or "Blue Sky" laws of certain jurisdictions and other than those permitted under the Indenture); except as set forth in the Final Memorandum, there are no (i) options, warrants or other rights to purchase from the Company or the Subsidiaries, (ii) agreements or other obligations of the Company or the Subsidiaries to issue or (iii) other rights to convert any obligation into, or exchange any securities for, Equity Interests in the Company or the Subsidiaries outstanding. As used herein "Equity Interest" of any person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including partnership interests, whether general or limited, of such person. (c) Each of the Company and the Subsidiaries has been duly organized, is validly existing and is in good standing under the laws of the jurisdiction of its organization, with all requisite power and authority to own its properties and conduct its business as now conducted, and as described in the Final Memorandum; each of the Company and the Subsidiaries is duly qualified to do business as a foreign corporation and is 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, individually or in the aggregate, would not (i) have a material adverse effect on the general affairs, management, business, condition (financial or otherwise), prospects or results of operations of the Company and the Subsidiaries, taken as a whole, or (ii) materially impair the ability of the Company or the Subsidiaries to perform their respective obligations contemplated by the Transaction Documents (as defined below) to which they are a party and the transactions contemplated to be performed by them described in the Final Memorandum (any such event, a "Material Adverse Effect"). This Agreement, the Unit Agreement, the Indenture, the Notes, the Exchange Notes (as defined in the Registration Rights Agreement), the Private Exchange Notes (as defined in the Registration Rights Agreement), the Warrant Agreement and the Warrants are referred to herein collectively as the "Transaction Documents." (d) The Company has all requisite power and authority to execute, deliver and perform each of its obligations under the Transaction Documents. The Notes, the Exchange Notes and the Private Exchange Notes have each been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in accordance with the provisions 3 of the Indenture and, in the case of the Notes, when delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company 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 with respect thereto may be brought. (e) The Company has all requisite power and authority to execute, deliver and perform its obligations under the Indenture. The Indenture meets the requirements for qualification under the Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly authorized by the Company and, when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its 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 with respect thereto may be brought. (f) The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and the Registration Rights Agreement. When executed and delivered by the Company (assuming the due authorization, execution and delivery by each other party thereto) each of this Agreement and the Registration Rights Agreement will constitute the valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that (A) 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 relating thereto may be brought and (B) any rights to indemnity or contribution thereunder may be limited by federal or state securities laws or public policy considerations. (g) The Company has all requisite power and authority to perform its obligations under the Unit Agreement. The Unit Agreement has been duly and validly authorized by the Company and, when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Unit Agent), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its 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 with respect thereto may be brought. 4 (h) The Company has all requisite power and authority to execute, deliver and perform its obligations under the Warrant Agreement. The Warrant Agreement has been duly and validly authorized by the Company and, when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Warrant Agent), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its 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 with respect thereto may be brought. (i) The Warrants have been duly and validly authorized for issuance and sale pursuant to this Agreement and the issuance of the Warrants will not trigger any pre-emptive, anti-dilution or similar rights. The Warrants are exercisable into Warrant Shares in accordance with the terms of the Warrant Agreement. The Warrant Shares have been duly and validly authorized by the Company and reserved for issuance upon exercise of the Warrants and, when issued upon exercise of the Warrants in accordance with the terms thereof, will be validly issued, fully paid and non-assessable. The issuance of the Warrant Shares will not trigger any anti-dilution, pre-emptive or similar rights. The Warrants and the Warrant Shares when issued and delivered, will conform in all material respects to the description thereof in the Final Memorandum. (j) No consent, approval, authorization or order of any court or governmental agency or body, or third party is required for the performance by the Company of its obligations under the Transaction Documents or the consummation by the Company of the transactions contemplated thereby or hereby, except such as shall have been made or obtained prior to the Closing Date, such as may be required in connection with the registration of the Notes, Exchange Notes or the Warrant Shares under the Securities Act in accordance with the Registration Rights Agreement or the Warrant Agreement, such as may be required under state securities or "Blue Sky" laws, such as may be required for qualification of the Indenture under the TIA and such that the failure to obtain would not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect. None of the Company or the Subsidiaries is (i) in violation of its certificate of incorporation or bylaws (or similar organizational documents), (ii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties of the Initial Purchaser in Section 8 hereof) 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, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, or (iii) in breach of 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 indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, distributor agreement, permit, certificate, contract or other agreement or instrument to which any of them is a party or to which any of them or their respective properties or assets is subject (collectively, "Contracts"), except for any 5 such breach, default, violation or event which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. (k) The issuance, sale and delivery of the Units and the execution, delivery and performance by the Company of each of the Transaction Documents, and the consummation by the Company of the transactions contemplated thereby and hereby, and the fulfillment of the terms thereof or hereof, will not conflict with or constitute or result in a breach of or a default under or an event which with notice or passage of time or both would constitute a default under or violation of or cause an acceleration of any material obligation under, or result in the imposition or creation of (or the obligation to create or impose) a lien on any property or assets of the Company with respect to (i) any of the terms or provisions of any Contract, except for any such conflict, breach, violation, default or event which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or similar organizational documents) of any of the Company or the Subsidiaries or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties of the Initial Purchaser in Section 8 hereof) any statute, judgment, decree, order, rule or regulation applicable to any of the Company or the Subsidiaries or any of their respective properties or assets, except for any such conflict, breach or violation which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. (l) The historical consolidated financial statements (including the related notes thereto) of the Company included in the Final Memorandum present fairly in all material respects the financial position, results of operations and cash flows of the Company and the 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 financial data in the Final Memorandum under the headings "Offering Memorandum Summary - Summary Consolidated Financial Data" and "Selected Consolidated Financial Data" present fairly in all material respects the information purported to be shown therein and have been prepared and compiled on a basis consistent with the financial statements included therein, except as otherwise stated therein. Ernst & Young LLP (the "Independent Accountants") is an independent public accounting firm with respect to the Company within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder, as of the dates of above-referenced financial statements. (m) The pro forma financial information included in the Final Memorandum (i) has been properly computed on the bases described therein and the assumptions used in the preparation of the pro forma financial data and other pro forma financial information included in the Final Memorandum are reasonable, and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein; and (ii) presents fairly, in all material respects, the information purported to be shown therein. 6 (n) Except as described in the Final Memorandum, there is not pending or, to the knowledge of the Company or any Subsidiary, threatened any action, suit or proceeding to which the Company, any Subsidiary or any of their respective affiliates is a party, or to which the property or assets of the Company, any Subsidiary or their respective affiliates are subject, before or brought by any court, arbitrator or governmental agency or body which, if determined adversely to the Company or any Subsidiary, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or which seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Units to be sold hereunder or the consummation of the other transactions on the Closing Date contemplated by the Transaction Documents or otherwise described in the Final Memorandum. Neither the Company nor any Subsidiary has received any notice or claim of any default (or event, condition or omission which with notice or lapse of time or both would result in a default) under any of their respective Contracts, including those referred to in the Final Memorandum, or any other Transaction Document to which it is a party or has knowledge of any breach of any of such Contracts by the other party or parties thereto, except such defaults or breaches as would not reasonably be expected to result in a Material Adverse Effect. (o) Each of the Company and the Subsidiaries owns or possesses adequate licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights and know-how necessary to conduct the businesses now or proposed to be operated by it as described in the Final Memorandum except where the failure to possess or make the same would not reasonably be expected to have a Material Adverse Effect, and none of the Company or the Subsidiaries has received any notice of infringement of or conflict with (or knows of any such infringement of or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how which, if such assertion of infringement or conflict were sustained, individually or in the aggregate, would have a Material Adverse Effect. (p) Since the date of the most recent financial statements appearing in the Final Memorandum, except as described therein or as contemplated by the Transaction Documents or the Merger Agreement, (i) neither the Company nor any Subsidiary has incurred any liabilities or obligations, direct or contingent, or entered into or agreed to enter into any transactions or contracts (written or oral) not in the ordinary course of business which liabilities, obligations, transactions or contracts, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, (ii) neither the Company nor any Subsidiary has purchased any of its outstanding Equity Interests, or declared, paid or otherwise made any dividend or distribution of any kind on its Equity Interests and (iii) there has not been any change in the long term indebtedness of the Company or any Subsidiary that, individually or in the aggregate, would have a Material Adverse Effect. Since the respective dates as of which information is given in the Final Memorandum, except as described therein, there has been no occurrence or any fact or event known to the Company which has had, or would reasonably be expected to have, a Material Adverse Effect. (q) Each of the Company and the Subsidiaries has filed all necessary federal, state 7 and foreign income and franchise tax returns required to be filed through the date hereof except where the failure to so file such returns, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, and has paid all taxes shown as due thereon prior to the date upon which penalties attach thereto, except for taxes which the Company or any Subsidiary is contesting in good faith for which adequate reserves have been established; and other than tax deficiencies which the Company or any Subsidiary is contesting in good faith and for which the Company or such Subsidiary has provided adequate reserves, there is no tax deficiency that has been asserted against the Company or any of the Subsidiaries that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. (r) The statements set forth under the heading "Description of Capital Stock" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the articles of incorporation of the Company provide a fair summary of such provisions and information with respect thereto; the statements set forth under the heading "Description of the Warrants" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Warrant Agreement, the Warrant Registration Rights Agreement and the Warrants provide a fair summary of such provisions and information with respect thereto; the statements set forth under the heading "Description of the Notes" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Notes and the Indenture, provide a fair summary of such provisions and information with respect thereto; the statements set forth under the heading "Description of Senior Credit Facility" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Senior Credit Facility provide a fair summary of such provisions and information with respect thereto; the statements set forth under the heading "Certain Relationships and Related Transactions" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Recapitalization, the Merger Agreement, the Management Agreement, the Stockholders Agreement, the Registration Agreement and the Tax Sharing Agreement (each as defined in the Final Memorandum), provide a fair summary of such provisions and information with respect thereto; the statements set forth under the subheading "Recapitalization" under the heading "Certain Relationships and Related Transactions" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Recapitalization (as defined in the Final Memorandum), provide a fair summary of such provisions and information with respect thereto. (s) The statistical and market-related data included in the Final Memorandum are based on or derived from sources which the Company believes to be reliable and accurate. (t) No part of the proceeds of the sale of the Notes will be used, directly or indirectly, for any purpose that violates any provision of Regulation T, U or X of the Board of Governors of the Federal Reserve System, in each case as in effect, or as the same may hereafter be in effect, on the Closing Date. 8 (u) Each of the Company and the Subsidiaries has good and marketable title in fee simple to all real property and owns all personal property described in the Final Memorandum as being owned by it and holds a leasehold estate in the real and personal property described in the Final Memorandum as being leased by it, in each case, free and clear of all liens, charges, encumbrances or restrictions, except (i) liens, encumbrances and claims securing the Senior Credit Facility or otherwise permitted under the Indenture, (ii) as described in the Final Memorandum or (iii) to the extent the failure to have such title or the existence of such liens, charges, encumbrances or restrictions, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All leases, contracts and agreements to which the Company or any of the Subsidiaries is a party or by which any of them is bound are valid and enforceable against the Company or the Subsidiary, as the case may be, and, to the Company's knowledge, are valid and enforceable against the other party or parties thereto (in each case, 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 with respect thereto may be brought) and are in full force and effect with only such exceptions as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. (v) Except as described in the Final Memorandum or as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect (A) each of the Company and the Subsidiaries is in compliance with and not subject to liability under applicable Environmental Laws (as defined below), (B) each of the Company and the Subsidiaries has made all filings and provided all notices required under any applicable Environmental Law, and has and is in compliance with all permits required under any applicable Environmental Laws and each of them is in full force and effect, (C) there is no civil, criminal or administrative action, suit, claim, hearing, notice of violation, investigation, proceeding, written notice or demand letter or request for information pending or, to the knowledge of the Company or any Subsidiary, threatened against the Company or any Subsidiary under any Environmental Law, (D) no lien, encumbrance or restriction has been recorded under any Environmental Law with respect to any assets, facility or property owned, operated, leased or controlled by the Company or any Subsidiary, (E) none of the Company or the Subsidiaries has received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or any comparable state law, (F) no property or facility of the Company or any Subsidiary is (i) listed or proposed for listing on the National Priorities List under CERCLA or is (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list maintained by any state or local governmental authority. For purposes of this Agreement, "Environmental Laws" means the common law and all applicable federal, state and local laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, relating to pollution or protection 9 of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of hazardous substances as defined by CERCLA, including, without limitation, petroleum, crude oil or any fraction thereof (collectively, "Hazardous Materials"), into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) and (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of Hazardous Materials. (w) There is no strike, labor dispute, slowdown or work stoppage with the employees of any of the Company or the Subsidiaries which is pending or, to the knowledge of the Company or any Subsidiary, threatened, which would reasonably be expected to have a Material Adverse Effect. No employees of the Company or any Subsidiary are covered by a collective bargaining agreement nor is any union organizing effort or campaign pending or, to the knowledge of the Company or any Subsidiary, threatened with respect to any such employees. (x) Each of the Company and the Subsidiaries maintains insurance in such amounts and covering such risks as are reasonable and customary given the nature of their respective businesses and the value of their properties. (y) None of the Company or the Subsidiaries has any liability for any prohibited transaction or accumulated funding deficiency (as defined in Section 412 of the Code) or any complete or partial withdrawal liability with respect to any pension, profit sharing or other plan which is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to which the Company or any Subsidiary makes or ever has made a contribution and in which any employee of the Company or any Subsidiary is or has ever been a participant. With respect to such plans, the Company and each Subsidiary is in compliance in all material respects with all applicable provisions of ERISA. (z) Each of the Company and the Subsidiaries (i) makes and keeps reasonably accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's general or specific authorizations, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's general or specific authorizations and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals and appropriate action has been taken with respect to any differences. (aa) None of the Company or any Subsidiary is or will be an "investment company" or "promoter" or "principal underwriter" for an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. 10 (bb) None of the Company or any Subsidiary does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes 1985, as amended, and all regulations promulgated thereunder. (cc) No condition, omission, event or act has occurred with respect to the Company or any Subsidiary which, had the Indenture already been executed and delivered, would (or, with the giving of notice and/or the lapse of time and/or the issuance of a certificate, could) constitute a Default (as defined in the Indenture). (dd) Other than holders of the Notes or the Exchange Notes pursuant to the Registration Rights Agreement and holders of the Warrants pursuant to the Warrant Agreement, no holder of securities of the Company or any Subsidiary will be entitled to have such securities registered under the registration statements required to be filed by the Company pursuant to the Registration Rights Agreement or the Warrant Agreement other than as expressly permitted thereby. (ee) Immediately after the consummation of the transactions contemplated by this Agreement (including the Related Transactions (as defined below)), the fair value and present fair saleable value of the assets of the Company (on a consolidated and going concern basis) will exceed the sum of its stated liabilities and identified contingent liabilities; the Company (on a consolidated basis) is not, nor will the Company (on a consolidated basis) be, after giving effect to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (including the Related Transactions (as defined below)), (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, or (b) unable to pay its debts (contingent or otherwise) as they mature. (ff) Assuming the accuracy of the representations and warranties of the Initial Purchaser contained in Section 8 hereof and their compliance with the agreements set forth therein, none of the Company, any Subsidiary or any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act) has directly, or through any authorized agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) which is or will be integrated with the sale of the Units in a manner that would require the registration under the Securities Act of the Units, the Notes or the Warrant Shares or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Rule 502(c) under the Securities Act) in connection with the offering of the Units or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (gg) Assuming the accuracy of the representations and warranties of the Initial Purchaser in Section 8 hereof and its compliance with the agreements set forth therein, it is not necessary in connection with the offer, sale and delivery of the Units to the Initial Purchaser in the manner contemplated by this Agreement to register any of the Units, the Notes, the Warrants or the 11 Warrant Shares under the Securities Act or to qualify the Indenture under the TIA. (hh) No securities of the Company or any Subsidiary are of the same class (within the meaning of Rule 144A under the Securities Act) as the Units, the Notes, the Warrants or the Warrant Shares and listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a United States automated inter-dealer quotation system. (ii) None of the Company or the Subsidiaries has taken, nor will any of them 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 Units, the Notes or the Warrants in violation of Regulation M under the Exchange Act. 3. Purchase, Sale and Delivery of the Units. On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, 49,086 Units at a purchase price of $500.39705 per Unit (the "Unit Purchase Price"), or an aggregate purchase price of $24,562,490 (the "Purchase Price"). The Company and the Initial Purchaser agree that, for federal income tax purposes, (i) the Notes and the Warrants constitute investment units and (ii) the aggregate issuance price of the Units is $509.31, with the aggregate issue price of the Notes being $496.72 and the aggregate issue price of the Warrants being $12.59. Neither the Company nor the Initial Purchaser shall voluntarily take any action inconsistent with the agreement set forth in the immediately preceding sentence, except that, with respect to clause (ii) thereof, any such party may, after notice to the other party, compromise or settle any audit or review of such treatment initiated by the Internal Revenue Service. One or more certificates in definitive form for the Units 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 Company at least thirty-six (36) hours prior to the Closing Date, shall be delivered by or on behalf of the Company to the Initial Purchaser on the Closing Date, against payment by or on behalf of the Initial Purchaser of the purchase price therefor by wire transfer (same day funds), to such account or accounts as the Company shall specify prior to the Closing Date, or by such means as the parties hereto shall agree prior to the Closing Date. The Units will be represented by one or more definitive global securities in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company or its designated custodian. For purposes of Rule 15c6-1 under the Exchange Act, the Closing Date shall be the date for payment of funds and delivery of securities for all the Units sold pursuant to the offering of the Units. Such delivery of and payment for the Units shall be made at the offices of Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois, at 10:00 A.M., Chicago time, on August 5, 1998, or at such other place, time or date as the Initial Purchaser and the Company may agree upon, such time and date of delivery against payment being herein referred to as the "Closing Date." The Company will make such certificate or certificates for the Units available 12 for checking and packaging by the Initial Purchaser at the offices of Winston & Strawn in Chicago, Illinois, or at such other place as the Initial Purchaser may designate, at least twenty-four (24) hours prior to the Closing Date. The Company hereby agrees to pay any transfer taxes payable in connection with the initial delivery to the Initial Purchaser of the Notes. 4. Offering by the Initial Purchaser. The Initial Purchaser proposes to make an offering of the Units 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. 5. Covenants of the Company. The Company covenants and agrees with the Initial Purchaser that: (a) The Company will not 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 have objected to by notice to the Company, unless the Company is advised by counsel that such amendment or supplement is legally required. The Company will promptly, upon the reasonable request of the Initial Purchaser or counsel for the Initial Purchaser, make any amendments or supplements to the Final Memorandum that may be necessary or advisable in connection with the resale of the Notes by the Initial Purchaser. (b) The Company will cooperate with the Initial Purchaser in arranging for the qualification of the Units for offering and sale under the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchaser may reasonably designate and will continue such qualifications in effect for as long as may be necessary to complete the resale of the Units; provided, however, that in connection herewith, the Company shall not be required to qualify as a foreign entity 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 or qualified. (c) If, at any time prior to the completion of the resale by the Initial Purchaser of the Units, any event occurs or information becomes known as a result of which, in the reasonable opinion of counsel for the Company, 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 light of the circumstances under which they were made and at the time made, not misleading, or if for any other reason it is necessary, in the reasonable opinion of counsel for the Company, at any time to amend or supplement the Final Memorandum to comply with applicable law, the Company will promptly notify the Initial Purchaser thereof and will prepare, 13 at the expense of the Company, an amendment or supplement to the Final Memorandum that corrects such statement or omission or effects such compliance. (d) The Company will, without charge, provide to the Initial Purchaser and to counsel for the Initial Purchaser as many copies of the Final Memorandum or any amendment or supplement thereto as the Initial Purchaser may reasonably request. (e) For and during the period commencing on the date hereof and ending on the date that no Units, Notes or Warrants are outstanding, the Company will furnish to the Initial Purchaser copies of all reports and other communications (financial or otherwise) furnished by the Company to the Unit Agent, the Trustee, the Warrant Agent or the holders of the Units, the Notes, the Exchange Notes or the Warrants and, as soon as available, copies of any reports or financial statements furnished to or filed by the Company with the Commission or any national securities exchange or governing body of any automated quotation system on which any class of securities of the Company may be listed. (f) Prior to the Closing Date, the Company will furnish to the Initial Purchaser, as soon as they are available to the Company, a copy of any unaudited interim financial statements of the Company and the Subsidiaries, for any period subsequent to the period covered by the most recent financial statements appearing in the Final Memorandum. (g) None of the Company, the Subsidiaries 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 Securities Act) which could be integrated with the sale of the Units in a manner which would require the registration under the Securities Act of any of the Securities. (h) None of the Company or the Subsidiaries shall, for a period of 120 days following the date hereof, without the prior written consent of the Initial Purchaser, offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any debt securities of the Company or the Subsidiaries, other than the Notes, the Exchange Notes, the Private Exchange Notes, and debt securities evidencing indebtedness under the Senior Credit Facility, indebtedness otherwise permitted under the Senior Credit Facility, indebtedness of Globe Manufacturing pursuant to the Senior Subordinated Note Offering (as defined in the Final Memorandum) or indebtedness under a loan or similar agreement entered into between the Company or Globe Manufacturing and banks or banking or other financial institutions or otherwise relating to receivables or inventory financings entered into by the Company or Globe Manufacturing. (i) Prior to the effectiveness of the Exchange Registration Statement (as defined in the Registration Rights Agreement) or the Shelf Registration Statement (as defined in the Registration Rights Agreement), as the case may be, and thereafter only to the extent contemplated by such registration statements, none of the Company or its affiliates will engage in any form of 14 general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Units or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (j) For so long as any of the Units, the Notes or the Warrants remain outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company will make available, upon request, to any holder of such securities the information specified in Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act. (k) The Company will use its reasonable best efforts to (i) permit the Units, the Notes and the Warrants to be designated PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers (the "NASD") relating to trading in the Private Offerings, Resales and Trading through Automated Linkages Market (the "Portal Market") and (ii) permit such securities to be eligible for clearance and settlement through The Depository Trust Company and its participants. 6. Expenses. The Company agrees to pay all costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 11 hereof, including all costs and expenses incident to (i) the printing, word processing or other production of documents with respect to the transactions contemplated hereby, including any costs of printing the Final Memorandum and any amendment or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements relating to the delivery to the Initial Purchaser of copies of the foregoing documents, (iii) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Company, (iv) preparation (including printing), issuance and delivery to the Initial Purchaser of the Units, (v) the qualification of the Securities under state securities and "Blue Sky" laws, including filing fees and reasonable fees and expenses of counsel for the Initial Purchaser relating thereto, (vi) reasonable fees and expenses of the Unit Agent, the Trustee and the Warrant Agent including reasonable fees and expenses of counsel thereto, (vii) all expenses and listing fees incurred in connection with the application for quotation of the Units, the Notes and the Warrants on the PORTAL Market and (viii) any fees charged by investment rating agencies for the rating of the Notes; provided, however, that except as expressly provided in the last sentence of this Section 6, the Initial Purchaser shall pay its own costs and expenses. If the sale of the Units provided for herein is not consummated because any condition to the obligations of the Initial Purchaser set forth in Section 7 hereof is not satisfied, because this Agreement is terminated pursuant to Section 11 hereof or because of any failure, refusal or inability on the part of the Company to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder (other than solely by reason of a default by the Initial Purchaser of its obligations hereunder after all conditions hereunder have been satisfied in accordance herewith), the Company agrees to promptly reimburse the Initial Purchaser upon demand for all out-of-pocket expenses (including reasonable fees and 15 expenses of Winston & Strawn, counsel for the Initial Purchaser) that shall have been incurred by the Initial Purchaser in connection with the proposed purchase and sale of the Units. 7. Conditions of the Initial Purchaser's Obligations. The obligation of the Initial Purchaser to purchase and pay for the Notes shall, in its sole discretion, be subject to the satisfaction or waiver of the following conditions on or prior to the Closing Date: (a) On the Closing Date, the Initial Purchaser shall have received (i) an opinion, dated as of the Closing Date and addressed to the Initial Purchaser, of Hale & Dorr, special counsel for the Company, in form and substance satisfactory to the Initial Purchaser, and (ii) an opinion, dated as of the Closing Date and addressed to the Initial Purchaser, of Maynard, Cooper and Gale P.C., special counsel for Globe Manufacturing, in form and substance satisfactory to the Initial Purchaser. (b) On the Closing Date, the Initial Purchaser shall have received the opinion, dated as of the Closing Date and addressed to the Initial Purchaser, of Kirkland & Ellis, counsel for the Company, in form and substance satisfactory to the Initial Purchaser. In addition, the Initial Purchaser shall have received a letter or letters permitting it to rely on any opinions rendered by counsel to MergerCo, the Company and Globe Manufacturing in connection with the Transactions. (c) On the Closing Date, the Initial Purchaser shall have received the opinion, in form and substance satisfactory to the Initial Purchaser, dated as of the Closing Date and addressed to the Initial Purchaser, of Winston & Strawn, counsel for the Initial Purchaser, with respect to certain legal matters relating to this Agreement and such other related matters as the Initial Purchaser may reasonably require. In rendering such opinion, Winston & Strawn shall have received and may rely upon such certificates and other documents and information as it may reasonably request to pass upon such matters. (d) The Initial Purchaser shall have received from the Independent Accountants a comfort letter or letters dated the date hereof and the Closing Date, in form and substance reasonably satisfactory to counsel for the Initial Purchaser. (e) The representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date; the statements of the Company's officers made pursuant to any certificate delivered in accordance with the provisions hereof shall be true and correct and as of the date made and on and as of the Closing Date; the Company shall have performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior the Closing Date; and, except as described in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), subsequent to the date of the most recent financial statements in such Final Memorandum, there shall have been no event or development that, 16 individually or in the aggregate, has or would reasonably be expected to have a Material Adverse Effect. (f) The sale of the Units hereunder shall not be enjoined (temporarily or permanently) on the Closing Date. (g) Subsequent to the date of the most recent financial statements in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), the conduct of the business and operations of the Company or the Subsidiaries shall not have been interfered with by strike, fire, flood, hurricane, accident or other calamity (whether or not insured) or by any court or governmental action, order or decree, and, except as otherwise stated therein, the properties of the Company or any Subsidiary shall not have sustained any loss or damage (whether or not insured) as a result of any such occurrence, except any such interference, loss or damage which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. (h) The Initial Purchaser shall have received a certificate of the Company, dated the Closing Date, signed by its Chairman of the Board, President or any Vice President and the Chief Financial Officer (in their respective capacities as such), to the effect that: (i) The representations and warranties of the Company contained in this Agreement are true and correct as of the date hereof and as of the Closing Date, and the Company has performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; (ii) At the Closing Date, since the date hereof or since the date of the most recent financial statements in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), no event or events have occurred, no information has become known nor does any condition exist that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (iii) The sale of the Units hereunder shall not have been enjoined (temporarily or permanently); and (iv) The Related Transactions have been consummated. As used herein, "Related Transactions" means (i) the Recapitalization of the Company (as defined in the Final Memorandum) pursuant to the Merger Agreement (as defined below), (ii) the Merger (as defined in the Final Memorandum), (iii) the CHS Loan, (iv) the repayment of the CHS Loan by the Company with the net proceeds of the offering of the Units, (v) the Asset Drop Down (as defined in the Final Memorandum), (vi) the consummation of the Senior Credit Facility and the initial borrowing by Globe Manufacturing of approximately $120 million thereunder, (vii) the repayment of all 17 outstanding obligations under the Old Credit Facility (as defined in the Final Memorandum) and the release of all liens on property of the Company granted in connection therewith and (viii) the other transactions contemplated by the Merger Agreement. As used herein, the Merger Agreement means the Agreement and Plan of Merger dated June 23, 1998, by and between the Company and Globe Acquisition Company, a newly formed affiliate of Code Hennessy & Simmons III, L.P., as amended through the date hereof. (i) On the Closing Date, the Initial Purchaser shall have received (x) the Registration Rights Agreement executed by the Company, (y) the Unit Agreement executed by the Company and the Unit Agent, the Trustee and the Warrant Agent and (z) the Warrant Agreement executed by the Company and the Warrant Agent and each such agreement shall be in full force and effect at all times from and after the Closing Date except as otherwise terminated in accordance with its terms. (j) The conditions to the obligations of MergerCo under the Merger Agreement shall have been satisfied in all material respects, and the Merger shall have been consummated in accordance with the terms of the Merger Agreement and as described in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof). (k) The Related Transactions shall have been consummated, and counsel to the Initial Purchaser shall have received such documents relating thereto and other evidence thereof as they may request in form and substance reasonably satisfactory to such counsel. (l) On the Closing Date, the Initial Purchaser shall have received certified copies of the Tax Sharing Agreement, the Management Agreement, the Registration Agreement, the Merger Agreement, the Senior Credit Facility and the agreement effecting the Asset Drop Down, each executed by the Company and/or the other signatories thereto and in form and substance reasonably satisfactory to the Initial Purchaser. (m) On the Closing Date, the Initial Purchaser shall have received the opinion dated as of the Closing Date and addressed to the Initial Purchaser of Valuation Research Corporation, regarding the solvency of the Company after giving effect to the Transactions (including the offering of the Units contemplated by the Final Memorandum), together with copies of all officers' certificates and other documents referred to therein, and such opinion and other documents shall be in form and substance reasonably satisfactory to the Initial Purchaser. (n) On the Closing Date, the Initial Purchaser shall have received evidence, in form and substance satisfactory to the Initial Purchaser, of the repayment in full of the CHS Loan. On or before the Closing Date, the Initial Purchaser and counsel for the Initial 18 Purchaser shall have received such further documents, opinions, certificates, letters and schedules or instruments relating to the business, corporate, legal and financial affairs of the Company and the Subsidiaries as they shall have heretofore reasonably requested from the Company. All such documents, opinions, certificates, letters, schedules or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory in all material respects to the Initial Purchaser and counsel for the Initial Purchaser. The Company shall furnish to the Initial Purchaser such conformed copies of such documents, opinions, certificates, letters, schedules and instruments in such quantities as the Initial Purchaser shall reasonably request. 8. Offering of Notes; Restrictions on Transfer. The Initial Purchaser agrees with the Company that (i) it has not and will not solicit offers for, or offer or sell, the Units by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and (ii) it has and will solicit offers for the Units only from, and has offered or sold and will offer, sell or deliver, the Units only to (A) in the case of offers inside the United States, (x) 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 (y) a limited number of other institutional investors reasonably believed by the Initial Purchaser to be Accredited Investors that, prior to their purchase of the Units, 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, in each case, in compliance with Regulation S under the Securities Act ("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 Units such persons are deemed to have represented and agreed as provided under the caption "Notice to Investors" contained in the Final Memorandum. 9. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless the Initial Purchaser, and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Initial Purchaser or such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact 19 contained in the Final Memorandum or any amendment or supplement thereto or any application, or any amendment or supplement thereto, prepared or executed by the Company or any Subsidiary or based upon written information furnished by or on behalf of the Company or any Subsidiary filed in any jurisdiction in order to qualify the Securities under the securities or "Blue Sky" laws thereof or filed with any securities association or securities exchange (each an "Application"); or (ii) the omission or alleged omission to state, in the Final Memorandum or any amendment or supplement thereto or any Application, a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made, not misleading, and will reimburse, promptly after demand, the Initial Purchaser and each such controlling person for any reasonable legal or other expenses reasonably incurred by the Initial Purchaser or such controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, the Company will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Final Memorandum or any amendment or supplement thereto or any Application in reliance upon and in conformity with written information concerning the Initial Purchaser furnished to the Company by the Initial Purchaser specifically for use therein. This indemnity agreement will be in addition to any liability that the Company may otherwise have to the indemnified parties. The Company shall not be liable under this Section 9 for any settlement of such claim or action effected without its consent, which shall not be unreasonably withheld. (b) The Initial Purchaser agrees to indemnify and hold harmless the Company and its directors, officers, employees, representatives, affiliates and agents and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Company or any such director, officer, employee, representative, affiliate, agent or controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Final Memorandum or any amendment or supplement thereto or any Application, or (ii) the omission or the alleged omission to state therein a material fact required to be stated in the Final Memorandum or any amendment or supplement thereto or any Application, or necessary to make the statements therein in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser, furnished to the Company by or on behalf of such Initial Purchaser specifically for use therein; and subject to the 20 limitation set forth immediately preceding this clause, will reimburse, promptly after demand, any reasonable legal or other expenses reasonably incurred by the Company or any such director, officer, employee, representative, affiliate, agent or controlling person in connection with investigating or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability that the Initial Purchaser may otherwise have to the indemnified parties. The Initial Purchaser shall not be liable under this Section 9 for any settlement of any claim or action effected without their consent, which shall not be unreasonably withheld. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action for which such indemnified party is entitled to indemnification under this Section 9, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party of the commencement thereof in writing; but the omission to so notify the indemnifying party (i) will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (a) and (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after receipt by the indemnifying party of notice of the institution of such action, then, in each such case, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action (which approval shall not be unreasonably withheld), the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) 21 in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by the Initial Purchaser in the case of paragraph (a) of this Section 9 or the Company in the case of paragraph (b) of this Section 9, representing the indemnified parties under such paragraph (a) or paragraph (b), as the case may be, who are parties to such action or actions) or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the prior written consent of the indemnifying party (which consent shall not be unreasonably withheld), unless such indemnified party waived in writing its rights under this Section 9, in which case the indemnified party may effect such a settlement without such consent. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 9 is unavailable to, or insufficient to hold harmless, an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Units or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative benefits received by the Company on the one hand and the Initial Purchaser on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the total discounts and commissions received by the Initial Purchaser on the other hand, bear to the total gross proceeds from the sale of the Units. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand, or the Initial Purchaser on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission, and any other equitable considerations appropriate in the circumstances. The Company and the Initial Purchaser agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). Notwithstanding any other provision of this paragraph (d), 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 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 the 22 omissions or alleged omissions to state a material fact, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchaser, and each director, officer, employee, representative, affiliate and agent of the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Company. 10. Survival Clause. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Company, its officers and directors and the Initial Purchaser set forth in this Agreement or made by or on behalf of them pursuant to this Agreement shall remain in full force and effect until termination of this Agreement, except as set forth in the following sentence, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, the Initial Purchaser or any controlling person referred to in Section 9 hereof and (ii) delivery of and payment for the Units. The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. 11. Termination. (a) This Agreement may be terminated in the sole discretion of the Initial Purchaser by notice to the Company given prior to the Closing Date in the event that the Company shall have failed, refused or been unable to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior thereto or, if on and after the date hereof and at or prior to the Closing Date: (i) any of the Company or the 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 dispute, slowdown or work stoppage or any legal or governmental proceeding, which loss or interference, in the sole judgment of the Initial Purchaser, has had or could be reasonably likely to have 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 the Company), 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, on the American Stock Exchange or in the Nasdaq National Market System shall have been suspended or minimum or maximum prices shall have been established on any 23 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 Units as contemplated by the Final Memorandum; or (v) any securities of the Company 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 11 shall be without liability of any party to any other party except as provided in Section 10 hereof. 12. Information Supplied by the Initial Purchaser. The statements set forth (i) in the last paragraph on the front cover page of the Final Memorandum, (ii) in the first paragraph on page i of the Final Memorandum and (iii) in the third, fourth and sixth paragraphs and in the second sentence of the fifth paragraph under the heading "Plan of Distribution" of the Final Memorandum constitute the only information furnished by the Initial Purchaser to the Company for the purposes of Sections 2(a) and 9 hereof. 13. Notices. All communications hereunder shall be in writing and, if sent to the Initial Purchaser, shall be mailed or delivered to (i) BancAmerica Robertson Stephens, 231 S. LaSalle Street, 17th Floor, Chicago, Illinois 60697, Attention: Thomas J. McGrath, with a copy to Winston & Strawn, 35 W. Wacker, Chicago, Illinois 60601, Attention: Steven J. Gavin; if sent to the Company, shall be mailed or delivered to 456 Bedford Street, Fall River, Massachusetts 02720, Attention: Chief Financial Officer; with a copy to Code, Hennessy & Simmons LLC, 10 South Wacker Drive, Chicago, Illinois 60606, Attention: Peter M. Gotsch, and to Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, Attention: Laurie T. Gunther. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; and one business day after being timely delivered to a next-day air courier. 24 14. Successors. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser, the 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 provisions herein contained; this Agreement and all conditions and provisions hereof being intended 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 the Company contained in Section 9 of this Agreement shall also be for the benefit of any person or persons who control the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchaser contained in Section 9 of this Agreement shall also be for the benefit of the directors, officers, employees, representatives, affiliates and agents and any person or persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act. No purchaser of the Units from the Initial Purchaser will be deemed a successor because of such purchase. 15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW. 16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17. Effective Date. This Agreement shall be deemed effective as of July 30, 1998. [Signature pages follow] 25 If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and the Initial Purchaser. Very truly yours, GLOBE HOLDINGS, INC. By /s/ Lawrence R. Walsh --------------------------- Name: Lawrence R. Walsh Title: Vice President, Finance and Administration Treasurer and Assistant Clerk The foregoing Agreement is hereby confirmed and accepted as of the date first above written. BANCAMERICA ROBERTSON STEPHENS By: /s/ Thomas J. McGrath ------------------------------ Title: Managing Director Schedule 1 Subsidiaries of the Company
Jurisdiction of Name Incorporation - ----------------------------------------------------------- --------------- Globe Manufacturing Corp. Alabama Globe Manufacturing FSC Ltd. Barbados
Exhibit A Form of Registration Rights Agreement EX-4.3 8 REGISTRATION RIGHTS AGREEMENT Exhibit 4.3 EXECUTION COPY - -------------------------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT Dated as of August 6, 1998 Between GLOBE HOLDINGS, INC. and BANCAMERICA ROBERTSON STEPHENS as Initial Purchaser - -------------------------------------------------------------------------------- $49,086,000 14% SENIOR DISCOUNT NOTES DUE 2009 TABLE OF CONTENTS
Page 1. Definitions............................................................. 1 2. Exchange Offer.......................................................... 4 3. Shelf Registration...................................................... 7 4. Liquidated Damages...................................................... 8 5. Registration Procedures.................................................10 6. Registration Expenses...................................................18 7. Indemnification.........................................................19 8. Rule 144 and 144A.......................................................22 9. Underwritten Registrations..............................................22 10. Miscellaneous...........................................................23 (a) No Inconsistent Agreements.........................................23 (b) Adjustments Affecting Registrable Notes............................23 (c) Amendments and Waivers.............................................23 (d) Notices............................................................23 (e) Successors and Assigns.............................................25 (f) Counterparts.......................................................25 (g) Headings...........................................................25 (h) Governing Law......................................................25 (i) Severability.......................................................26 (j) Notes Held by the Company or its Affiliates........................26 (k) Third Party Beneficiaries..........................................26
REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is dated as of August 6, 1998, by and between Globe Holdings, Inc., a Massachusetts corporation (the "Company"), and BancAmerica Robertson Stephens (the "Initial Purchaser"). This Agreement is entered into in connection with the Purchase Agreement, effective as of July 30, 1998, between the Company and the Initial Purchaser (the "Purchase Agreement"), which provides for the sale to the Initial Purchaser of Units (the "Units") consisting of an aggregate of $49,086,000 principal amount at maturity of 14% Senior Discount Notes due 2009 of the Company (the "Notes") and Warrants (the "Warrants") to purchase shares of the Company's Common Stock, $0.01 par value per share. The Notes and the Warrants will be separately transferable at the close of business upon the earliest to occur of (i) the date that is six months after the Issue Date (as defined below) (ii) the commencement of the Exchange Offer (as defined below), (iii) the date a Shelf Registration Statement (as defined below) is declared effective, (iv) a Change of Control (as defined in the Indenture and (v) such date as the Initial Purchaser may in its sole discretion deem appropriate. In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchaser and its direct and indirect transferees. The execution and delivery of this Agreement is a condition to the obligation of the Initial Purchaser to purchase the Units 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: Advice: See the last paragraph of Section 5 hereof. Agreement: See the first introductory paragraph hereto. Applicable Period: See Section 2(b) hereof. Closing Date: The Closing Date as defined in the Purchase Agreement. Company: See the first introductory paragraph hereto. Effectiveness Date: The 150th day after the Issue Date; provided, however, that with respect to any Shelf Registration, the Effectiveness Date shall be the 90th day after the Filing Date with respect thereto. Effectiveness Period: See Section 3(a) hereof. Event Date: See Section 4(b) hereof. 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) hereof. Exchange Offer: See Section 2(a) hereof. Exchange Registration Statement: See Section 2(a) hereof. Expiration Date: See Section 2(a) hereof. Filing Date: (A) In the case of an Exchange Registration Statement, the 60th day after the Issue Date; or (B) in the case of a Shelf Registration (which may be applicable notwithstanding the consummation of the Exchange Offer), the 60th day after a Shelf Notice is required to be delivered pursuant to this Agreement. Holder: Any record holder of a Registrable Note or Registrable Notes. Indemnified Person: See Section 7(c) hereof. Indemnifying Person: See Section 7(c) hereof. Indenture: The Indenture, dated as of August 6, 1998 between the Company and Norwest Bank Minnesota, National Association, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. Initial Purchaser: See the first introductory paragraph hereto. Inspectors: See Section 5(o) hereof. Issue Date: August 6, 1998, the date of original issuance of the Notes. Liquidated Damages: See Section 4(a) hereof. NASD: See Section 5(s) hereof. Offering Memorandum: The final offering memorandum of the Company dated July 30, 1998, in respect of the offering of the Notes. 2 Participant: See Section 7(a) hereof. Participating Broker-Dealer: See Section 2(b) hereof. Person: An individual, trustee, corporation, partnership, limited liability company, limited liability limited partnership, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. Private Exchange: See Section 2(b) hereof. Private Exchange Notes: See Section 2(b) hereof. Prospectus: The prospectus included in any Registration Statement (including, without limitation, any 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, and all other amendments and supplements to the Prospectus, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the second introductory paragraph hereto. Records: See Section 5(o) hereof. Registrable Notes: Each Note upon its original issuance and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until in the case of any such Note, Exchange Note or Private Exchange Note, as the case may be, the earliest to occur of (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Registration Statement) covering such Note, Exchange Note or Private Exchange Note, as the case may be, has been declared effective by the SEC and such Note (unless such Note was not tendered for exchange by the Holder thereof), Exchange Note or Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case may be, is sold in compliance with Rule 144, or (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture. Registration Statement: Any registration statement of the Company, including, but not limited to, the Exchange Registration Statement, that 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 3 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. 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 Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. Shelf Notice: See Section 2(c) hereof. Shelf Registration: See Section 3(a) hereof. Shelf Registration Statement: See Section 3(a) hereof. 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 for reoffering to the public. 2. Exchange Offer. (a) The Company agrees to file with the SEC no later than the Filing Date a registration statement with respect to an offer to exchange (the "Exchange Offer") any and all of the Registrable Notes (other than the Private Exchange Notes, if any) for a like aggregate principal amount of senior discount debt securities of the Company which are identical in all material respects to the Notes (the "Exchange Notes") and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the 4 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 qualified under the TIA, except that the Exchange Notes (other than Private Exchange Notes, if any) shall have been registered pursuant to an effective Registration Statement under the Securities Act and shall contain no restrictive legend thereon. The Exchange Offer shall be registered under the Securities Act on the appropriate form (the "Exchange Registration Statement") and shall 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 be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20 business days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders (the last day of such period, the "Expiration Date"); and (z) consummate the Exchange Offer on or prior to the 180th day following the Issue Date. Each Holder who participates in the Exchange Offer will be required to represent to the Company that any Exchange Notes to be 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 in violation of the provisions of the Securities Act, that such Holder is not an affiliate of any of the Company within the meaning of the Securities Act and that such Holder is not acting on behalf of any Person who could not truthfully make the foregoing representations. Upon consummation of the Exchange Offer in accordance with this Section 2, the Company shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Registration Statement. (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 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 judgment of the Initial Purchaser, represent the prevailing views of the Staff of the SEC. Such "Plan of Distribution" section shall also expressly permit 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 any Participating Broker-Dealer subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes; provided, however, that such period shall not exceed 180 days following the first bona fide offering of securities under such 5 Registration Statement (or such longer period if extended pursuant to the last paragraph of Section 5 hereof)(the "Applicable Period"). Notwithstanding the foregoing, the Company shall have no obligation to keep the Exchange Registration Statement effective or to amend and supplement the Prospectus contained therein in the event that the Company has not received written notice within 30 days following the completion of the Exchange Offer that a Participating Broker-Dealer received Exchange Notes in the Exchange Offer. If, prior to consummation of the Exchange Offer, the Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Company shall, upon the request of the Initial Purchaser, 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 such Notes held by the Initial Purchaser a like principal amount of debt securities of the Company that are identical to the Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant to the same indenture as the Exchange Notes) except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and the Private Exchange Notes will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange Offer, the Company shall: (1) mail or cause to be mailed to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, the City of New York; (3) 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; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall: (1) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; 6 (2) deliver to the Trustee for cancellation all Notes so accepted for exchange; and (3) 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 shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture, which in either event shall provide that (1) the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture and (2) the Private Exchange Notes shall be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter. (c) If, (i) because of any change in law or in currently prevailing interpretations of the Staff of the SEC, the Company reasonably determines in good faith that it is not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests at any time after the consummation of the Private Exchange, or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of the Company within the meaning of the Securities Act) and any such Holder so requests in writing to the Company, then the Company shall promptly (and, in any event, within five business days) deliver to the Holders and the Trustee written notice thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to Section 3 hereof; provided, that the Company shall have no obligation to deliver a Shelf Notice or file a Shelf Registration Statement pursuant to clause (ii) above if the Exchange Registration Statement has been declared effective by the SEC and the scheduled expiration date of the Exchange Offer is less than 195 days after the Issue Date. 3. Shelf Registration. If a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then: (a) Shelf Registration. The Company shall as promptly as reasonably practicable 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 "Shelf Registration"). The Company shall use its best efforts to file with the SEC the Shelf Registration on or before the applicable Filing Date. The Shelf Registration shall be on Form S-1 or another appropriate form (the "Shelf Registration Statement") permitting registration of such Registrable Notes for resale by 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 Shelf Registration. 7 The Company shall use its commercially reasonable efforts to cause the Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Shelf Registration continuously effective under the Securities Act until the date which is two years from the date on which the SEC declares such Shelf Registration Statement effective, subject to extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter period ending when all Registrable Notes covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration. (b) Withdrawal of Stop Orders. If the Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of 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. (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 of such Registrable Notes. 4. Liquidated Damages. (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, under the circumstances and to the extent set forth below, liquidated damages ("Liquidated Damages") shall become payable in respect of the Notes as follows (each clause below being given independent effect): (i) if the Exchange Registration Statement or any Shelf Registration has not been filed on or prior to the applicable Filing Date, Liquidated Damages shall accrue on the principal amount at maturity of the Notes at a rate of 0.50% per annum for the first 90 days immediately following such Filing Date, such Liquidated Damages increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; (ii) if (A) the Exchange Registration Statement is not declared effective by the SEC on or prior to the relevant Effectiveness Date or (B) notwithstanding that the Company has consummated or will consummate the Exchange Offer, the Company is required to file a Shelf Registration and such Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date in respect of such Shelf Registration, then, commencing on the day after either such Effectiveness Date, Liquidated Damages shall accrue on the principal amount at maturity of the Notes at a rate of 0.50% per annum for the first 90 days immediately following such date, such Liquidated Damages increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; and 8 (iii) if (A) the Company has not exchanged Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 180th day after the Issue Date or (B) the Exchange Registration Statement ceases to be effective at any time prior to the Expiration Date or (C) if applicable, the Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period (unless all Notes have been sold thereunder), then Liquidated Damages shall accrue on the principal amount at maturity of the Notes at a rate of 0.50% per annum for the first 90 days commencing on (x) the 181st day after the Issue Date in the case of (A) above, or (y) the day the Exchange Registration Statement ceases to be effective in the case of (B) above, or (z) the day such Shelf Registration ceases to be effective in the case of (C) above, such Liquidated Damages increasing by an additional 0.25% per annum at the beginning of each such subsequent 90-day period; provided, however, that the Liquidated Damages as a result of the provisions of clauses (i), (ii) and (iii) above may not exceed in the aggregate 2.0% per annum; and provided, further, that (1) upon the filing of the Exchange Registration Statement or a Shelf Registration (in the case of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange Registration Statement or the Shelf Registration (in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of Exchange Notes for all Notes tendered and not withdrawn (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf Registration which had ceased to remain effective (in the case of (iii)(C) of this Section 4(a)), Liquidated Damages on the Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Company shall notify the Trustee within five business days after each and every date on which an event occurs in respect of which Liquidated Damages are required to be paid (an "Event Date"). Any amounts of Liquidated Damages due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable to the Holders of affected Notes in cash semi-annually on each February 1 and August 1 in each year (to the holders of record on the January 15 and July 15 immediately preceding such dates), commencing with the first such date occurring after any such Liquidated Damages commence to accrue. The amount of Liquidated Damages will be determined by multiplying the applicable rate of Liquidated Damages by the principal amount at maturity of the Notes, multiplied by a fraction, the numerator of which is the number of days such Liquidated Damages rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 5. Registration Procedures. In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall effect such registration(s) to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant 9 thereto and in connection with any Registration Statement filed by the Company hereunder, the Company shall: (a) Prepare and file with the SEC prior to the applicable Filing Date a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof, and use its best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof 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 covered by such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, 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 (in each case at least five business days prior to such filing). The Company shall not file any Shelf Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity 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 Shelf Registration Statement, their counsel, or the managing underwriters, if any, shall reasonably object. (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 or until consummation of the Exchange Offer, 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) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it 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 paragraph 5(j) hereof and the last paragraph of this Section 5. (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period and who has notified the Company in writing that 10 it will be a Participating Broker-Dealer on or prior to 30 days following the completion of the Exchange Offer, the Company shall notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within five business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment 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 or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Company contained in any agreement (including any underwriting agreement), contemplated by Section 5(l) hereof 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, the existence of any condition 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 light of the circumstances under which they were made, not misleading, and (vi) of the determination by the Company that a post- effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof 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 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. 11 (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters (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 such information about the Company as the managing underwriter or underwriters (if any), such Holders, or counsel for any of them reasonably request to be included therein and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof 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 upon request to counsel and each managing underwriter, if any, at the sole expense of the Company, 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. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof 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 respective counsel, and the underwriters, if any, at the sole expense of the Company, 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 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 such Registrable Notes (and to cooperate with 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) for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, 12 Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request in writing; provided, however, 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); use its best efforts to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective hereunder 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, however, 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 any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, 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. (j) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof 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) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole 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, 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 light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be required to amend or supplement a Registration Statement, any related Prospectus or any document incorporated therein by reference, in the event that, and for a period not to exceed an aggregate of 45 days in any calendar year if, (i) any event occurs and is continuing as a result of which a Shelf Registration Statement would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (ii)(a) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or 13 prospects of the Company or (b) the disclosure otherwise relates to a pending material business transaction that has not been publicly disclosed. (k) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes or Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as the case may be. (l) In connection with any 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 in form and substance reasonably satisfactory to the Company and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the 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 incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) obtain the written opinion of counsel to the Company and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt similar to the Notes; (iii) use its best efforts to obtain "cold comfort" letters and updates thereof in form, scope 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 or any of its subsidiaries for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and substantially in the form delivered to the Initial Purchaser under the Purchase Agreement; 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. (m) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, subject to prior receipt of appropriate confidentiality agreements, make available for inspection by one representative of the selling Holders of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any 14 attorney, accountant or other agent retained by any such selling Holders or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments 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 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, (iii) disclosure of such information is, in the opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or reasonably likely to involve such Inspector and arising out of, based upon, relating to, or involving this Agreement, or any transactions contemplated hereby or arising hereunder, or (iv) the information in such Records has been made generally available to the public; provided, further, however, that prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clauses (i), (ii), (iii) or (iv) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this paragraph (m)) and that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable). Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer 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 as the basis for any market transactions in the securities of the Company or any of its subsidiaries unless and until such information is 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 prior notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the Records deemed confidential at the Company's, sole expense. (n) 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) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any 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. 15 (o) Comply with all applicable rules and regulations of the SEC to the extent and so long as they are applicable to the Exchange Registration Statement or the Shelf Registration Statement 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 60 days after the end of any 12-month period (or 120 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. (p) 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 Registrable Notes that such Registrable Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (q) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, 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"). (r) Upon consummation of the Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Company, in a form customary for underwritten transactions, 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, that the Exchange Notes or Private Exchange Notes, as the case may be, and the related indenture constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, subject to customary exceptions and qualifications. 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 as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Notes or Exchange Notes of any seller or Participating Broker-Dealer who fails to furnish such information within a reasonable time after receiving such request. Each seller or Participating Broker-Dealer as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such seller or Participating Broker-Dealer not materially misleading and to promptly notify the Company following any sale or other 16 transfer of Registrable Notes covered by the Shelf Registration Statement, which notice shall specify the amount of securities involved and the market, if any, on which such sale or transfer occurred. 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 actual 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) hereof, 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 or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(j) hereof, 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 amendments or supplements thereto. In the event the Company shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y) the Advice; provided, however, that nothing in this paragraph shall be construed to require the Company to keep a Registration Statement effective at a time when all of the Registrable Notes covered thereby may be sold under Rule 144. 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) hereof, 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 requested by the managing underwriter or underwriters, if any, or by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or sold by any Participating Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery expenses incurred by the Company, (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 17 Section 6(b) hereof), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(l)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees, if any, and any fees associated with making the Registrable Notes or Exchange Notes eligible for trading through The Depository Trust Company, (vii) Securities Act liability insurance, if the Company desires such insurance, (viii) fees and expenses of all other Persons retained by the Company, (ix) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (x) the expense of any annual audit of the Company, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable, and (xii) the expenses relating to printing, word processing and distributing all Registration Statements and any other documents necessary in order to comply with this Agreement. (b) In the event the Company is required to file a Shelf Registration Statement pursuant to a Shelf Notice delivered pursuant to Section 2(c)(ii) hereof, the Company, shall reimburse the Holders of the Registrable Notes being registered in a Shelf 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 Shelf Registration Statement. 7. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of Registrable Notes offered pursuant to a Shelf Registration Statement 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 actually 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 pursuant to which the offering of such Registrable Notes or Exchange Notes, as the case may be, is registered (or any amendment thereto) or related Prospectus (or any amendments or supplements thereto) or any related preliminary prospectus, or caused by, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company will not be required to indemnify a Participant if (i) 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 furnished to the Company in writing by or on behalf of such Participant expressly for use therein or (ii) if such Participant sold to the person asserting the claim the Registrable Notes or Exchange Notes which are the subject of such claim and such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or any amendment 18 or supplement thereto and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and it is established by the Company in the related proceeding that such Participant failed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Registrable Notes or Exchange Notes sold to such Person if required by applicable law, unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) or as a result of noncompliance by the Company with Section 5 of this Agreement. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors and officers, employees, representatives, affiliates and agents and each Person who controls the Company 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 (i) with reference to information relating to such Participant furnished to the Company in writing by or on behalf of such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus or (ii) with respect to any untrue statement or representation made by such Participant in writing to the Company. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange 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 of the two preceding paragraphs, 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 Person, shall retain 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 actually incurred by such counsel related to such proceeding; provided, however, that the failure to so notify the Indemnifying Person shall not relieve it of any obligation or liability which it may have hereunder or otherwise (unless and only to the extent that such failure directly results in the loss or compromise of any material rights or defenses by the Indemnifying Person and the Indemnifying Person was not otherwise aware of such action or claim). 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 shall have failed within a reasonable period of 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 representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that, unless there exists a conflict among Indemnified Persons, the Indemnifying Person shall not, in connection with any one such proceeding or separate but substantially similar related 19 proceedings in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed promptly after demand 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 and Exchange Notes sold by all such Participants and any such separate firm for the Company, its directors, officers, employees, representatives, agents and affiliates 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 prior written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, the Indemnifying Person agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the prior written consent of the Indemnified Person (which consent shall not be unreasonably withheld), effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in the first and second paragraphs of this Section 7 is for any reason unavailable to, or insufficient to hold harmless, 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 and in order to provide for just and equitable contribution, 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 (i) the relative benefits received by the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other from the offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. 20 (e) The parties 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, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. (f) 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. Rule 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 in accordance with the requirements of the Securities Act and the Exchange Act 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, provide other information so long as necessary to permit sales pursuant to Rule 144 and Rule 144A. The Company further covenants for so long as any Registrable Notes remain outstanding, to make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A. 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 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 21 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 required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) No Inconsistent Agreements. The Company has not, as of the date hereof, and 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 nor will it enter into any agreement with respect to any of its securities which will grant to any Person piggy-back registration rights with respect to a Registration Statement. (b) 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. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Company and the Holders of not less than a majority in aggregate principal amount of the then outstanding 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 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, however, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. (d) 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 facsimile: 1. if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture, with a copy in like manner to the Initial Purchaser as follows: 22 BancAmerica Robertson Stephens 231 S. LaSalle Street 17th Floor Chicago, Illinois 60697 Facsimile No: (312) 828-5539 Attention: Thomas J. McGrath with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Facsimile No: (312) 558-5700 Attention: Steven J. Gavin 2. if to the Initial Purchaser, at the addresses specified in Section 10(d)(1); 3. if to the Company, as follows: Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Facsimile No: (508) 679-9458 Attention: President with copies to: Code Hennessy & Simmons LLC 10 South Wacker Drive Suite 3175 Chicago, Illinois 60606 Facsimile No: (312) 876-3884 Attention: Peter M. Gotsch and Kirkland & Ellis 200 East Randolph Chicago, Illinois 60601 Facsimile No: (312) 861-2000 Attention: Laurie T. Gunther 23 All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes. (f) 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. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) 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 WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT T0 THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) 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 reasonable 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. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) 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 24 Notes held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third Party Beneficiaries. Holders of Registrable Notes and Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. [Signature pages follow] 25 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. GLOBE HOLDINGS, INC., a Massachusetts corporation By: /s/ Thomas A. Rodgers, III ------------------------------ Name: Thomas A. Rodgers, III Title: President The foregoing Agreement is hereby confirmed and accepted as of the date first above written: BANCAMERICA ROBERTSON STEPHENS By: /s/ Thomas J. McGrath --------------------------- Name: Thomas J. McGrath Title: Managing Director 26 EX-4.4 9 UNIT AGREEMENT Exhibit 4.4 EXECUTION COPY =============================================================================== UNIT AGREEMENT Between GLOBE HOLDINGS, INC. and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Unit Agent, Warrant Agent and Trustee Dated as of August 6, 1998 =============================================================================== TABLE OF CONTENTS
Page SECTION 1. Appointment of Unit Agent......................................... 1 SECTION 2. Unit Certificates................................................. 2 SECTION 3. Execution of Unit Certificates.................................... 2 SECTION 4. Registration and Authentication................................... 3 SECTION 5. Registration of Transfers and Exchanges........................... 3 SECTION 6. Separation of the Notes and the Warrants.......................... 7 SECTION 7. Rights of Unit Holders............................................ 8 SECTION 8. Unit Agent........................................................ 8 SECTION 9. Resignation and Appointment of Successor..........................10 SECTION 10. Notices to the Company and Unit Agent, Trustee and Warrant Agent..12 SECTION 11. Supplements and Amendments........................................13 SECTION 12. Successors........................................................13 SECTION 13. Governing Law.....................................................13 SECTION 14. Benefits of This Agreement........................................13 SECTION 15. Counterparts......................................................13
i UNIT AGREEMENT This UNIT AGREEMENT (this "Agreement") dated as of August 6, 1998 is between Globe Holdings, Inc., a Massachusetts corporation (the "Company"), and Norwest Bank Minnesota, National Association, as Unit Agent (in such capacity, together with any successor unit agent, the "Unit Agent") and as Warrant Agent (as defined below) and as Trustee (as defined below). WHEREAS, the Company proposes to issue $49,086,000 aggregate principal amount at maturity of its 14% Senior Discount Notes due 2009 (the "Notes") pursuant to an Indenture dated as of August 6, 1998 (the "Indenture") between the Company and Norwest Bank Minnesota, National Association, as Trustee (in such capacity, the "Trustee"), and to issue warrants (the "Warrants") to initially purchase an aggregate of 69,481 shares of its Class A Common Stock, par value $.01 per share (the "Common Stock"), pursuant to a Warrant Agreement dated as of August 6, 1998 (the "Warrant Agreement") between the Company and Norwest Bank Minnesota, National Association, as Warrant Agent (in such capacity, the "Warrant Agent"). The Notes and the Warrants will initially be represented by units (the "Units"), with each Unit consisting of $1,000 principal amount of Notes and one Warrant initially entitling the holder thereof to purchase 1.4155 shares of Common Stock (the "Warrant Shares"). WHEREAS, the Company, the Trustee and the Warrant Agent desire to appoint the Unit Agent to act as their agent for the purpose of issuing certificates ("Unit Certificates") representing the Units and for the registration of transfers and exchanges thereof. WHEREAS, the Units will be exchangeable for the Notes and Warrants represented thereby upon the earliest to occur of: (i) the date that is six months following the initial sale of the Units, (ii) the commencement of the Exchange Offer (as defined in the Indenture), (iii) the date a Shelf Registration Statement (as defined in the Registration Rights Agreement) with respect to the Notes is declared effective, (iv) a Change of Control (as defined in the Indenture), and (v) such date as the BancAmerica Robertson Stephens (the "Initial Purchaser") may, in its sole discretion, deem appropriate. The earliest date on which an event listed in the preceding sentence occurs is referred to as the "Separation Date." WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Indenture. NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Appointment of Unit Agent. (a) The Company hereby appoints the Unit Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Unit Agent hereby accepts such appointment. 1 (b) The Trustee and the Company hereby appoint the Unit Agent as an Authenticating Agent and Registrar (as such terms are defined in the Indenture) for the Notes for so long as the Notes are represented by the Units. In its capacity as an Authenticating Agent and Registrar, the Unit Agent shall have the rights and obligations provided for such capacities in the Indenture. (c) The Warrant Agent and the Company hereby appoint the Unit Agent as Warrant Registrar (as such term is defined in the Warrant Agreement) for the Warrants for so long as the Warrants are represented by the Units. In its capacity as Warrant Registrar, the Unit Agent shall have the rights and obligations provided for such capacity in the Warrant Agreement. SECTION 2. Unit Certificates. Units issued in global form ("Global Units") shall be substantially in the form of Exhibit A attached hereto and shall include the Global Unit Legend set forth on Exhibit B (the "Global Unit Legend") and the "Schedule of Exchanges of Interests in Global Units." Units issued in definitive form (the "Definitive Units") shall be substantially in the form of Exhibit A attached hereto but shall not include the Global Unit Legend or the "Schedule of Exchanges of Interests in Global Units." Global Units shall represent such of the outstanding Units as shall be specified therein and each shall provide that it shall represent the aggregate Units from time to time endorsed thereon and that the aggregate amount of outstanding Units represented thereby may from time to time be reduced or increased, as appropriate. Any endorsement of a Global Unit to reflect the amount of any increase or decrease in the amount of outstanding Units represented thereby shall be made by the Unit Agent in accordance with instructions given by the holder thereof. The Depository Trust Company shall act as the Depositary with respect to the Global Units until a successor shall be appointed by the Company and the Unit Agent. Upon written request, a Unit holder may receive from the Unit Agent Definitive Units as set forth in Section 5 below. SECTION 3. Execution of Unit Certificates. Unit Certificates shall be signed on behalf of the Company by two Officers (as such term is defined in the Indenture). Each such signature upon the Unit Certificates may be in the form of a facsimile signature of any person who is an Officer as of or subsequent to the date hereof and may be imprinted or otherwise reproduced on the Unit Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been an Officer, notwithstanding the fact that at the time the Unit Certificates shall be authenticated and delivered or disposed of he or she shall have ceased to hold such office. The seal of the Company, if affixed to a Unit Certificate, may be in the form of a facsimile thereof. In case any Officer of the Company who shall have signed any of the Unit Certificates shall cease to be such Officer before the Unit Certificates so signed shall have been authenticated by the Unit Agent, or disposed of by the Company, such Unit Certificates nevertheless may be authenticated and delivered or disposed of as though such person had not ceased to be such Officer of the Company; and any Unit Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Unit Certificate, shall be a proper Officer of the Company to sign such Unit Certificate, although at the date of the execution of this Unit Agreement any such person was not such officer. 2 Unit Certificates shall be dated the date of authentication by the Unit Agent. SECTION 4. Registration and Authentication. The Unit Agent, on behalf of the Company, shall number and register the Unit Certificates in a register as they are issued by the Company. Unit Certificates shall be manually authenticated by the Unit Agent and shall not be valid for any purpose unless so authenticated. The Unit Agent shall, upon written instructions of an Officer of the Company specifying the number of Units to be authenticated, whether the Units are to be Global Units or Definitive Units, the date of such Units, and such other information as the Unit Agent may request, initially authenticate and deliver not more than 49,086 Units and shall thereafter authenticate and deliver Units as otherwise provided in this Agreement. SECTION 5. Registration of Transfers and Exchanges. (a) Transfer and Exchange. The Unit Certificates shall be issued in registered form only. The Company shall cause to be kept at the office of the Unit Agent a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Unit Certificates and transfers or exchanges of Unit Certificates as herein provided. All Unit Certificates issued upon any registration of transfer or exchange of Unit Certificates shall be valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Unit Certificates surrendered for such registration of transfer or exchange. A holder of Units may transfer its Units only by complying with the terms of this Agreement, the Indenture and the Warrant Agreement. No such transfer shall be effected until final acceptance and registration of the transfer by the Unit Agent in the register. Prior to the registration of any transfer of Units as provided herein, the Company, the Unit Agent and any agent of the Company or the Unit Agent may treat the Person in whose name the Units are registered as the owner thereof for all purposes and as the Person entitled to exercise the rights represented thereby, any notice to the contrary notwithstanding. Furthermore, any holder of a Global Unit, shall, by acceptance of such Global Unit, agree that transfers of beneficial interests in such Global Unit may be effected only through a book-entry system maintained by the holder of such Global Unit (or its agent), and that ownership of a beneficial interest in the Units represented thereby shall be required to be reflected in a book entry. When Unit Certificates are presented to the Unit Agent with a request to register the transfer or to exchange them for an equal number of Units of other authorized denominations, the Unit Agent shall register the transfer or make the exchange in accordance with the provisions hereof. (b) Registration, Registration of Transfer and Exchange. Prior to the Separation Date, when Unit Certificates are presented to the Unit Agent with a request from the holder of such Units to register the transfer or to exchange them for an equal number of Units of other authorized denominations, the Unit Agent shall register the transfer or make the exchange as requested; provided, however, that every Unit presented and surrendered for registration of transfer or exchange, as well as the Notes and Warrants to which it relates, shall be duly endorsed and be accompanied by a written 3 instrument of transfer in form satisfactory to the Company, duly executed by the holder thereof or such holder's attorneys duly authorizing in writing. Prior to the Separation Date, to permit registrations of transfer and exchanges, the Company shall make available to the Unit Agent a sufficient number of executed Unit Certificates to effect such registrations of transfers and exchanges. No service charge shall be made to the holder of Units for any registration of transfer or exchange of Units, but the Company may require from the transferring or exchanging holder payment of a sum sufficient to cover any transfer tax or similar governmental charge payable under the Indenture or the Warrant Agreement, and such transfer or exchange shall not be consummated unless or until such holder shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company and the Unit Agent that such tax has been paid. (c) Book-Entry Provisions for Global Units. (i) The Global Units initially shall (A) be registered in the name of the Depositary (as defined in the Indenture) for such Global Units or the nominee of such Depositary, (B) be delivered to the Unit Agent as custodian for such Depositary and (C) bear the legends as set forth on Exhibit A and Exhibit B. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to any Global Unit held on their behalf by the Depositary or the Unit Agent as its custodian, or under any Global Unit, and the Depositary may be treated by the Company, the Unit Agent and any agent of the Company or the Unit Agent as the absolute owner of any Global Unit for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Unit Agent or any agent of the Company or the Unit Agent from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Unit. (ii) Transfers of Global Units shall be limited to transfers in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Units may be transferred or exchanged for Definitive Units and Definitive Units may be transferred or exchanged for beneficial interests in the Global Units in accordance with the rules and procedures of the Depositary and the provisions of Section 5(d). In addition, Definitive Units shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Units if (x) the Company notifies the Unit Agent that the Depositary is unwilling or unable to continue as Depositary for any Global Unit and a successor Depositary is not appointed by the Company within 90 days of such notice or (y) the Company, at its option, notifies the Unit Agent in writing that it elects to cause the issuance of the Units in definitive form under the Unit Agreement. (iii) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Unit to beneficial owners pursuant to paragraph (ii) above, the Unit 4 Agent shall (if one or more Definitive Units are to be issued) reflect on its books and records the date and a decrease in the number of Units represented by the Global Unit in an amount equal to the number of Units represented by the beneficial interest in the Global Unit to be transferred, and the Company shall execute, and the Unit Agent shall authenticate and cause to be delivered, one or more Definitive Units in an amount equal to the beneficial interest in the Global Unit so transferred. (iv) In connection with the transfer of Global Units as an entirety to beneficial owners pursuant to paragraph (ii) above, the Global Units shall be deemed to be surrendered to the Unit Agent for cancellation, and the Company shall execute, and the Unit Agent shall authenticate and cause to be delivered to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the Global Units, Definitive Units of authorized denominations representing, in the aggregate, the number of Units theretofore represented by the Global Units so transferred. (v) Any Definitive Unit delivered in exchange for an interest in a Global Unit pursuant to paragraph (ii) or (iii) shall bear the legend described as the Private Placement Legend on Exhibit A (the "Private Placement Legend"). (vi) The registered holder of any Global Unit 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 Unit Agreement or the Units. (d) Special Transfer Restrictions. (i) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. Persons and other Transfers Exempt under the Securities Act. The following provisions shall apply (x) with respect to the registration of any proposed transfer of a Unit to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person and (y) with respect to the registration of any proposed transfer pursuant to another available exemption from the registration requirements of the Securities Act: (A) the Unit Agent shall register the transfer of any Units if (x) the requested transfer is to an Institutional Accredited Investor pursuant to a private placement exemption from the registration requirements of the Securities Act or (y) the requested transfer is to a Non-U.S. Person pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 904 under the Securities Act or (z) the requested transfer is being made in reliance on another exemption from the registration requirements of the Securities Act, together, in the case of either clause (x), (y) or (z) with a certification to such effect (in substantially the form set forth in the form of Unit attached hereto as Exhibit A) and such other certifications, Opinions of Counsel or other information as the Company or the Unit Agent 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 Securities Act; and 5 (B) the Unit Agent shall register the transfer of any Unit if the proposed transferor is an Agent Member holding a beneficial interest in a Global Unit, upon, receipt by the Unit Agent of (x) the certificate, if any, required by paragraph (A) above and (y) instructions given in accordance with the Depositary's and the Unit Agent's procedures, whereupon (a) the Unit Agent shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Definitive Units) a decrease in the number of Units represented by the applicable Global Unit, in an amount equal to the number of Units represented by the beneficial interest in the Global Warrant to be transferred (the "Transfer Amount"), (b) if the Units to be transferred are to be evidenced by Definitive Units, the Company shall execute and the Unit Agent shall authenticate upon receipt of a written order from the Company and cause to be delivered one or more Definitive Units in an aggregate number equal to the Transfer Amount and (c) if the Units to be transferred are to be evidenced by an interest in a Global Unit, upon receipt of instructions given in accordance with the Depositary's and the Unit Agent's procedures, the Unit Agent shall reflect on its books and records the date and an increase in the number of Units represented by the Global Unit in which the transferee will hold its beneficial interest in an amount equal to the Transfer Amount. (ii) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Unit to a QIB (excluding transfers to Non-U.S. Persons): (A) the Unit Agent shall register the transfer if such transfer is being made by a proposed transferor who has delivered a certification (in substantially the form set forth in the form of Unit attached hereto as Exhibit A) stating, or has otherwise advised the Company and the Unit Agent in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has advised the Company and the Unit Agent in writing that it is purchasing the Unit 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 Company and the transferor are relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; if the Unit Agent or the Company shall so request, such proposed transferor shall have delivered an Opinion of Counsel, an officers' certificate and such other information as the Unit Agent or the Company may reasonably require in connection with such proposed transfer; and (B) if the proposed transferee is an Agent Member, and the Units to be transferred consist of Definitive Units which after transfer are to be evidenced by an interest in the Global Unit, upon receipt by the Unit Agent of instructions given in accordance with the Depositary's and the Unit Agent's procedures, the Unit Agent shall reflect on its books and records the date and an increase in the number of Units represented by the Global Unit in an amount equal to the number of Definitive Units to be transferred, and the Unit Agent shall cancel the Definitive Units so transferred; and (C) if the proposed transferee is an Agent Member, and the Units to be transferred consist of a beneficial interest in a Global Unit which after transfer is to continue to be evidenced 6 by an interest in a Global Unit, upon receipt by the Unit Agent of instructions given in accordance with the Depositary's and the Unit Agent's procedures, the Unit Agent shall reflect on its books and records (A) the date, (B) a decrease in the number of Units represented by the Global Unit in which the transferor owns the beneficial interest to be transferred in an amount equal to the number of Units represented by the beneficial interest to be transferred and (C) an increase in the number of Units represented by the Global Unit in which the transferee will hold its beneficial interest in a like amount. (iii) Other Restrictions on Transfer. In addition to the restrictions on transfer set forth in (i) and (ii) above, any transfers of Units shall be made in accordance with the transfer and exchange provisions set forth in the Indenture and the Warrant Agreement. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Units, the Unit Agent shall deliver only Units that bear the Private Placement Legend. (f) Cancellation and/or Adjustment of Global Unit. At such time as all beneficial interests in Global Units have either been exchanged for Definitive Units or canceled, all Global Units shall be returned to or retained and canceled by the Unit Agent and destroyed by the Company, or by the Unit Agent at the Company's request. At any time prior to such cancellation, if any beneficial interest in a Global Unit is exchanged for Definitive Units or canceled, the number of Units represented by such Global Unit shall be reduced and an endorsement shall be made on such Global Unit by the Unit Agent to reflect such reduction. (g) Legends. Each Unit Certificate evidencing the Global Units and the Definitive Units (and all Units issued in exchange therefor or substitution thereof) shall bear a legend substantially to the following effect: THIS SECURITY HAS BEEN OFFERED AS PART OF A UNIT. EACH OF THE UNITS CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 14% SENIOR DISCOUNT NOTES DUE 2009 (THE "NOTES") OF GLOBE HOLDINGS, INC. (THE "COMPANY") AND ONE WARRANT TO PURCHASE 1.4155 SHARES OF COMMON STOCK OF THE COMPANY (THE "WARRANT"). THE NOTES AND WARRANTS WILL NOT BE TRANSFERABLE BY A HOLDER THEREOF SEPARATELY FROM EACH OTHER UNTIL THE "SEPARATION DATE," WHICH SHALL BE THE EARLIEST TO OCCUR OF (i) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE UNITS, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES, (iii) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE, (iv) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (v) SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE. SECTION 6. Separation of the Notes and the Warrants. After the Separation Date, the Notes and the Warrants represented by the Units shall be separately transferable. Upon 7 presentation after the Separation Date of any Unit Certificate for exchange for Warrants and Notes or for registration of transfer or otherwise, (i) the Unit Agent shall notify the Trustee and the Warrant Agent of the number of Units so presented, the registered owner thereof, such owner's registered address, the nature of any legends or restrictive endorsements set forth on such Unit Certificate and any other information provided by the holder thereof in connection therewith, (ii) the Trustee and Registrar under the Indenture, if the requirements of the Indenture for such transaction are met, shall promptly register, authenticate and deliver a new Note equal in principal amount to the Notes represented by such Unit Certificate in accordance with the direction of such holder and (iii) the Warrant Agent, if the requirements of the Warrant Agreement for such transactions are met, shall promptly countersign, register and deliver a new Warrant Certificate for the number of Warrants previously represented by such Unit Certificate in accordance with the directions of such holder. The Warrant Agent and the Trustee will notify the Unit Agent of any additional requirements in connection with a particular transfer or exchange. Following the Separation Date, no Unit Certificates shall be issued upon transfer or exchange of Unit Certificates, or otherwise. SECTION 7. Rights of Unit Holders. The registered holder of a Unit Certificate shall have all the rights and privileges of a registered owner of the principal amount of Notes represented thereby and the number of Warrants represented thereby and shall be treated as the registered owner thereof for all purposes. The Company agrees that it shall be bound by all provisions of the Indenture, the Notes, the Warrant Agreement and the Warrants and that the Notes and Warrants represented by each Unit Certificate shall be deemed legal, valid and binding obligations of the Company and that upon exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and nonassessable. SECTION 8. Unit Agent. The Unit Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by which the Company and the holders of Units, by their acceptance thereof, shall be bound: (a) The statements contained herein and in the Unit Certificates shall be taken as statements of the Company, and the Unit Agent assumes no responsibility for the correctness of any of the same, other than with respect to the certificate of authentication, except such as describe the Unit Agent or action taken or to be taken by it. The Unit Agent assumes no responsibility with respect to the distribution of the Unit Certificates except as herein otherwise specifically provided. (b) The Unit Agent shall not be responsible for any failure of the Company to comply with any of the covenants in this Agreement, the Unit Certificates, the Indenture or the Warrant Agreement to be complied with by the Company. (c) The Unit Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Unit Agent shall incur no liability or responsibility to the Company or to any holder of any Unit Certificate in respect of any action taken, suffered 8 or omitted by it hereunder in good faith and in accordance with the written opinion or the written advice of such counsel. (d) The Unit Agent shall incur no liability or responsibility to the Company or to any holder of any Unit Certificate for any action taken in reliance on any Unit Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument reasonably believed by the Unit Agent to be genuine and to have been signed, sent or presented by the proper party or parties. (e) The Company agrees to pay to the Unit Agent reasonable compensation for all services rendered by the Unit Agent in connection with this Agreement, to reimburse the Unit Agent for all expenses (including reasonable fees, expenses and disbursements of counsel), taxes and governmental charges and other charges of any kind and nature incurred by the Unit Agent in connection with this Agreement and to indemnify the Unit Agent and save it harmless against any and all losses and liabilities, including judgments, costs and counsel fees and actual expenses, for any action taken or omitted by the Unit Agent or arising in connection with this Agreement and the exercise by the Unit Agent of its rights hereunder and the performance by the Unit Agent of any of its obligations hereunder except as a result of the Unit Agent's gross negligence, bad faith or willful misconduct. (f) The Unit Agent, and any stockholder, director, officer, affiliate or employee ("Related Parties") of it, may buy, sell or deal in any of the Units, Notes, Warrants, Common Stock or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Unit Agent under this Agreement. Nothing herein shall preclude the Unit Agent or such Related Parties from acting in any other capacity for the Company or for any other legal entity. (g) The Unit Agent shall act hereunder solely as agent for the Company, the Trustee and the Warrant Agent, and its duties shall be determined solely by the provisions hereof. The Unit Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence, bad faith or willful misconduct. (h) No provision of this Agreement shall require the Unit Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (i) The Unit Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action unless the Company or one or more registered holders of Unit Certificates shall furnish the Unit Agent with security and indemnity for any costs and 9 expenses which may be incurred acceptable to the Unit Agent. This provision shall not affect the power of the Unit Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Units may be enforced by the Unit Agent without the possession of any of the Unit Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Unit Agent shall be brought in its name as Unit Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Units, as their respective rights or interests may appear. (j) Before the Unit Agent acts or refrains from acting with respect to any matter contemplated by this Unit Agreement, it may require: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Unit Agreement relating to the proposed action have been complied with; and (2) an opinion of counsel for the Company stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each Officers' Certificate or opinion of counsel with respect to compliance with a condition or covenant provided for in this Unit Agreement shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. The Unit Agent shall not be liable for any action it takes or omits to take in good faith in reliance on any such certificate or opinion. (k) In the absence of bad faith on its part, the Unit Agent 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 Unit Agent and conforming to the requirements of this 10 Unit Agreement. However, the Unit Agent shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Unit Agreement. (l) The Unit Agent may rely and shall be fully protected in relying upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Unit Agent need not investigate any fact or matter stated in the document. (m) The Unit Agent may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. SECTION 9. Resignation and Appointment of Successor. (a) The Company agrees, for the benefit of the Holders from time to time of the Units, that there shall at all times be a Unit Agent hereunder. (b) The Unit Agent may at any time resign as Unit Agent by giving written notice to the Company of such intention on its part, specifying the date on which its desired resignation shall become effective, provided that such date shall be at least 30 days after the date on which such notice is given unless the Company agrees to accept less notice. Upon receiving such notice of resignation, the Company shall promptly appoint a successor Unit Agent, qualified as provided in Section 9(d) hereof, by written instrument in duplicate signed on behalf of the Company, one copy of which shall be delivered to the resigning Unit Agent and one copy to the successor Unit Agent. As provided in Section 9(d) hereof, such resignation shall become effective upon the earlier of (x) the acceptance of the appointment by the successor Unit Agent or (y) 30 days after receipt by the Company of notice of such resignation. The Company shall remove the Unit Agent and appoint a successor Unit Agent by written instrument signed by the Company, one copy of which shall be delivered to the Unit Agent being removed and one copy to the successor Unit Agent, if the Unit Agent shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Unit Agent or of its property shall be appointed, or any public officer shall take charge or control of it or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. The Company may also remove the Unit Agent for any reason, in the manner described in the preceding sentence, with the consent of the Trustee and the Warrant Agent. Any removal of the Unit Agent and any appointment of a successor Unit Agent shall become effective upon acceptance of appointment by the successor Unit Agent as provided in Section 9(d). As soon as practicable after appointment of the successor Unit Agent, the Company shall cause written notice of the change in the Unit Agent to be given to each of the registered holders of the Units in the manner provided for in Section 10 hereof. (c) Upon resignation or removal of the Unit Agent, if the Company shall fail to appoint a successor Unit Agent within a period of 30 days after receipt of such notice of resignation or removal, then the holder of any Unit Certificate or the Unit Agent may apply to a court of competent jurisdiction for the appointment of a successor to the Unit Agent. Pending appointment of a successor to the Unit Agent, either by the Company or by such a court, the duties of the Unit Agent shall be carried out by the Company. 11 (d) Any successor Unit Agent, whether appointed by the Company or by a court, shall be an institution that meets the eligibility requirements for a trustee under the Indenture. Such successor Unit Agent shall execute and deliver to its predecessor and to the Company an instrument accepting such appointment hereunder and all the provisions of this Agreement, and thereupon such successor Unit Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Unit Agent hereunder, and such predecessor shall thereupon become obligated to (i) transfer and deliver, and such successor Unit Agent shall be entitled to receive, all securities, records or other property on deposit with or held by such predecessor as Unit Agent hereunder and (ii) upon payment of the amounts then due it pursuant to Section 8(e) hereof, pay over, and such successor Unit Agent shall be entitled to receive, all monies deposited with or held by any predecessor Unit Agent hereunder. (e) Any corporation or bank into which the Unit Agent hereunder may be merged or converted, or any corporation or bank with which the Unit Agent may be consolidated, or any corporation or bank resulting from any merger, conversion or consolidation to which the Unit Agent shall be a party, or any corporation or bank to which the Unit Agent shall sell or otherwise transfer all or substantially all of its corporate trust business, shall be the successor to the Unit Agent under this Agreement (provided that such corporation or bank shall be qualified as aforesaid) without the execution or filing of any document or any further act on the part of any of the parties hereto. (f) No Unit Agent under this Unit Agreement shall be personally liable for any action or omission of any successor Unit Agent. (g) The indemnity provisions of Section 8(e) hereof shall survive the resignation or removal of the Unit Agent. SECTION 10. Notices to the Company and Unit Agent, Trustee and Warrant Agent. Notice to the Unit Agent, the Warrant Agent and the Trustee shall be sufficiently given or made when received by the Unit Agent, the Warrant Agent or the Trustee, as applicable, at the addresses set forth below. Notice or demand authorized by this Agreement to be given to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage paid, addressed to: Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: Chief Financial Officer Copies to: Code, Hennessy & Simmons LLC 10 South Wacker Drive Suite 3175 Chicago, IL 60606 12 Attention: Peter Gotsch and Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Stephen L. Ritchie, Esq. Address of the Unit Agent, the Warrant Agent and the Trustee: Norwest Bank Minnesota, National Association Norwest Center Sixth and Marquette Minneapolis, Minnesota 55479 Attention: Corporate Trust Services The parties hereto by notice to the other parties may designate additional or different addresses for subsequent communications or notice. Any notice to be mailed to a holder of Units shall be mailed to him or her at the address that appears on the register of Units maintained by the Unit Agent. Copies of any such communication shall also be mailed to the Unit Agent, Trustee and Warrant Agent. The Unit Agent shall furnish the Company, the Trustee or the Warrant Agent promptly when requested with a list of registered holders of Units for the purpose of mailing any notice or communication to the holders of the Notes or Warrants and at such other times as may be reasonably requested. SECTION 11. Supplements and Amendments. The Company and the Unit Agent may from time to time supplement or amend this Agreement without the approval of any holders of Units in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company, the Trustee, the Warrant Agent and the Unit Agent may deem necessary or desirable and which shall not adversely affect the interests of the holders of Unit Certificates in any material respect. Any amendment or supplement to this Agreement that has a material adverse effect on the interests of Unit holders shall require the written consent of registered holders of the then outstanding Units representing not less than a majority of the then outstanding Units. SECTION 12. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company, the Trustee, the Warrant Agent or the Unit Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. 13 SECTION 13. Governing Law. THIS AGREEMENT AND EACH UNIT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. SECTION 14. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Trustee, the Warrant Agent, the Unit Agent and the registered holders of the Unit Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Trustee, the Warrant Agent, the Unit Agent and the registered holders of the Unit Certificates. SECTION 15. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. GLOBE HOLDINGS, INC. By: /s/ Thomas A. Rodgers, III ------------------------------ Name: Thomas A. Rodgers, III Title: President NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Unit Agent, Warrant Agent and Trustee By: /s/ Curtis D. Schwegman ------------------------------ Name: Curtis D. Schwegman Title: Assistant Vice President EXHIBIT A [FORM OF UNIT CERTIFICATE] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED THAT IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (d) SUCH TRANSFER IS EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND IS SUBJECT TO THE RECEIPT BY THE REGISTRAR (AND THE COMPANY, IF ITS SO REQUESTS) OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (ii) TO THE COMPANY OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITIES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THE NOTE COMPRISING A PART OF THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT" FOR FEDERAL INCOME TAX PURPOSES. FOR THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THE NOTE FOR FEDERAL INCOME TAX PURPOSES, HOLDERS MAY CONTACT THE A-1 COMPANY'S REPRESENTATIVE, LAWRENCE R. WALSH, VICE PRESIDENT, FINANCE AND ADMINISTRATION, AT (508) 674-3585. THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF 14% SENIOR DISCOUNT NOTES DUE 2009 OF THE COMPANY (THE "NOTES") AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.4155 SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (I) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE OFFER (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES, (III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE, (IV) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (V) SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE, THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATE FROM. BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS. A-2 GLOBE HOLDINGS, INC. Units, Each Consisting of $1,000 Principal Amount at Maturity of 14% Senior Discount Notes due 2009 and one Warrant to Purchase 1.4155 Shares of Common Stock No._______ CUSIP No._________ _______ Units Globe Holdings, Inc., a Massachusetts corporation (the "Company," which term includes any successor corporation), hereby certifies that _____________ is the owner of __________ Units as described above, transferable only on the books of the Company by the holder thereof in person or by his or her duly authorized attorney, on surrender of this Certificate properly endorsed. Each Unit consists of $1,000 principal amount at maturity of 14% Senior Discount Notes due 2009 of the Company (collectively, the "Notes") and one warrant (collectively, the "Warrants") to purchase 1.4155 shares of Class A Common Stock of the Company, par value $.01 per share (the "Common Stock"), subject to adjustment as provided in the Warrant Agreement (as defined below). The Notes and the Warrants represented by this Unit Certificate, which are attached hereto and made a part hereof, are non-detachable and not separately transferrable except as set forth herein. This Unit is issued pursuant to the Unit Agreement dated as of August 6, 1998 (the "Unit Agreement"), between the Company and Norwest Bank Minnesota, National Association, in its capacity as Unit Agent (in such capacity, the "Unit Agent") as well as in its capacities as Warrant Agent under the Warrant Agreement and Trustee under the Indenture (as defined below) and is subject to the terms and provisions contained therein, to all of which terms and provisions the holder of this Unit Certificate consents by acceptance hereof. The terms of the Notes are governed by an Indenture dated as of August 6, 1998 (the "Indenture") between the Company and Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"), and are subject to the terms and provisions contained therein, to all of which terms and provisions the holder of this Unit Certificate consents by acceptance hereof. The terms of the Warrants are governed by a Warrant Agreement dated as of August 6, 1998 (the "Warrant Agreement") between the Company and Norwest Bank Minnesota, National Association, as Warrant Agent (the "Warrant Agent"), and are subject to the terms and provisions contained therein, to all of which terms and provisions the holder of this Unit Certificate consents by acceptance hereof. The Company will furnish to any Holder of a Unit upon written request and without charge a copy of the Unit Agreement, the Indenture and the Warrant Agreement. Requests may be made to: Globe Holdings, Inc., 456 Bedford Street, Fall River, Massachusetts 02720, Attn: Chief Financial Officer. A-3 A-4 Dated: GLOBE HOLDINGS, INC. By:______________________________________ Name: Title: By:_______________________________________ Name: Title: A-5 Certificate of Authentication: This is one of the Units referred to in the above mentioned Unit Agreement. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Unit Agent By:___________________________________ Authorized Signatory A-6 NOTICE: THIS UNIT MAY NOT BE TRANSFERRED SEPARATELY FROM THE NOTES AND WARRANTS THAT COMPRISE THIS UNIT ASSIGNMENT FORM To assign this Unit, fill in the form below: (I) or (we) assign and transfer this Unit to: - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint _______________________________________________________ to transfer this Unit on the books of the Company. The agent may substitute another to act for him. [Check One] [_] (a) this Unit is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder. [_] (b) this Unit is being transferred pursuant to Rule 904 under the Securities Act and documents are being furnished which comply with the conditions of transfer set forth in the Unit Agreement. [_] (c) this Unit is being transferred other than in accordance with (a) or (b) above and documents are being furnished which comply with the conditions of transfer set forth in the Unit Agreement. If none of the foregoing boxes is checked, the Unit Agent shall not be obligated to register this Unit 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 5 of the Unit Agreement shall have been satisfied. Transfer of this Unit is subject to the terms of the Indenture and the Warrant Agreement. A-7 Date: ____________________ Your Signature:__________________________________________________ (Sign exactly as your names appears on the face of this Unit) Signature Guarantee:___________________________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Registrar) TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED The undersigned represents and warrants to the Company, the Unit Agent, the Trustee and the Warrant Agent that it is purchasing this Unit 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 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. Date:__________________________ _______________________________________ NOTICE: to be executed by an executive officer A-8 SCHEDULE OF EXCHANGES OF INTERESTS IN GLOBAL UNITS/1/ ----------------------------------------------------- The following exchanges of a part of this Global Unit for Definitive Units have been made: Number of Units Decrease in Increase in of this Global Signature of Number of Number of Unit following authorized Units of this Units of this such decrease signatory of Date of Exchange Global Unit Global Unit (or increase) Unit Agent ================================================================================ - ------------------ /1/ This is to be included only if the Unit is in global form. EXHIBIT B FORM OF LEGEND FOR GLOBAL UNIT Any Global Unit authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required under the Unit Agreement) in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE UNIT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY OR A SUCCESSOR. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE UNIT AGREEMENT. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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. TRANSFERS OF GLOBAL SECURITIES SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO THE DEPOSITARY, ITS SUCCESSORS OR THEIR RESPECTIVE NOMINEES. INTERESTS OF BENEFICIAL OWNERS IN THE GLOBAL SECURITIES MAY BE TRANSFERRED OR EXCHANGED FOR CERTIFICATED SECURITIES IN ACCORDANCE WITH THE RULES AND PROCEDURES OF THE DEPOSITARY AND THE PROVISIONS OF SECTION 5 OF THE UNIT AGREEMENT. IN ADDITION, CERTIFICATED SECURITIES SHALL BE TRANSFERRED TO ALL BENEFICIAL OWNERS IN EXCHANGE FOR THEIR B-1 BENEFICIAL INTERESTS IN GLOBAL SECURITIES IF (i) THE COMPANY NOTIFIES THE REGISTRAR THAT THE DEPOSITARY IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITARY FOR ANY GLOBAL SECURITY AND A SUCCESSOR DEPOSITARY IS NOT APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE OR (ii) THE COMPANY, AT ITS OPTION, NOTIFIES THE REGISTRAR IN WRITING THAT IT ELECTS TO CAUSE THE ISSUANCE OF SECURITIES IN DEFINITIVE FORM UNDER THE UNIT AGREEMENT. B-2 EX-4.5 10 WARRANT AGREEMENT Exhibit 4.5 EXECUTION COPY ================================================================================ WARRANT AGREEMENT ________________________________________ GLOBE HOLDINGS, INC. as Issuer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Warrant Agent ________________________________________ August 6, 1998 ________________________________________ ================================================================================ WARRANT AGREEMENT dated as of August 6, 1998 between Globe Holdings, Inc. (the "Company") and Norwest Bank Minnesota National Association, as Warrant Agent (the "Warrant Agent"). WHEREAS, the Company proposes to issue common stock purchase warrants, as hereinafter described (the "Warrants"), to purchase up to an aggregate of 69,481 shares of Class A Common Stock, par value $0.01 per share (the "Common Stock"), of the Company (the Common Stock issuable on exercise of the Warrants being referred to herein as the "Warrant Shares"), in connection with an offering of an aggregate of $49,086,000 principal amount at maturity of the 14% Senior Discount Notes due 2009 (the "Notes") of the Company and 49,086 Warrants, each Warrant entitling the holder thereof to purchase 1.4155 Warrant Shares. The Notes and Warrants will be sold in units (the "Units"), each Unit consisting of $1,000 in aggregate principal amount of Notes and one Warrant. WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance of Warrant Certificates (as defined below) and other matters as provided herein; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used herein shall have the meanings assigned to such terms in this Agreement. In addition, the following terms shall have the meanings set forth below. "144A Global Warrant" means a Global Warrant in the form of Exhibit A hereto bearing the Global Warrant Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding number of the Warrants sold in reliance on Rule 144A. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with") as used with respect to any Person, shall mean 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. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Warrant, the rules and procedures of the Depositary that apply to such transfer or exchange. "Business Day" means any day other than a Legal Holiday. "Definitive Warrant" means a certificated Warrant registered in the name of the holder thereof and issued in accordance with Section 3 hereof, in the form of Exhibit A1 hereto except that such Warrant shall not bear the Global Warrant Legend and shall not have the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto. "Depositary" means, with respect to the Warrants issuable or issued in whole or in part in global form, the Person specified in Section 3.3 hereof as the Depositary with respect to the Warrants, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Agreement. "Disinterested Director" means, in connection with any issuance of securities that give rise to a determination of the Fair Market Value thereof under this Agreement, each member of the Board of Directors of the Company who is not an officer, employee, director or other Affiliate of the party to whom the Company is proposing to issue the securities giving rise to such determination. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" for a security shall mean (A) the average over the 20 trading days ending on the date immediately preceding the date of such determination of the last reported sale price, or, if no such sale takes place on any such day, the closing bid price, in either case as reported for consolidated transactions on the principal national securities exchange (including the NASDAQ National Market) on which such security is listed or admitted for trading or (B) if such security is not listed on any exchange or admitted for trading on the NASDAQ Stock Market, the Fair Market Value shall be (1) in connection with a sale to a party that is not an Affiliate of the Company in an arm's length transaction (a "Non-Affiliate Sale"), the fair market value of such security determined in good faith by a majority of the Board of Directors of the Company, including a majority of the Disinterested Directors, and approved in a board resolution delivered to the Warrant Agent and (2) in connection with any sale to an Affiliate of the Company, (a) the last price per security at which such security was sold in a Non-Affiliate Sale within the three-month period preceding such date of determination, (b) if clause (a) is not applicable and the sale involves aggregate gross proceeds to the Company of $15 million or less, the fair market value of such security determined in good faith by a majority of the Board of Directors of the Company, including a majority of the Disinterested Directors, and approved in a board resolution delivered to the Warrant Agent or (c) if neither clause (a) nor clause (b) is applicable, the fair market value of such security determined in good faith by an Independent Financial Expert, in each case, taking into account, among other factors deemed relevant by the Board of Directors or such Independent Financial Expert, the trading price and volume of such security on any national securities exchange or automated quotation system on which such security is traded. "Fully Diluted Shares" means (i) shares of Common Stock outstanding as of a specified date and (ii) shares of Common Stock into or for which rights, options, warrants or other securities outstanding as of such date are or, within 180 days after the date of determination, will be exercisable, convertible or exchangeable (including the Warrants). "Global Warrants" means, individually and collectively, each of the Restricted Global Warrants, in the form of Exhibit A hereto issued in accordance with Section 3.1 hereof. "Global Warrant Legend" means the legend set forth in Section 3.5(e)(ii), which is required to be placed on all Global Warrants issued under this Warrant Agreement. 2 "IAI Global Warrant" means the Global Warrant in the form of Exhibit A hereto bearing the Global Warrant Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding number of the Warrants sold to Institutional Accredited Investors. "Indenture" means the Indenture dated August 6, 1998 between the Company and Norwest Bank Minnesota, National Association, as trustee, relating to the Company's 14% Senior Discount Notes due 2009. "Independent Financial Expert" means a nationally recognized investment banking, appraisal or valuation firm reasonably acceptable to the Warrant Agent (i) that does not (and whose directors, officers, employees and Affiliates do not) have a direct or indirect material financial interest in the Company or any of its Affiliates, (ii) that has not been and, at the time it is called upon to serve as Independent Financial Expert under this Agreement, is not (and none of its directors, officers, employees or Affiliates is) a promoter, director or officer of the Company, (iii) that has not been retained by the Company or any of its Affiliates for any purpose, other than to perform an equity valuation, within the preceding twelve months, and (iv) that, in the reasonable judgment of the Board of Directors of the Company, is otherwise qualified to serve as an independent financial advisor. Any such Person may receive customary compensation and indemnification by the Company for opinions or services it provides as an Independent Financial Expert. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York are not required to be open. If a date on which any action required to be taken under this Agreement is a Legal Holiday, such action shall be taken at the next succeeding day that is not a Legal Holiday, and no interest or penalty shall accrue for the intervening period. "Non-Affiliate Sale" has the meaning assigned to such term in the definition of Fair Market Value. "Non-U.S. Person" means a Person who is not a U.S. Person. "Officer" means, with respect to any Person, the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer, the Controller, any Vice-President the Secretary or Clerk, and any Assistant Secretary or Assistant Clerk of such Person. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Warrant Agent in form and substance reasonably acceptable to the Warrant Agent. The counsel may be an employee of or counsel to the Company, any subsidiary of the Company or the Warrant Agent. "Participant" means a Person who has an account with the Depositary. 3 "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, business trust, unincorporated organization or government or any agency or political subdivision thereof. "Private Placement Legend" means the legend set forth in Section 3.5(e)(i) to be placed on all Warrants issued under this Warrant Agreement except where otherwise permitted by the provisions of this Warrant Agreement. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Warrant" means a Global Warrant in the form of Exhibit A hereto bearing the Global Warrant Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding number of the Warrants initially sold in reliance on Rule 903 of Regulation S. "Restricted Definitive Warrant" means a Definitive Warrant bearing the Private Placement Legend. "Restricted Global Warrant" means a Global Warrant bearing the Private Placement Legend. "Restricted Warrant" means a Warrant that is a "restricted security" as defined in Rule 144(a)(3) under the Securities Act; provided, that the Warrant Agent shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Warrant is a Restricted Warrant. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Unrestricted Definitive Warrant" means a Definitive Warrant that is an Unrestricted Warrant. "Unrestricted Global Warrant" means a Global Warrant that is an Unrestricted Warrant. 4 "Unrestricted Warrant" means a Warrant other than a Restricted Warrant. "Warrant Number" means the number of Warrant Shares issuable upon the exercise of each Warrant. "Warrant Registration Rights Agreement" means the Warrant Registration Rights Agreement dated August 6, 1998 between the Company and BancAmerica Robertson Stephens. "Warrant Shares" has the meaning assigned to such term in the preamble to this Agreement. Section 2. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment. Section 3. Warrant Certificate. 3.1. Form and Dating. (a) General. The Warrants shall be substantially in the form of Exhibit A hereto (the "Warrant Certificates"). The Warrants may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Warrant shall be dated the date of the countersignature. The terms and provisions contained in the Warrants shall constitute, and are hereby expressly made, a part of this Warrant Agreement. The Company and the Warrant Agent, by their execution and delivery of this Warrant Agreement, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Warrant conflicts with the express provisions of this Warrant Agreement, the provisions of this Warrant Agreement shall govern and be controlling. (b) Global Warrants. Warrants issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Warrant Legend thereon and the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto). Warrants issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Warrant Legend thereon and without the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto). Each Global Warrant shall represent such of the outstanding Warrants as shall be specified therein and each shall provide that it shall represent the number of outstanding Warrants from time to time endorsed thereon and that the number of 5 outstanding Warrants represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Warrant to reflect the amount of any increase or decrease in the number of outstanding Warrants represented thereby shall be made by the Warrant Agent in accordance with instructions given by the holder thereof as required by Section 3.5 hereof. 3.2. Execution. An Officer shall sign the Warrants for the Company by manual or facsimile signature. If the Officer whose signature is on a Warrant no longer holds that office at the time a Warrant is countersigned, the Warrant shall nevertheless be valid. A Warrant shall not be valid until countersigned by the manual signature of the Warrant Agent. The signature shall be conclusive evidence that the Warrant has been authenticated under this Warrant Agreement. The Warrant Agent shall, upon a written order of the Company signed by an Officer (a "Warrant Countersignature Order"), countersign Warrants for original issue up to the number stated in the preamble hereto. The Warrant Agent may appoint an agent acceptable to the Company to countersign Warrants. Such an agent may countersign Warrants whenever the Warrant Agent may do so. Each reference in this Warrant Agreement to a countersignature by the Warrant Agent includes a countersignature by such agent. Such an agent has the same rights as the Warrant Agent to deal with the Company or an Affiliate of the Company. 3.3. Warrant Registrar. The Company shall maintain an office or agency where Warrants may be presented for registration of transfer or for exchange ("Warrant Registrar"). The Warrant Registrar shall keep a register of the Warrants and of their transfer and exchange. The Company may appoint one or more co-Warrant Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The Company may change any Warrant Registrar without notice to any holder. The Company shall notify the Warrant Agent in writing of the name and address of any Warrant Registrar or Co-Warrant Registrar. If the Company fails to appoint or maintain another entity as Warrant Registrar, the Warrant Agent shall act as such. The Company or any of its subsidiaries may act as Warrant Registrar. The Depository Trust Company shall act as the Depositary with respect to the Global Warrants until a successor shall be appointed by the Company and the Warrant Agent. The Global Warrants shall be registered in the name of the Depositary, or the nominee of such Depositary. So long as the Depositary or its nominee is the registered owner of a Global Warrant it will be deemed to be the sole owner and holder of such Global Warrant for all purposes hereunder and under such Global Warrant. 6 The Company initially appoints the Warrant Agent to act as the Warrant Registrar with respect to the Global Warrants. References in this Agreement to the Warrant Agent shall include the Warrant Agent in its capacity as Warrant Registrar. 3.4. Holder Lists. The Warrant Agent shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all holders or Warrants. If the Warrant Agent is not the Warrant Registrar, the Company shall furnish to the Warrant Agent upon the Warrant Agent's written request a list in such form and as of such date as the Warrant Agent may reasonably require of the names and addresses of the holders of Warrants. 3.5. Registration of Transfers and Exchanges. (a) Transfer and Exchange of Global Warrants. The transfer and exchange of Global Warrants or beneficial interests therein shall be effected through the Depositary, in accordance with this Agreement and the Applicable Procedures. (b) Book-Entry Provisions for Global Warrants. (i) The Global Warrants initially shall (i) be registered in the name of Cede & Co., as the nominee of The Depository Trust Company, (ii) be delivered to the Warrant Agent as custodian for such Depositary and (iii) bear the Private Placement Legend. Members of, or Participants in, the Depositary ("Agent Members") shall have no rights under this Warrant Agreement with respect to any Global Warrant held on their behalf by the Depositary, or the Warrant Agent as its custodian, or under the Global Warrant, and the Depositary may be treated by the Company, the Warrant Agent and any agent of the Company or the Warrant Agent as the absolute owner of the Global Warrant for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Warrant Agent or any agent of the Company or the Warrant Agent from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Warrant. (ii) Transfers of Global Warrants shall be limited to transfers in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Warrants may be transferred or exchanged for Definitive Warrants in accordance with the Applicable Procedures and the provisions of Section 3.5(c). In addition, Definitive Warrants shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Warrants if (i) the Company notifies the Warrant Agent that the Depositary is unwilling or unable to continue as Depositary for any Global Warrant and a successor depositary is not appointed by the Company and the Warrant Agent within 90 days 7 of such notice or (ii) the Company, at its option, notifies the Warrant Agent in writing that it elects to cause the issuance of Warrants in definitive form under this Warrant Agreement. (iii) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Warrant to beneficial owners pursuant to this Section 3.5(b), the Warrant Agent shall (if one or more Definitive Warrants are to be issued) reflect on its books and records the date and a decrease in the number of Warrants represented by the Global Warrant in an amount equal to the number of Warrants represented by the beneficial interest in the Global Warrant to be transferred, and the Company shall execute, and the Warrant Agent shall countersign and cause to be delivered, one or more Definitive Warrants of like amount. (iv) In connection with the transfer of Global Warrants as an entirety to beneficial owners pursuant to this Section 3.5(b), the Global Warrants shall be deemed to be surrendered to the Warrant Agent for cancellation, and the Company shall execute, and the Warrant Agent shall countersign and cause to be delivered to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the Global Warrants, Definitive Warrants of authorized denominations representing, in the aggregate, the number of Warrants theretofore represented by the Global Warrants so transferred. (v) Any Definitive Warrant constituting a Restricted Warrant delivered in exchange for an interest in a Global Warrant pursuant to this Section 3.5(b) shall, except as otherwise provided by Section 3.5(e)(i)(B), bear the Private Placement Legend. (vi) The registered holder of any Global Warrant 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 Warrant Agreement or the Warrants. (c) Special Transfer Provisions. (i) Transfers to Non-QIB Institutional Accredited Investors and Non- U.S. Persons and other Transfers Exempt under the Securities Act. The following provisions shall apply (x) with respect to the registration of any proposed transfer of a Warrant constituting a Restricted Warrant to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person and (y) with respect to the registration of any proposed transfer pursuant to another available exemption from the registration requirements of the Securities Act: (A) the Warrant Agent shall register the transfer of any Warrant constituting a Restricted Warrant, whether or not such Warrant bears the Private Placement Legend, if (w) the requested transfer is after the second anniversary of the original issue date with respect thereto; provided, however, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such security, or portion thereof, at any time on or prior to the second 8 anniversary of such issue date or (x) the requested transfer is to an Institutional Accredited Investor pursuant to a private placement exemption from the registration requirements of the Securities Act or (y) the requested transfer is to a Non-U.S. Person pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 904 under the Securities Act or (z) the requested transfer is being made in reliance on another exemption from the registration requirements of the Securities Act, together, in the case of either clause (w), (x), (y) or (z) with a certification to such effect (in substantially the form of Exhibit B) and such other certifications, Opinions of Counsel or other information as the Company or the Warrant Agent 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 Securities Act; and (B) the Warrant Agent shall register the transfer of any Warrant constituting a Restricted Warrant, whether or not such Warrant bears the Private Placement Legend, if the proposed transferor is an Agent Member holding a beneficial interest in a Global Warrant, upon, receipt by the Warrant Agent of (x) the certificate, if any, required by paragraph (A) above and (y) instructions given in accordance with the Applicable Procedures and the Warrant Agent's procedures, whereupon (a) the Warrant Agent shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Definitive Warrants) a decrease in the number of Warrants represented by the applicable Global Warrant in an amount equal to the number of Warrants represented by the beneficial interest in the Global Warrant to be transferred (the "Transfer Amount"), (b) if the Warrants to be transferred are to be evidenced by Definitive Warrants, the Company shall execute and the Warrant Agent shall countersign upon receipt of a Warrant Countersignature Order, and cause to be delivered one or more Definitive Warrants in an aggregate number equal to the Transfer Amount and (c) if the Warrants to be transferred are to be evidenced by an interest in a Global Warrant, upon receipt of instructions given in accordance with the Applicable Procedures and the Warrant Agent's procedures, the Warrant Agent shall reflect on its books and records the date and an increase in the number of Warrants represented by the Global Warrant in which the transferee will hold its beneficial interest in an amount equal to the Transfer Amount. (ii) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Warrant constituting a Restricted Warrant to a QIB (excluding transfers to Non-U.S. Persons): (A) the Warrant Agent shall register the transfer if such transfer is being made by a proposed transferor who has delivered a certification (in substantially the form of Exhibit B) stating, or has otherwise advised the Company and the Warrant Agent in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has advised the Company and the Warrant Agent in writing that it is purchasing the Warrant 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 9 information and that it is aware that the Company and the transferor are relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; if the Warrant Agent or the Company shall so request, such proposed transferor shall have delivered an Opinion of Counsel, an officers' certificate and such other information as the Warrant Agent or the Company may reasonably require in connection with such proposed transfer; and (B) if the proposed transferee is an Agent Member, and the Warrants to be transferred consist of Definitive Warrants which after transfer are to be evidenced by an interest in the 144A Global Warrant, upon receipt by the Warrant Agent of instructions given in accordance with the Applicable Procedures and the Warrant Agent's procedures, the Warrant Agent shall reflect on its books and records the date and an increase in the number of Warrants represented by the 144A Global Warrant in an amount equal to the number of Definitive Warrants to be transferred, and the Warrant Agent shall cancel the Definitive Warrants so transferred; and (C) if the proposed transferee is an Agent Member, and the Warrants to be transferred consist of a beneficial interest in a Global Warrant which after transfer is to continue to be evidenced by an interest in a Global Warrant, upon receipt by the Warrant Agent of instructions given in accordance with the Applicable Procedures and the Warrant Agent's procedures, the Warrant Agent shall reflect on its books and records (A) the date, (B) a decrease in the number of Warrants represented by the Global Warrant in which the transferor owns the beneficial interest to be transferred in an amount equal to the number of Warrants represented by the beneficial interest to be transferred and (C) an increase in the number of Warrants represented by the Global Warrant in which the transferee will hold its beneficial interest in a like amount. (d) General. By its acceptance of any Warrant bearing the Private Placement Legend, each holder of such a Warrant acknowledges the restrictions on transfer of such Warrant set forth in this Warrant Agreement and in the Private Placement Legend and agrees that it will transfer such Warrant only as provided in this Warrant Agreement and such Warrant. (e) Legends. The following legends shall appear on the face of all Global Warrants and Definitive Warrants issued under this Warrant Agreement unless specifically stated otherwise in the applicable provisions of this Warrant Agreement. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Warrant and each Definitive Warrant (and all Warrants issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE 10 "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." (B) Upon the transfer, exchange or replacement of Warrants not bearing the Private Placement Legend, the Warrant Agent shall deliver Warrants that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Warrants bearing the Private Placement Legend, the Warrant Agent shall deliver only Warrants that bear the Private Placement Legend unless (i) such transfer is after the second anniversary of the later of (x) the original issue date of such Warrants or (y) the last date on which the Company or any Affiliate of the Company held a beneficial interest in such Warrants (or any predecessor securities), or any portion thereof; (ii) there is delivered to the Company and the Warrant Agent an Opinion of Counsel reasonably satisfactory to the Company and the Warrant Agent 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 Warrants have been sold pursuant to an effective registration statement under the Securities Act. (ii) Global Warrant Legend. Each Global Warrant shall bear a legend in substantially the following form: "THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS 11 NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.7 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IT IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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." (iii) Unit Legend. Each Warrant issued prior to the Separation Date shall bear the following legend (the "Unit Legend") on the face thereof: "THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF THE 14% SENIOR DISCOUNT NOTES DUE 2009 OF THE COMPANY (THE "NOTES") AND ONE WARRANT (THE "WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.4155 SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (I) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES, (III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE, (IV) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (V) SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES." (f) Cancellation and/or Adjustment of Global Warrants. 12 At such time as all beneficial interests in a particular Global Warrant have been exercised or exchanged for Definitive Warrants or a particular Global Warrant has been exercised, redeemed, repurchased or canceled in whole and not in part, each such Global Warrant shall be returned to or retained and canceled by the Warrant Agent in accordance with Section 3.8 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Warrant is exercised or exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant or for Definitive Warrants, the amount of Warrants represented by such Global Warrant shall be reduced accordingly and an endorsement shall be made on such Global Warrant by the Warrant Agent or by the Depositary at the direction of the Warrant Agent to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant, such other Global Warrant shall be increased accordingly and an endorsement shall be made on such Global Warrant by the Warrant Agent or by the Depositary at the direction of the Warrant Agent to reflect such increase. (g) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall countersign Global Warrants and Definitive Warrants upon the Company's order or at the Warrant Agent's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Warrant or to a holder of a Definitive Warrant for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith. (iii) All Global Warrants and Definitive Warrants issued upon any registration of transfer or exchange of Global Warrants or Definitive Warrants shall be the duly authorized, executed and issued warrants for Common Stock of the Company, not subject to any preemptive rights, and entitled to the same benefits under this Warrant Agreement, as the Global Warrants or Definitive Warrants surrendered upon such registration of transfer or exchange. (iv) Prior to due presentment for the registration of a transfer of any Warrant, the Warrant Agent and the Company may deem and treat the Person in whose name any Warrant is registered as the absolute owner of such Warrant for all purposes and neither the Warrant Agent nor the Company shall be affected by notice to the contrary. (v) The Warrant Agent shall countersign Global Warrants and Definitive Warrants in accordance with the provisions of Section 3.2 hereof. (h) Facsimile Submissions to Warrant Agent. All certifications, certificates and Opinions of Counsel required to be submitted to the Warrant Agent pursuant to this Section 3.5 to effect a registration of transfer or exchange may be submitted by facsimile. 13 Notwithstanding anything herein to the contrary, as to any certificates and/or certifications delivered to the Warrant Agent pursuant to this Section 3.5, the Warrant Agent's duties shall be limited to confirming that any such certifications and certificates delivered to it are in the form of Exhibit B attached hereto. The Warrant Registrar shall not be responsible for confirming the truth or accuracy of representations made in any such certifications or certificates. As to any Opinions of Counsel delivered pursuant to this Section 3.5, the Warrant Registrar may rely upon, and be fully protected in relying upon, such opinions. (i) Exchange. Any holder of Warrants may, subject to the provision of this Agreement, exchange a Definitive Warrant for a beneficial interest in a Global Warrant, a beneficial interest in a Global Warrant for a Definitive Warrant or a Restricted Warrant for an Unrestricted Warrant, in each case in accordance with the Applicable Procedures and the Warrant Agent's procedures, upon delivery to the Warrant Agent of a certification (in substantially the form of Exhibit C) and such other certifications, Opinions of Counsel or other information as the Company or the Warrant Agent may reasonably require. 3.6. Replacement Warrants. If any mutilated Warrant is surrendered to the Warrant Agent or the Company or the Warrant Agent receives evidence to its satisfaction of the destruction, loss or theft of any Warrant, the Company shall issue and the Warrant Agent, upon receipt of a Warrant Countersignature Order, shall countersign a replacement Warrant if the Warrant Agent's requirements are met. If required by the Warrant Agent or the Company, an indemnity bond must be supplied by the holder that is sufficient in the judgment of the Warrant Agent and the Company to protect the Company, the Warrant Agent, and any agent for purposes of the countersignature from any loss that any of them may suffer if a Warrant is replaced. The Company may charge for its expenses in replacing a Warrant. Every replacement Warrant is an additional warrant of the Company and shall be entitled to all of the benefits of this Warrant Agreement equally and proportionately with all other Warrants duly issued hereunder. 3.7. Temporary Warrants. Until certificates representing Warrants are ready for delivery, the Company may prepare and the Warrant Agent, upon receipt of a Warrant Countersignature Order, shall countersign temporary Warrants. Temporary Warrants shall be substantially in the form of certificated Warrants but have variations that the Company considers appropriate for temporary Warrants and as shall be reasonably acceptable to the Warrant Agent. Without unreasonable delay, the Company shall prepare and the Warrant Agent shall countersign definitive Warrants in exchange for temporary Warrants. Holders of temporary Warrants shall be entitled to all of the benefits of this Warrant Agreement. 14 3.8. Cancellation. The Company at any time may deliver Warrants to the Warrant Agent for cancellation. The Warrant Registrar (if not the Warrant Agent) shall forward to the Warrant Agent any Warrants surrendered to them for registration of transfer, exchange or exercise. The Warrant Agent and no one else shall cancel all Warrants surrendered for registration of transfer, exchange, exercise, replacement or cancellation and shall destroy canceled Warrants (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Warrants shall be delivered to the Company. The Company may not issue new Warrants to replace Warrants that have been exercised or that have been delivered to the Warrant Agent for cancellation. Section 4. Separation of Warrants; Terms of Warrants; Exercise of Warrants. 4.1. The Notes and Warrants will not be separately transferable until the earliest to occur of (i) the date that is six months following the initial sale of the Units, (ii) the commencement of the Exchange Offer (as defined in the Indenture), (iii) the date a Shelf Registration Statement (as defined in the Registration Rights Agreement) with respect to the Notes is declared effective, (iv) a Change of Control (as defined in the Indenture) or (v) such date as BancAmerica Robertson Stephens may, in its sole discretion, deem appropriate (the earliest of such dates, the "Separation Date"), at which time such Warrants shall become separately transferable. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised commencing on the opening of business on the Separation Date and through and until 5:00 p.m., New York City time on August 1, 2009 (or such later date as provided in the following paragraph) (the "Exercise Period"), to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the exercise price (the "Exercise Price") then in effect for such Warrant Shares; provided that holders shall be able to exercise their Warrants only if a registration statement relating to the Warrant Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. In the alternative, each holder may exercise its right to receive Warrant Shares on a net basis, such that without the exchange of any funds, the holder receives that number of Warrant Shares otherwise issuable upon exercise of its Warrants less that number of Warrant Shares having a Fair Market Value equal to the aggregate Exercise Price that would otherwise have been paid by the holder for the Warrant Shares being issued. Except as provided in the following paragraph, each Warrant not exercised prior to 5:00 p.m., New York City time, on August 1, 2009 (the "Expiration Date") shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. No adjustments as to dividends will be made upon exercise of the Warrants. The Company shall give notice not less than 90, and not more than 120, days prior to the Expiration Date to the registered holders of all then outstanding Warrants to the effect that the Warrants will terminate and become void as of 5:00 p.m., New York City time, on the Expiration Date. If the Company fails to give such notice, the Warrants will not expire until 5:00 p.m., New York City time, on the 90th day after the Company gives such notice; provided, however, in no event will holders be entitled 15 to any damages or other remedy for the Company's failure to give such notice other than any such extension. The Company shall give written notice to all Warrant holders at least 20 days prior to the establishment of a record date for the payment of any dividend on any shares of Common Stock or the repurchase of Common Stock from the holders thereof. 4.2. In order to exercise all or any of the Warrants represented by a Warrant Certificate, (i) in the case of Definitive Warrants, the holder thereof must surrender for exercise the Warrant Certificate to the Company at the office of the Warrant Agent at its corporate trust office, (ii) in the case of a book- entry interest in a Global Warrant, the exercising Participant whose name appears on a securities position listing of the Depositary as the holder of such book-entry interest must comply with the Depositary's procedures relating to the exercise of such book-entry interest in such Global Warrant and (iii) in the case of both Global Warrants and Definitive Warrants, the holder thereof or the Participant, as applicable, must deliver to the Company at the office of the Warrant Agent the form of election to purchase on the reverse thereof duly filled in and signed, which signature shall be medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price, which is set forth in the form of Warrant Certificate as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised. In addition, if the holder is exercising Warrants sold pursuant to Regulation S, such holder must certify in writing that it is not a U.S. Person and that the Warrant is not being exercised on behalf of a U.S. Person or provide a written Opinion of Counsel to the effect that the Warrant and the securities delivered upon exercise thereof have been registered under the Securities Act or are exempt from registration thereunder. Payment of the aggregate Exercise Price shall be made (i) in cash, by wire transfer or by certified or official bank check payable to the order of the Company or (ii) on a net basis in the manner provided in Section 4.1 hereof. 4.3. Subject to the provisions of Section 5 hereof, upon compliance with Section 4.2 above, the Company shall deliver or cause to be delivered with all reasonable dispatch, to or upon the written order of the holder and in such name or names as the Warrant holder or Participant may designate, a certificate or certificates for the number of whole Warrant Shares issuable upon the exercise of such Warrants or other securities or property to which such holder is entitled hereunder, together with cash as provided in Section 10 hereof; provided that if any consolidation, merger or lease or sale of assets is proposed to be effected by the Company as described in Section 8.11 hereof, or a tender offer or an exchange offer for shares of Common Stock is made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than two Business Days thereafter, deliver or cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence or other securities or property to which such holder is entitled hereunder, together with cash as provided in Section 10 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. 4.4. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part. If less than all the Warrants represented by a Definitive Warrant are exercised, such Definitive Warrant shall be surrendered and a new Definitive Warrant of the same tenor 16 and for the number of Warrants which were not exercised shall be executed by the Company and delivered to the Warrant Agent and the Warrant Agent shall countersign the new Definitive Warrant, registered in such name or names as may be directed in writing by the holder, and shall deliver the new Definitive Warrant to the Person or Persons entitled to receive the same. The Warrant Agent shall make such notations on Schedule A to each Global Warrant as are required to reflect any change in the number of Warrants represented by such Global Warrant resulting from any exercise in accordance with the terms hereof. 4.5. All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be disposed of by the Warrant Agent in a manner satisfactory to the Company. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. 4.6. The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request. Section 5. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Section 6. Reservation of Warrant Shares. 6.1. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. 6.2. The Company or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the 17 rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 10. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 11 hereof. 6.3. Before taking any action which would cause an adjustment pursuant to Section 8 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. 6.4. The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. Section 7. Obtaining Stock Exchange Listings. The Company will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. Section 8. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 8. For purposes of this Section 8, "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount. 8.1. Adjustment for Change in Capital Stock. If the Company: (i) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (ii) subdivides its outstanding shares of Common Stock into a greater number of shares; 18 (iii) combines its outstanding shares of Common Stock into a smaller number of shares; (iv) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or (v) issues by reclassification or conversion of its Common Stock any shares of its capital stock, then the Warrant Number in effect immediately prior to such action shall be proportionately adjusted so that the holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of the Company which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. 8.2. Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to all holders of its Common Stock entitling them to purchase shares of Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock at a price per share (or with an initial conversion, exchange or exercise price) less than the Fair Market Value per share on the record date specified below, the Warrant Number shall be adjusted in accordance with the following formula: W' = W x O + N ------------------------- O + N x P ----- M where: W' = the adjusted Warrant Number. W = the Warrant Number immediately prior to such adjustment. O = the number of Fully Diluted Shares outstanding on the record date. N = the number of additional shares of Common Stock offered or otherwise issuable upon exercise of such rights, options or warrants. P = the offering price per share of the additional shares offered or otherwise issuable. 19 M = the Fair Market Value per share of Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Warrant Number shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. 8.3. Adjustment for Other Distributions. If the Company distributes to all or any holders of its Common Stock (i) evidences of indebtedness of the Company or any of its Subsidiaries, (ii) any assets (including cash) of the Company or any of its Subsidiaries or (iii) any rights, options or warrants to acquire any of the foregoing, the Warrant Number shall be adjusted in accordance with the following formula: W' = W x M ------- M - F where: W' = the adjusted Warrant Number. W = the Warrant Number immediately prior to the record date or, if applicable, the date of distribution mentioned above. M = the Fair Market Value per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the indebtedness, assets, securities, rights, options or warrants so distributed applicable to one share of Common Stock. The Board of Directors shall determine the fair market value in such manner as it deems reasonable under the circumstances. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution (or, if no record date is established, on the date of distribution). If an adjustment shall be made pursuant to this Section 8.3 as a result of the issuance of rights, options or warrants and at the end of the period during which such rights, options or warrants are exercisable, not all such rights, options or warrants shall have been exercised, the Warrant shall be immediately readjusted as if "F" in the above formula was the fair market value on the record date of the indebtedness or assets actually distributed upon exercise of such rights, options or warrants divided by the number of shares of Common Stock outstanding on the record date. This Section 8.3 does not apply to cash dividends or distributions declared by the Board of Directors of the Company, provided that the Company has provided written notice of any such 20 dividend to the holders of the Warrants at least 20 business days prior to the record date with respect thereto in accordance with Section 11. In addition, this Section 8.3 does not apply to the transactions referred to in Section 8.1 or to rights, options or warrants referred to in Section 8.2. 8.4. Adjustment for Certain Common Stock Issues. If the Company issues shares of Common Stock (other than any issuance pursuant to a Non-Affiliate Sale) for a consideration per share less than the Fair Market Value per share of Common Stock on the date the Company fixes the offering price of such additional shares, the Warrant Number shall be adjusted in accordance with the formula: W' = W x A --------- O + P - M where: W' = the adjusted Warrant Number. W = the Warrant Number immediately prior to any such issuance. O = the number of Fully Diluted Shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares of Common Stock. M = the Fair Market Value per share on the date of issuance of such additional shares of Common Stock. A = the number of Fully Diluted Shares outstanding immediately after the issuance of such additional shares of Common Stock. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This Section 8.4 does not apply to: (i) any of the transactions described in Section 8.1 or the issuance of Common Stock pursuant to any transaction described in Sections 8.2 or 8.3; (ii) the issuance of Common Stock in connection with (a) the exercise of Warrants or (b) the conversion, exercise or exchange of any options, warrants or other securities convertible into or exchangeable for Common Stock which are issued after the date hereof in a transaction 21 described in Section 8.5 and in compliance with all other applicable provisions of this Agreement; (iii) the issuance of Common Stock pursuant to any option, warrant or other convertible or exchangeable security outstanding on the date hereof; (iv) Common Stock issued in a bona fide public offering pursuant to a firm commitment underwriting by a nationally recognized investment banking firm; and (v) the issuance of Common Stock pursuant to any employee benefit, compensation or incentive arrangement approved by a majority of the Board of Directors of the Company, including a majority of the Disinterested Directors. 8.5. Adjustments for Convertible Securities Issue. If the Company after the date hereof issues any options, warrants or other securities convertible into or exchangeable or exercisable for Common Stock, or securities convertible into or exchangeable or exercisable for Common Stock (other than securities issued in any Non-Affiliate Sale or in transactions described in Sections 8.3 or 8.4), for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities (including the amount of consideration paid to the Company for issuance of each option, warrant or other security) less than the Fair Market Value per share on the date of issuance of such securities, the Warrant Number shall be adjusted in accordance with the formula: W' = W x O + D ----- O + P - M where: W' = the adjusted Warrant Number. W = the Warrant Number immediately prior to any such issuance. O = the number of Fully Diluted Shares outstanding immediately prior to the issuance of such securities. P = the aggregate consideration received for the issuance of such securities. M = the Fair Market Value per share on the date of issuance of such securities. D = the maximum number of shares of Common Stock deliverable upon conversion or in exchange for or upon exercise of such securities at the initial conversion, exchange or exercise rate. 22 The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion or exchange of such securities has not been issued when such securities are no longer outstanding, then the Warrant Number shall promptly be readjusted to the Warrant Number which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion or exchange of such securities. This Section 8.5 does not apply to: (i) convertible securities issued in a bona fide public offering pursuant to a firm commitment underwriting by a nationally recognized investment banking firm; (ii) the issuance by the Company of options, warrants or other securities convertible into exchangeable or exercisable for Common Stock pursuant to any employee benefit, compensation or incentive arrangement approved by a majority of the Board of Directors of the Company, including a majority of the Disinterested Directors; and (iii) transactions described in Section 8.2. 8.6. Consideration Received. For purposes of any computation respecting consideration received pursuant to Sections 8.4 and 8.5, the following shall apply: (i) in the case of the issuance of shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, for cash, the consideration shall be the gross amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other costs, fees or expenses incurred by the Company for any underwriting of the issue or otherwise in connection with the sale and issuance of such shares; (ii) in the case of the issuance of Common Stock, or securities convertible into or exchangeable or exercisable for Common Stock, for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a board resolution delivered to the Warrant Agent; and 23 (iii) in the case of the issuance of securities convertible into or exchangeable or exercisable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion, exchange or exercise thereof (the consideration in each case to be determined in the same manner as provided in clauses (i) and (ii) of this Section 8.6). 8.7. When De Minimis Adjustment May Be Deferred. No adjustment in the Warrant Number need be made unless the adjustment would require an increase or decrease of at least 1% in the Warrant Number. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment, provided that no such adjustment shall be deferred after the date on which the Warrants become exercisable. All calculations under this Section 8 shall be made to the nearest 1/100th of a share. 8.8. When No Adjustment Required. If an adjustment is made upon the establishment of a record date for a distribution subject to Sections 8.1, 8.2 or 8.3 and such distribution is subsequently canceled, the Warrant Number then in effect shall be readjusted, effective as of the date when the Board of Directors of the Company determines to cancel such distribution, to that which would have been in effect if such record date had not been fixed. No adjustment need to be made for a change in the par value, or from par value to no par value, or from no par value to par value, of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. 8.9. Notice of Adjustment. Whenever the Warrant Number is adjusted, the Company shall provide the notices required by Section 11. 8.10. Voluntary Reduction. The Company from time to time may, as the Board of Directors deems appropriate, reduce the Exercise Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period; provided, however, that in no event may the Exercise Price be less than the par value of a share of Common Stock. Whenever the Exercise Price is reduced, the Company shall mail to Warrant holders a notice of the reduction. The Company shall mail the notice at least 15 days before the date the reduced 24 Exercise Price takes effect. The notice shall state the reduced Exercise Price and the period it will be in effect. A reduction in the Exercise Price does not change or adjust the Warrant Number otherwise in effect for purposes of Sections 8.1, 8.2, 8.3, 8.4 and 8.5. 8.11. Reorganization of the Company. In case of any capital reorganization or the consolidation or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding shares of Common Stock into shares of other stock or other securities, cash or property), or the sale of the assets and property of the Company as an entirety or substantially as an entirety (collectively, such actions being hereinafter referred to as "Reorganizations"), there shall thereafter be deliverable upon exercise of any Warrant (in lieu of the number of shares of Common Stock theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock that would otherwise have been deliverable upon the exercise of such Warrant would have been entitled upon such Reorganization if such Warrant had been exercised in full immediately prior to such Reorganization. In case of any Reorganization, appropriate adjustment, as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a board resolution delivered to the Warrant Agent, shall be made in the application of the provisions herein set forth with respect to the rights and interests of holders of Warrants so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares or other property thereafter deliverable upon exercise of Warrants. The Company shall not effect any such Reorganization unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such Reorganization or the corporation purchasing such assets or other appropriate corporation or entity shall expressly assume, by a supplemental Warrant Agreement executed and delivered to the Warrant Agent (and a notice of which shall be delivered to the holders of the Warrants) the obligation to deliver to each such holder such shares of stock, securities, cash or assets as, in accordance with the foregoing provisions, such holder may be entitled to purchase, and all other obligations and liabilities under this Agreement. If this Section 8.11 applies, Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof do not apply. 8.12. Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Section 8 should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental Warrant Agreement under Section 8.11 are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section 8. 8.13. When Issuance or Payment May Be Deferred. 25 In any case in which this Section 8 shall require that an adjustment in the Warrant Number be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable prior to such record date upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 10; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. 8.14. Adjustment in Exercise Price. Upon each adjustment of the Warrant Number pursuant to this Section 8, the Exercise Price applicable to each Warrant outstanding prior to the making of the adjustment in the Warrant Number shall thereafter be adjusted to reflect an adjusted Exercise Price (calculated to the nearest hundredth) obtained from the following formula: E' = E x W --- W' where: E' = the adjusted Exercise Price for each Warrant following the adjustment of the Warrant Number. E = the Exercise Price prior to adjustment. W' = the adjusted Warrant Number. W = the Warrant Number prior to adjustment. provided that in no event shall the Exercise Price be less than the par value of each share of capital stock deliverable upon the exercise of the Warrant for one Warrant Share. 8.15. Form of Warrants. Upon each adjustment of the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, each Warrant outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase the number and kind of shares then purchasable upon the exercise of the Warrants, after giving effect to such adjustment, at the adjusted Exercise Price. The Company may elect on or after any adjustment of the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants to cause to be distributed to registered holders of Warrant Certificates either Warrant Certificates representing the additional Warrants issuable pursuant to the adjustment, or substitute Warrant Certificates to replace all outstanding Warrant Certificates. 26 Section 9. No Dilution or Impairment. 9.1. If any event shall occur as to which the provisions of Section 8 are not strictly applicable but the failure to make any adjustment would adversely affect the purchase rights represented by the Warrants in accordance with the essential intent and principles of such Section, then, in each such case, the Company shall appoint an Independent Financial Expert, which shall give its opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in Section 8, necessary to preserve, without dilution, the purchase rights, represented by the Warrants. Upon receipt of such opinion, the Company will promptly file a copy thereof with the Warrant Agent, mail a copy thereof to the holders of the Warrants and make the adjustments described therein. 9.2. The Company will not, by amendment of its articles of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of the Warrants against dilution or other impairment. Without limiting the generality of the foregoing, the Company (1) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock on the exercise of the Warrants from time to time outstanding and (2) will not take any action which results in any adjustment of the Exercise Price or the Warrant Number if the total number of Warrant Shares issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by the Company's articles of incorporation and available for the purposes of issue upon such exercise. Section 10. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 10, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the same fraction of the Fair Market Value (as determined by the Company) of one Warrant Share on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. Section 11. Notice to Warrant Holders. Upon any adjustment of the Warrant Number pursuant to Section 8, the Company shall within 15 days thereafter: (i) cause to be filed with the Warrant Agent a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors of the Company (who may be the regular auditors of the Company) setting forth the Warrant Number and Exercise Price after giving effect to such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based, which certificate shall be conclusive evidence of the correctness of the matters set forth therein; and (ii) cause to be given to each of the registered holders of the Warrant Certificates at such registered holder's address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where 27 appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 11. In case: (a) The Company shall authorize the issuance to all holders of shares of Common Stock of Common Stock or rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (b) The Company shall authorize the distribution to all holders of shares of Common Stock of assets including, without limitation, cash dividends or distributions, evidences of its indebtedness or other securities; or (c) of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (e) The Company proposes to take any other action which would require an adjustment of the Warrant Number or Exercise Price pursuant to Section 8; then the Company shall cause to be filed with the Warrant Agent and shall cause to be given to each of the registered holders of the Warrant certificates at its address appearing on the Warrant register, at least 20 business days prior to the applicable record date, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividends, rights, options, warrants or distributions are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 11 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, lease, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of Directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. 28 Section 12. Merger, Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor warrant agent under the provisions of Section 14. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and in case at that time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in tile Warrant Certificates and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. Section 13. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: (a) The duties of the Warrant Agent shall be determined by the express provisions of this Warrant Agreement and no implied covenants or obligations shall be read into this Warrant Agreement against the Warrant Agent. (b) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided. (c) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be compiled with by the Company. (d) Before the Warrant Agent acts or refrains from acting, the Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant 29 Agent shall incur no liability or responsibility, to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. (e) The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (f) The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement and to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of its negligence, bad faith or willful misconduct. (g) The Company shall indemnify the Warrant Agent against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Warrant Agreement, including the costs and expenses of enforcing this Warrant Agreement against the Company (including this Section 13(g)) and defending itself or investigating against any claim (whether asserted by the Company or any Warrant holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, bad faith or willful misconduct. The Warrant Agent shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Warrant Agent to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Warrant Agent shall cooperate in the defense. The Warrant Agent may have separate counsel and the Company shall pay for reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. (h) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. 30 (i) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence or bad faith. (j) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the legality, validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. (k) The Warrant Agent shall not be required to take notice or be deemed to have notice of any fact, event or determination (including, without limitation, any dates other than the end of the Exercise Period or events defined in this Agreement or the designation of any Person as an Affiliate), under this Agreement unless and until the Warrant Agent shall be specifically notified in writing by the Company or any holder of such fact, event or determination. (l) No provision of this Agreement shall require the Warrant Agent to expand or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (m) The Warrant Agent may act through its attorneys or agents and shall not be responsible for the willful misconduct or negligence of any agent appointed with due care. Section 14. Change of Warrant Agent. If the Warrant Agent shall become incapable of acting as Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such incapacity by the Warrant Agent or by the registered holder of a Warrant, then the registered holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. After appointment the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 14, however, or any defect therein, shall not affect the legality or validity of the 31 appointment of a successor to the Warrant Agent. The Warrant Agent shall at all times be an institution that meets the eligibility requirements for a trustee under the Indenture. Section 15. Registration. Holders shall be able to exercise their Warrants only if a registration statement relating to the Warrant Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act, and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. Section 16. Reports. (a) Whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Warrants are outstanding, the Company shall furnish to the Warrant Agent and the holders of Warrants (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 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 certified independent accountants 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. In addition, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all such information and reports the Commission for public availability (unless the Commission shall not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (b) The Company shall provide the Warrant Agent with a sufficient number of copies of all such reports that the Warrant Agent may be required to deliver to the holders of the Warrants under this Section 16. Section 17. Notices to the Company and Warrant Agent. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows: Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: Lawrence R. Walsh with a copy to: Kirkland & Ellis 32 200 East Randolph Drive Chicago, Illinois 60601 Attention: Laurie T. Gunther In case the Company shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the principal office of the Warrant Agent. Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered. postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows: Norwest Bank Minnesota, National Association Norwest Center Sixth and Marquette Minneapolis, Minnesota 55479 Attention: Corporate Trust Services Section 18. Supplements and Amendments. From time to time, the Company and the Warrant Agent, without consent of the holders of the Warrants, may amend or supplement the Warrant Agreement for certain purposes, including curing defects or inconsistencies or making chances that do not materially adversely affect the rights of any holder. Any amendment or supplement to the Warrant Agreement that has a material adverse effect on the interests of the holders of the Warrants requires the written consent of the holders of a majority of the then outstanding Warrants (excluding Warrants held by the Company or any of its Affiliates). The consent of each holder of the Warrants is required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares or other securities or property purchasable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided for in the Warrant Agreement as generally described above). Notwithstanding anything in this Agreement to the contrary, no supplement or amendment that changes the rights and duties of the Warrant Agent under this Agreement will be effective against the Warrant Agent without the execution of such supplement or amendment by the Warrant Agent. Section 19. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 20. Termination. This Agreement shall terminate at 5:00 p.m., New York City time on August 1, 2009, or on such later date to which the Exercise Period shall have been extended pursuant to Section 4.1. 33 Notwithstanding the foregoing, this Agreement will terminate on any earlier date if all Warrants have been exercised. The provisions of Section 13, regarding indemnification, shall survive such termination. Section 21. Governing Law. This Agreement and each Warrant Certificate issued hereunder 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 internal laws of said State. Section 22. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant Certificates. Section 23. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [Signature Page Follows] 34 IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be duly executed, as of the day and year first above written. GLOBE HOLDINGS, INC. By: /s/ Thomas A. Rodgers, III ---------------------------------- Name: Thomas A. Rodgers, III Title: President NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Warrant Agent By: /s/ Curtis D. Schwegman ---------------------------------- Name: Curtis D. Schwegman Title: Assistant Vice President EXHIBIT A FORM OF WARRANT [Face of Warrant Certificate] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED THAT IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (d) SUCH TRANSFER IS EFFECTED BY THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND IS SUBJECT TO THE RECEIPT BY THE REGISTRAR (AND THE COMPANY, IF ITS SO REQUESTS) OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (ii) TO THE COMPANY OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITIES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY OR A SUCCESSOR. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE A-1 DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IT IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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. TRANSFERS OF GLOBAL SECURITIES SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO THE DEPOSITARY, ITS SUCCESSORS OR THEIR RESPECTIVE NOMINEES. INTERESTS OF BENEFICIAL OWNERS IN THE GLOBAL SECURITIES MAY BE TRANSFERRED OR EXCHANGED FOR CERTIFICATED SECURITIES IN ACCORDANCE WITH THE RULES AND PROCEDURES OF THE DEPOSITARY AND THE PROVISIONS OF SECTION 3.5(c) OF THE WARRANT AGREEMENT. IN ADDITION, CERTIFICATED SECURITIES SHALL BE TRANSFERRED TO ALL BENEFICIAL OWNERS IN EXCHANGE FOR THEIR BENEFICIAL INTERESTS IN GLOBAL SECURITIES IF (i) THE COMPANY NOTIFIES THE REGISTRAR THAT THE DEPOSITARY IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITARY FOR ANY GLOBAL SECURITY AND A SUCCESSOR DEPOSITARY IS NOT APPOINTED BY THE ISSUER WITHIN 90 DAYS OF SUCH NOTICE OR (ii) THE COMPANY, AT ITS OPTION, NOTIFIES THE REGISTRAR IN WRITING THAT IT ELECTS TO CAUSE THE ISSUANCE OF SECURITIES IN DEFINITIVE FORM UNDER THE WARRANT AGREEMENT. THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF 14% SENIOR DISCOUNT NOTES DUE 2009 OF THE COMPANY AND ONE WARRANT ("WARRANT") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.4155 SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE COMPANY. PRIOR TO THE EARLIEST TO OCCUR OF (I) THE DATE THAT IS SIX MONTHS FOLLOWING THE INITIAL SALE OF THE UNITS, (II) THE COMMENCEMENT OF AN EXCHANGE OFFER (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT TO THE NOTES, (III) THE DATE A SHELF REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) WITH RESPECT A-2 TO THE NOTES IS DECLARED EFFECTIVE, (IV) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE), OR (V) SUCH DATE AS BANCAMERICA ROBERTSON STEPHENS MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATE FROM. BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES. A-3 EXERCISABLE ON OR AFTER THE SEPARATION DATE No. __________ CUSIP No. _________ __________ Warrants Warrant Certificate GLOBE HOLDINGS, INC. This Warrant Certificate certifies that ______________, or registered assigns, is the registered holder of Warrants expiring August 1, 2009 (the "Warrants") to purchase Class A Common Stock, $.01 par value per share ("Common Stock"), of Globe Holdings, Inc. (the "Company"). Each Warrant entitles the holder upon exercise to receive from the Company, commencing on the Separation Date (as defined in the Warrant Agreement) and through and until 5:00 p.m. New York City Time on August 1, 2009 (or on such later date to which the Exercise Period shall have been extended pursuant to Section 4.1 of the Warrant Agreement), 1.4155 fully paid and nonassessable shares of Common Stock as set forth in the Warrant Agreement, subject to adjustment as set forth in Sections 8 and 9 of the Warrant Agreement, at the initial exercise price (the "Exercise Price") of $0.01 per share payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. Notwithstanding the foregoing, Warrants may be exercised without the exchange of funds pursuant to the net exercise provisions of Section 4 of the Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., New York City Time, on August 1, 2009 (or such later date provided in Section 4.1 of the Warrant Agreement), and to the extent not exercised by such time such Warrants shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York. A-4 IN WITNESS WHEREOF, Globe Holdings, Inc. has caused this Warrant Certificate to be signed by its duly authorized officers and may cause its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 6, 1998 GLOBE HOLDINGS, INC. By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: Countersigned: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Warrant Agent By: -------------------------------------- Name: Title: A-5 [Reverse of Warrant Certificate] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring August 1, 2009 entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as of August 6, 1998 (the "Warrant Agreement") and a Warrant Registration Rights Agreement dated as of August 6, 1998 (the "Warrant Registration Rights Agreement"), both duly executed and delivered by the Company to Norwest Bank Minnesota, National Association, as warrant agent (the "Warrant Agent"), which Warrant Agreement and Warrant Registration Rights Agreement are hereby incorporated by reference in and made a part of this instrument and are hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. Copies of the Warrant Agreement and the Warrant Registration Rights Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or after the Separation Date, and on or before August 1, 2009 (or such later date to which the Exercise Period shall have been extended pursuant to Section 4.1 of the Warrant Agreement); provided that holders shall be able to exercise their Warrants only if a registration statement relating to the Warrant Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. In order to exercise all or any of the Warrants represented by this Warrant Certificate, (i) in the case of Definitive Warrants, the holder must surrender for exercise this Warrant Certificate to the Warrant Agent at its corporate trust office set forth in Section 17 of the Warrant Agreement, (ii) in the case of a book-entry interest in a Global Warrant, the exercising Participant whose name appears on a securities position listing of the Depositary as the holder of such book-entry interest must comply with the Depositary's procedures relating to the exercise of such book-entry interest in such Global Warrant and (iii) in the case of both Global Warrants and Definitive Warrants, the holder thereof or the Participant, as applicable, must deliver to the Warrant Agent the form of election to purchase on the reverse hereof duly filled in and signed, which signature shall be a medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price, as adjusted as provided in the Warrant Agreement, for the number of Warrant Shares in respect of which such Warrants are then exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant, provided that the Company complies with the notice provisions set forth in Sections 8.3 and 11 of the Warrant Agreement. The Warrant Agreement provides that upon the occurrence of certain events the number of shares of Common Stock or other securities issuable upon exercise of the Warrants evidenced hereby may, subject to certain conditions, be adjusted. If the Warrant Number is adjusted, the Warrant Agreement provides that the Exercise Price set forth on the face hereof may be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. A-6 Warrant Certificates, when surrendered at the office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entities any holder hereof to any rights of a stockholder of the Company. A-7 Form of Election to Purchase (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive __________ shares of Common Stock and herewith tenders payment for such shares to the order of the Company in the amount of $________ in accordance with the terms hereof unless the holder is exercising Warrants pursuant to the net exercise provisions of Section 4 of the Warrant Agreement in which case the holder shall tender Warrants having a fair market value (as provided in the Warrant Agreement) equal to the Exercise Price of the Warrants being exercised by such holder. The undersigned requests that a certificate for such shares be registered in the name of ______________________________, whose address is ______________________________ and that such shares be delivered to _________________________ whose address is ______________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _____________, whose address is ____________________, and that such Warrant Certificate be delivered to ______________, whose address is ____________________. Date: _____________, ____ ----------------------------------------- (Signature) ----------------------------------------- (Signature Guaranteed) A-8 SCHEDULE A SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL WARRANT The initial number of Warrants evidenced by this Global Warrant shall be _______________. The following decreases/increases in the number of Warrants evidenced by this Warrant have been made:
Total Number of Warrants Decrease in Increase in Evidenced by Number of Number of this Warrants Warrants Global Warrant Notation Made Date of Evidenced by Evidenced by Following such by or on Decrease/ this Global this Global Decrease/ Behalf of Increase Warrant Warrant Increase Warrant Agent --------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- ------------- - ----------- ------------ ------------ --------------- -------------
A-9 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: Lawrence R. Walsh Norwest Bank Minnesota, National Association Norwest Center Sixth and Marquette Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Services Re: Warrants to Purchase Shares of Common Stock ----------------------------------------------------------------- (CUSIP __________) Reference is hereby made to the Warrant Agreement, dated as of August 6, 1998 (the "Warrant Agreement"), between Globe Holdings, Inc., as issuer (the "Company"), and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. _______________, (the "Transferor") owns and proposes to transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A hereto, in the amount of ________________ in such Warrant[s] or interests (the "Transfer"), to ________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [_] Check if Transferee will take delivery of a beneficial interest in the 144A Global Warrant or a Definitive Warrant Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Warrant is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Warrant for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed B-1 on the 144A Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and the Securities Act. 2. [_] Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Warrant or a Definitive Warrant pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(a) or Rule 904(a) of Regulation S under the Securities Act and, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the "restricted period" (as defined in Rule 903 under the Securities Act), the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and the Securities Act. 3. [_] Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Warrant or a Definitive Warrant pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Warrants and Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [_] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [_] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [_] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or B-2 (d) [_] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Warrant or Restricted Definitive Warrants and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Warrant Agreement and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Warrant and/or the Definitive Warrants and in the Warrant Agreement and the Securities Act. 4. [_] Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Warrant or of an Unrestricted Definitive Warrant. (a) [_] Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (b) [_] Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the B-3 transferred beneficial interest or Definitive Warrant will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants or Restricted Definitive Warrants and in the Warrant Agreement. B-4 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ---------------------------------------- [Insert Name of Transferor] By: ---------------------------------- Name: Title: Dated: ________ __, ____ B-5 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [_] a beneficial interest in the: (i) [_] 144A Global Warrant (CUSIP ____), or (ii) [_] Regulation S Global Warrant (CUSIP ____), or (iii) [_] IAI Global Warrant (CUSIP _____); or (b) [_] a Restricted Definitive Warrant. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [_] a beneficial interest in the: (i) [_] 144A Global Warrant (CUSIP _____), or (ii) [_] Regulation S Global Warrant (CUSIP _____), or (iii) [_] IAI Global Warrant (CUSIP _____); or (lv) [_] Unrestricted Global Warrant (CUSIP _____); or (b) [_] a Restricted Definitive Warrant; or (c) [_] an Unrestricted Definitive Warrant, in accordance with the terms of the Warrant Agreement. B-6 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: Lawrence R. Walsh Norwest Bank Minnesota, National Association Norwest Center Sixth and Marquette Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Services Re: Warrants to Purchase Shares of Common Stock ----------------------------------------------------------------- (CUSIP __________) Reference is hereby made to the Warrant Agreement, dated as of August 6, 1998 (the "Warrant Agreement"), between Globe Holdings, Inc., as issuer (the "Company"), and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. __________, (the "Owner") owns and proposes to exchange the Warrant[s] or interest in such Warrant[s] specified herein, in the amount of __________ in such Warrant[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Warrants or Beneficial Interests in a Restricted Global Warrant for Unrestricted Definitive Warrants or Beneficial Interests in an Unrestricted Global Warrant (a) [_] Check if Exchange is from beneficial interest in a Restricted Global Warrant to beneficial interest in an Unrestricted Global Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a beneficial interest in an Unrestricted Global Warrant in an equal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Warrants and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-1 (b) [_] Check if Exchange is from beneficial interest in a Restricted Global Warrant to Unrestricted Definitive Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required In order to maintain compliance with the Securities Act and (iv) the Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [_] Check if Exchange is from Restricted Definitive Warrant to Beneficial interest in an Unrestricted Global Warrant. In connection with the Owner's Exchange of a Restricted Definitive Warrant for a beneficial interest in an Unrestricted Global Warrant, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act. (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [_] Check if Exchange is from Restricted Definitive Warrant to Unrestricted Definitive Warrant. In connection with the Owner's Exchange of a Restricted Definitive Warrant for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the Unrestricted Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Warrants or Beneficial Interests in Restricted Global Warrants for Restricted Definitive Warrants or Beneficial Interests in Restricted Global Warrants. (a) [_] Check if Exchange is from beneficial interest in a Restricted Global Warrant to Restricted Definitive Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a Restricted Definitive Warrant with an equal amount, the Owner hereby certifies that the Restricted Definitive Warrant is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the Restricted Definitive Warrant issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Warrant and in the Warrant Agreement and the Securities Act. C-2 (b) [_] Check if Exchange is from Restricted Definitive Warrant to beneficial interest in a Restricted Global Warrant. In connection with the Exchange of the Owner's Restricted Definitive Warrant for a beneficial interest in the [CHECK ONE][_] 144A Global Warrant, [_] Regulation S Global Warrant, [_] IAI Global Warrant with an equal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Warrant and in the Warrant Agreement and the Securities Act. C-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ----------------------------------------- [Insert Name of Owner] By: ---------------------------------- Name: Title: Dated: ____________, ____ C-4 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Globe Holdings, Inc. 456 Bedford Street Fall River, Massachusetts 02720 Attention: Lawrence R. Walsh Norwest Bank Minnesota, National Association Norwest Center Sixth and Marquette Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Services Re: Warrants to Purchase Shares of Common Stock ----------------------------------------------------------------- (CUSIP __________) Reference is hereby made to the Warrant Agreement, dated as of August 6, 1998 (the "Warrant Agreement"), between Globe Holdings, Inc., as issuer (the "Company"), and Norwest Bank Minnesota, National Association, as Warrant Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. In connection with our proposed purchase of ______________ amount of: (a) [_] a beneficial interest in a Global Warrant, or (b) [_] a Definitive Warrant, we confirm that: 1. We understand that any subsequent transfer of the Warrants or any interest therein is subject to certain restrictions and conditions set forth in the Warrant Agreement and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Warrants or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Warrants have not been registered under the Securities Act, and that the Warrants and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Warrants or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional D-1 "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 and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act. (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act (or any successor provision) or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Warrant or beneficial interest in a Global Warrant from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Warrants or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Warrants purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Warrants or beneficial interest therein acquired by us must be effected through one of the Initial Purchasers. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Warrants, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Warrants or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. D-2 EX-4.6 11 WARRANT REGISTRATION RIGHTS AGREEMENT Exhibit 4.6 EXECUTION COPY ================================================================================ WARRANT REGISTRATION RIGHTS AGREEMENT Dated as of August 6, 1998 Among Globe Holdings, Inc. and BancAmerica Robertson Stephens ================================================================================ WARRANT REGISTRATION RIGHTS AGREEMENT, dated as of August 6, 1998 (this "Agreement"), between Globe Holdings, Inc., a Massachusetts corporation (the "Company"), and BancAmerica Robertson Stephens (the "Initial Purchaser"). Pursuant to the terms of a Purchase Agreement effective as of July 30, 1998 (the "Purchase Agreement"), between the Company and Initial Purchaser, the Company has agreed to issue and sell to the Initial Purchaser an aggregate of 49,086 warrants (each, a "Warrant") to be issued pursuant to the provisions of a Warrant Agreement (the "Warrant Agreement"), to be dated as of the date hereof, between the Company and Norwest Bank Minnesota, National Association (the "Warrant Agent"), each Warrant initially entitling the holder thereof to purchase 1.4155 shares of Common Stock (as defined below) of the Company at an exercise price of $.01 per share, as part of 49,086 units (the "Units"), each Unit consisting of $1,000 principal amount at maturity of 14% Senior Discount Notes due 2009 of the Company (each a "Note" and collectively, the "Notes") to be issued pursuant to the provisions of an Indenture dated as of the date hereof (the "Indenture") between the Company and Norwest Bank Minnesota, National Association, and one Warrant. The Note and the Warrant included in each Unit will become separately transferable at the close of business upon the earliest to occur of (i) the date that is six months after the Issue Date (as defined below); (ii) the commencement of an exchange offer with respect to the Notes undertaken pursuant to the Registration Rights Agreement (as defined below), (iii) the date a Shelf Registration Statement (as defined in the Registration Rights Agreement) with respect to the Notes is declared effective, (iv) a Change of Control (as defined below) and (v) such date as the Initial Purchaser may in its sole discretion deem appropriate. In consideration of the foregoing and of the mutual agreements contained herein and in the Purchase Agreement, the Company and the Warrant Agent hereby agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Auditors" means, at any time, the independent auditors of the Company at such time. "Board" means the board of directors of the Company from time to time. "Comfort Letter" has the meaning specified in Section 3 hereof. "Commission" means the United States Securities and Exchange Commission. "Common Shares" means the shares of the Common Stock of the Company. "Common Stock" means the Class A Common Stock, $0.01 par value, of the Company. "Company" has the meaning specified in the preamble to this Agreement. "Company Shares" has the meaning specified in Section 2 hereof. "Cutback Notice" has the meaning specified in Section 2 hereof. "Expiration Date" means August 1, 2009. "Holders" means the record holders of the Warrants and the record holders of Warrant Shares (or other securities) received upon exercise thereof. "Includible Secondary Shares" has the meaning specified in Section 2 hereof. "Indenture" has the meaning specified in the preamble to this Agreement. "Initial Purchaser" has the meaning specified in the preamble to this Agreement. "Issue Date" means the date the Warrants are originally issued under the Warrant Agreement. "Managing Underwriter" has the meaning specified in Section 2 hereof. "Notes" has the meaning specified in the recitals to this Agreement. "Opinion" has the meaning specified in Section 3 hereof. "Other Shares" has the meaning specified in Section 2 hereof. "Piggy-back Registration Rights" has the meaning specified in Section 2 hereof. "Purchase Agreement" has the meaning specified in the preamble to this Agreement. "Registration Agreement" means the Registration Agreement dated as of July 31, 1998, as amended from time to time, among the Company and the other signatories thereto. "Registration Rights Agreement" means the Registration Rights Agreement dated the date hereof between the Company and the Initial Purchaser. "Registration Statement" has the meaning specified in Section 2 hereof. "Resale Shelf" has the meaning specified in Section 3 hereof. "Resales Registration Statement" has the meaning specified in Section 9 hereof. "Securities Act" means the United States Securities Act of 1933, as amended. "Units" has the meaning specified in the preamble to this Agreement. "Warrant" has the meaning specified in the preamble to this Agreement. 2 "Warrant Agent" has the meaning specified in the preamble to this Agreement. "Warrant Agreement" has the meaning specified in the preamble to this Agreement. "Warrant Registration Statement" has the meaning specified in Section 3 hereof. "Warrant Shares" means the Common Shares issuable upon exercise of the Warrants, such other securities as shall be issuable upon the exercise of the Warrants, or the Common Shares or such other securities received upon the exercise thereof. 2. Piggy-Back Registration Rights. (a) If the Company proposes to file a Registration Statement with the Commission respecting an offering of any shares of Common Stock (or other securities) issuable upon exercise of the Warrants (other than (i) an offering registered solely on Form S-4 or S-8 or any successor form thereto and (ii) the initial public offering of shares of Common Stock (or other securities) issuable upon exercise of the Warrants if no shareholder of the Company participates therein), the Company shall give prompt written notice to all the Holders of Warrants or Common Shares or such other securities received upon exercise thereof at least 30 days prior to the initial filing of the registration statement relating to such offering (the "Registration Statement"). Each such Holder shall have the right, within 20 days after delivery of such notice, to request in writing that the Company include all or a portion of such of the Warrant Shares in such Registration Statement ("Piggy-back Registration Rights"). The Company shall include in the public offering all of the Warrant Shares that a Holder has requested be included, unless the underwriter for the public offering or the underwriter managing the public offering (in either case, the "Managing Underwriter") delivers a notice (a "Cutback Notice") pursuant to Section 2(b) or 2(c) hereof. The Managing Underwriter may deliver one or more Cutback Notices at any time prior to the execution of the underwriting agreement for the public offering. (b) If a proposed public offering (i) includes both securities to be offered for the account of the Company ("Company Shares") and shares to be sold by shareholders and (ii) Company Shares have a priority over the inclusion of any Other Shares (as defined below) in such public offering, the provisions of this Section 2(b) shall be applicable if the Managing Underwriter delivers a Cutback Notice stating that, in its opinion, the number of Common Shares that selling shareholders propose to sell therein, whether or not such selling shareholders have the right to include shares therein (the "Other Shares"), plus the number of Warrant Shares that the Holders have requested to be sold therein, plus the Company Shares, exceeds the maximum number of shares specified by the Managing Underwriter in such Cutback Notice which can be sold in an orderly manner in such offering within a price range acceptable to the Company (or to the holders of Other Shares initially requesting registration if the offering is being effected pursuant to a "demand" registration). Such maximum number of shares that may be so sold, excluding the Company Shares, are referred to as the "Includible Shares." 3 If the Managing Underwriter delivers such Cutback Notice, the Company shall be entitled to include all of the Company Shares in the public offering and each requesting Holder shall be entitled to include in the public offering up to its pro rata portion of the Includible Shares on a pro rata basis with the holders of any Other Shares that are proposed to be sold in such public offering. (c) If a proposed public offering is (i) entirely a secondary offering or (ii) shares to be sold by selling shareholders in such public offering have a priority over the inclusion of any Company Shares therein, the provisions of this Section 2(c) shall be applicable if the Managing Underwriter delivers a Cutback Notice stating that, in its opinion, the aggregate number of Warrant Shares and Other Shares proposed to be sold therein exceeds the maximum number of shares (the "Includible Secondary Shares") specified by the Managing Underwriter in such Cutback Notice which can be sold in an orderly manner in such offering within a price range acceptable to the Company (or to the holders of Other Shares initially requesting registration if the offering is being effected pursuant to a "demand" registration). If the Managing Underwriter delivers such Cutback Notice, each requesting Holder shall be entitled to include in the public offering up to its pro rata portion of the Includible Secondary Shares on a pro rata basis with the holders of any Other Shares that are proposed to be sold in such public offering. (d) Subject to the foregoing, the underwriting agreement for such public offering shall provide that each requesting Holder shall have the right to sell its Warrant Shares to the underwriters and that the underwriters shall purchase the Warrant Shares at the price paid by the underwriters for the Common Shares sold by the Company and/or selling shareholders, as the case may be. 3. Shelf Registration. (a) If only the Company sells Common Shares in an initial public offering or all of the Warrant Shares have not been sold in a public offering, the Company shall, upon the request of one or more Holders of Warrants, use its best efforts to cause to be filed pursuant to Rule 415 under the Securities Act a shelf registration statement on the appropriate form (the "Warrant Registration Statement") covering the issuance of the Warrant Shares upon exercise of the Warrants and shall use its best efforts to cause the Warrant Registration Statement to become effective under the Securities Act by the later of (i) 180 days after the closing date of the initial public offering and (ii) the first anniversary of the Issue Date; provided, however, that if the Commission shall request that the Company register the resale of the Warrant Shares instead of the issuance thereof, the Warrant Registration Statement shall register such resale as opposed to such issuance. The Company shall use reasonable efforts to keep the Warrant Registration Statement continuously effective until such time as all Warrants have been exercised or have expired or in the case the proviso in the foregoing sentence shall apply, until such time as all Warrant Shares have been resold. Prior to filing the Warrant Registration Statement or any amendment thereto, the Company shall provide a copy thereof to the Initial Purchaser and its counsel and afford them a reasonable time to comment thereon. 4 (b) If the Warrant Registration Statement shall register the sale of the Warrant Shares (a "Resale Shelf") as provided in Section 3(a)(2) above, the Company agrees to: (i) make available for inspection by a representative of the Holders, any underwriter participating in any disposition pursuant to such Resale Shelf and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, financial and other records, documents and properties of the Company that are pertinent to the conduct of due diligence customary for an underwritten offering, and cause the officers, directors and employees of the Company to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with a Resale Shelf; provided, however, that such persons shall first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such persons, unless and to the extent that disclosure of such information is required by law or such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard such information by such person; (ii) use its best efforts to cause all Warrant Shares sold under a Resale Shelf to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed, to the extent such Warrant Shares satisfy applicable listing requirements; (iii) provide a reasonable number of copies of the prospectus included in such Resale Shelf to Holders that are selling Warrant Shares pursuant to such Resale Shelf; (iv) cause to be provided to the Warrant Agent, on behalf of the Holders and beneficial owners of Warrant Shares, upon the effectiveness of such Resale Shelf, a customary "10b-5" opinion of independent counsel (an "Opinion") and a customary "cold comfort" letter of independent auditors (a "Comfort Letter"); (v) cause to be provided to Holders and beneficial owners of Warrant Shares an Opinion and Comfort Letter with respect to each Form 10-K and Form 10-Q, including any amendments thereto, that is incorporated by reference in such Resale Shelf; and (vi) notify the Warrant Agent, for distribution to the Holders, (A) when the Resale Shelf has become effective and when any post- effective amendment thereto has been filed and becomes effective, (B) of any request by the Commission or any state securities authority for amendments and supplements to the Resale Shelf or of any material request by the Commission or any state securities authority for additional information after the Resale Shelf has become effective, (C) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of the Resale Shelf or the initiation of any proceedings for that purpose, (D) if, between the effective date of the Resale Shelf and the closing 5 of any sale of Warrant Shares covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, including this Agreement, relating to disclosure cease to be true and correct in all material respects or if the Company receives any notification with respect to the suspension of the qualification of the Warrant Shares for sale in any jurisdiction or the initiation of any proceeding for such purpose, (E) of the happening of any event during the period the Resale Shelf is effective such that such Resale Shelf or the related prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make statements therein not misleading and (F) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate. The Holders hereby agree to suspend use of the prospectus contained in a Resale Shelf upon receipt of such notice under clause (E) or (F) above until the Company has amended or supplemented such prospectus to correct such misstatement or omission. 4. Suspension. Notwithstanding the foregoing, during any consecutive 365-day period, the Company shall have the privilege to suspend availability of the Warrant Registration Statement and the related prospectus for (a) up to two 30- consecutive-day periods, except during the 30 days immediately prior to the Expiration Date, if the Board determines in good faith that there is a valid purpose for such suspension and provides notice of such determination to the Holders at their addresses appearing in the register of Warrants maintained by the Warrant Agent and (b) five additional, non-consecutive three day periods, except during the 30 day period immediately prior to the Expiration Date, if the Board determines in good faith that the Company cannot provide adequate disclosure during such period due to circumstances beyond its control. 5. Blue Sky. The Company shall use its reasonable best efforts to register or qualify the Warrant Shares proposed to be sold or issued pursuant to the Registration Statement or the Warrant Registration Statement under all applicable securities or "blue sky" laws of all jurisdictions in the United States in which any Holder of Warrants may or may be deemed to purchase Warrant Shares upon the exercise of Warrants or resale of the Warrant Shares, as the case may be, and shall use its reasonable best efforts to maintain such registration or qualification through the earlier of (A) the date upon which all Warrants have been exercised or all Warrant Shares have been resold, as the case may be, under the Warrant Shelf Registration Statement and (B) the Expiration Date; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a broker or a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 5, (ii) file any general consent to service of process or (iii) subject itself to taxation in any jurisdiction if it is not otherwise so subject. 6. Accuracy of Disclosure. 6 The Company (and its successors) represents and warrants to each Holder (and each beneficial owner of a Warrant or Warrant Share) and agrees for the benefit of each Holder (and each beneficial owner of a Warrant or Warrant Share) that, except during any period in which the availability of the Warrant Registration Statement has been suspended, (i) the Warrant Registration Statement and the documents incorporated by reference therein will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading; and (ii) the prospectus delivered to such Holder upon its exercise of Warrants or pursuant to which such Holder sells its Warrant Shares, as the case may be, and the documents incorporated by reference therein will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties set forth in this Section 6 do not apply to statements or omissions made in reliance on and in conformity with information relating to the Holders furnished to the Company in writing by or on behalf of the Holders expressly for use in the Warrant Registration Statement or any such prospectus. 7. Indemnity. The Company hereby agrees to indemnify each beneficial owner of a Warrant and each person, if any, who controls any beneficial owner of a Warrant within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"), or is under common control with, or is controlled by, any beneficial owner of a Warrant (whether or not it is, at the time the indemnity provided for in this Section 7 is sought, such a beneficial owner), from and against all losses, damages or liabilities which such beneficial owner or any such controlling or affiliated person suffers as a result of any breach, on the date of any exercise of a Warrant by such beneficial owner or the resale of any Warrant Share by such Holder, in either case pursuant to the Warrant Registration Statement, of the representations, warranties or agreements contained in Section 6. Each beneficial owner of a Warrant Share sold pursuant to a Resale Shelf, by accepting its beneficial ownership of a Warrant, hereby (i) agrees to provide the Company with information with respect to it that the Company reasonably requests in connection with any Resale Shelf and (ii) agrees, severally and not jointly, to indemnify the Company, its directors and officers and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act against any liability incurred by it or such controlling person as a result of any misstatement of information provided by such beneficial owner to the Company in writing expressly for inclusion in the Resale Shelf. 8. Expenses. All expenses incident to the Company's performance of or compliance with its obligations under this Agreement will be borne by the Company, regardless of whether a Registration Statement or Warrant Registration Statement becomes effective, including without limitation (i) all Commission or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all reasonable fees and expenses incurred in connection with compliance with state securities or "blue sky" laws, (iii) all reasonable expenses of any persons incurred by or on behalf of the Company in preparing or assisting in preparing, word processing, printing and distributing any registration statement, any prospectus, any amendments or supplements thereto and other documents relating to the performance of and compliance with this Agreement, (iv) the reasonable fees (including legal 7 fees and expenses) and disbursements of the Warrant Agent, (v) the reasonable fees and disbursements of counsel for the Company and (vi) the fees and disbursements, if any, of the Auditors, but in each case excluding (x) fees and disbursements of counsel retained by the participating Holders and (y) the Holders' share of underwriting discounts and commissions. 9. Resale Shelf Registration Statement. In the event that the Initial Purchaser or any successor thereto, in its opinion, becomes an Affiliate (as such term is defined in Rule 144 under the Securities Act) of the Company, or any successor thereto, the Company (or its successor) shall use its best efforts to cause to be filed as soon as practicable after receiving notice thereof from such Initial Purchaser (or its successor) a shelf registration statement (the "Resales Registration Statement") under the Securities Act providing for the resale by such Initial Purchaser (or its successor) of all Warrants and Common Shares it acquires from time to time and to have such shelf registration statement declared effective by the Commission. The provisions of this Agreement concerning the Warrant Registration Statement shall apply to the Resales Registration Statement as if such Resales Registration Statement were the Warrant Registration Statement (except that the Company (or its successor) will use its best efforts to keep the Resales Registration Statement effective until the earlier of (i) the Expiration Date and (ii) such time as the Initial Purchaser shall, in its opinion, cease to be an Affiliate of the Company, as evidenced by written notice sent promptly upon such event). Notwithstanding anything to the contrary herein, the Company shall not be required to effect a Resales Registration Statement if the Initial Purchaser shall have ceased to make a market in the Warrants and Common Stock. 10. Miscellaneous. (a) No Inconsistent Agreements. The Company agrees that it will not enter into any agreement which is inconsistent with the rights granted to the Holders of Warrants or Warrant Shares in this Agreement or otherwise conflicts with the provisions hereof. The Company represents that the rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities under any agreements after giving effect to any consents and amendments received on or prior to the date hereof. (b) 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 outstanding Warrants affected by such amendment, modification, supplement, waiver or consent; provided that any amendment, modification or supplement to this Agreement which, in the good faith opinion of the Board of Directors of the Company (and evidenced by a resolution of such board), does not adversely affect any Holder, shall not be subject to such requirement for written consent. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most 8 current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 10(c); (ii) if to the Company, initially at the Company's address set forth in the Warrant Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 10(c); and (iii) if to the Warrant Agent, initially at the Warrant Agent address set forth in the Warrant Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 10(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Warrants in violation of the terms of the Purchase Agreement or the Warrant Agreement. If any transferee of any Holder shall acquire Warrants, in any manner, whether by operation of law or otherwise, such Warrants shall be held subject to all of the terms of this Agreement and the Warrant Agreement, and by taking and holding such Warrants such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement or the Warrant Agreement and such person shall be entitled to receive the benefits hereof. (e) Purchases and Sales of Warrants. The Company shall not, and shall use its best efforts to cause its affiliates (as defined in Rule 405 under the Securities Act) not to, purchase and then resell or otherwise transfer any Warrants other than Warrants acquired and canceled. (f) Third Party Beneficiary. The Holders shall be third party beneficiaries of the agreements made hereunder between the Company and the Warrant Agent, and each Holder shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. Notwithstanding anything to the contrary contained herein, Section 9 hereof shall not be amended, modified or supplemented without the prior written consent of BancAmerica Robertson Stephens and the Company's obligations under Section 9 will survive the termination of this Agreement and the performance of all other obligations under this Agreement. (g) 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. 9 (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by the laws of the State of New York. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Waiver of Immunity. To the extent that the Company has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgement, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of their obligations under this Agreement to the fullest extent permitted by law. 10 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Globe Holdings, Inc. By /s/ Thomas A. Rodgers, III ------------------------------ Name: Thomas A. Rodgers, III Title: President BancAmerica Robertson Stephens By /s/ Thomas J. McGrath ------------------------------ Name: Thomas J. McGrath Title: Managing Director 11 EX-12.1 12 STATEMENT OF COMPUTATION OF RATIOS Globe Holdings, Inc. Exhibit 12.1 Statement Re: Computation of ratio of earnings to fixed charges
Fiscal Year Ended: December 31, Six Months Ended: June 30, ----------------------------------------------------------- -------------------------- Pro forma Pro forma 1993 1994 1995 1996 1997 1997 1997 1998 1998 ---- ---- ---- ---- ---- --------- ---- ---- --------- Fixed Charges: - -------------- Interest expense 2,256 3,646 6,027 5,347 4,067 23,576 2,145 1,812 11,534 Interest capitalized 0 1,558 422 0 506 635 176 352 469 Interest portion of rental expense 21 22 18 6 7 7 3 4 4 Net amortization of debt discount and issuance expense 490 438 297 151 94 5,195 55 41 2,802 ------ ------ ------ ------ ------ ------ ------ ------ ------ 2,767 5,664 6,764 5,504 4,674 29,413 2,379 2,209 14,809 Earnings: - --------- Consolidated pretax income from continuing operations 14,884 6,706 4,127 13,346 25,232 (111) 14,016 17,678 4,702 Fixed charges per above 2,767 5,664 6,764 5,504 4,674 29,413 2,379 2,209 14,809 Less interest capitalized 0 1,558 422 0 506 635 176 352 469 ------ ------ ------ ------ ------ ------ ------ ------ ------ 17,651 10,812 10,469 18,850 29,400 28,667 16,219 19,535 19,042 Ratio of earnings to fixed charges 8.38 1.91 1.55 3.42 6.29 0.97(a) 6.82 8.84 1.29 ==================================================================================================================================
(a) Earnings on a Pro Forma basis for the full year ended December 31, 1997 were inadequate to cover fixed charges by $746. EX-21.1 13 SUBSIDIARIES OF THE REGISTRANT Exhibit 21.1 Subsidiaries of Globe Holdings, Inc.: 1. Globe Manufacturing Corp. (Alabama corporation) EX-23.1 14 CONSENT OF ERNST & YOUNG LLP 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 reports dated March 24, 1998 (except Note 12, as to which the date is August 6, 1998) in the Registration Statement (Form S-4 No. 333-00000) and related Prospectus of Globe Holdings, Inc. for the registration of $49,086,000 of its 14% Senior Discount Notes due 2009, Series B. /s/ Ernst & Young LLP Providence, Rhode Island September 28, 1998 EX-25.1 15 FORM T-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) NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A U.S. National Banking Association 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No.) bank) Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (Address of principal executive offices) (Zip code) Stanley S. Stroup, General Counsel NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (612) 667-1234 (Agent for Service) ------------------------------- GLOBE HOLDINGS, INC. (Exact name of obligor as specified in its charter) Massachusetts 04-2017769 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 456 Bedford Street Fall River, Massachusetts 02720 (Address of principal executive offices) (Zip code) ------------------------------- 14% Senior Discount Notes due 2009, Series B (Title of the indenture securities) ================================================================================ Item 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. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15. Foreign Trustee. Not applicable. Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility. Norwest Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.* Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* d. A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.* e. A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."* Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.* Exhibit 5. Not applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.** Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026. ** Incorporated by reference to exhibit number 25 filed with registration statement number 333-62999. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Norwest Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 22nd day of September 1998. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Curtis D. Schwegman ----------------------- Curtis D. Schwegman Assistant Vice President EXHIBIT 6 September 22, 1998 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Curtis D. Schwegman -------------------------- Curtis D. Schwegman Assistant Vice President EX-99.1 16 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 14% SENIOR DISCOUNT NOTES DUE 2009 OF GLOBE HOLDINGS, INC. PURSUANT TO THE PROSPECTUS DATED , 1998 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION By Registered or Certified Mail: Overnight Courier: Norwest Bank Minnesota, National Norwest Bank Minnesota, National Association Association P.O. Box 1517 Norwest Center Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113 Attention: Corporate Trust Services By Hand: Facsimile Transmission: Norwest Bank Minnesota, National (For Eligible Institutions Only) Association (612) 667-4927 NorthStar East, 12th Floor Confirm by Telephone: 608 Second Avenue South, North Star (612) 667-9764 East Minneapolis, Minnesota 55479-0113 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL 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. The undersigned acknowledges receipt of the Prospectus, dated , 1998 (the "Prospectus") of Globe Holdings, Inc. (the "Company") and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount at maturity of its 14% Senior Discount Notes due 2009, Series B (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement, for each $1,000 principal amount at maturity of its outstanding 14% Senior Discount Notes due 2009 (the "Notes"), of which $49,086,000 principal amount at maturity is outstanding. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term shall mean the latest date and time to which the Exchange Offer is extended. The term "Holder" with respect to the Exchange Offer means any person in whose name 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. Capitalized terms used but not defined herein have the respective meanings set forth in the Prospectus. This Letter of Transmittal is to be used by holders of Notes if (i) certificates representing the Notes are to be physically delivered to the Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by any financial institution that is a participant in the Book-Entry Transfer Facility and whose name appears on a security position listing as the owner of Notes to the extent provided herein or (iii) tender of the Notes is to be made according to the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. Notwithstanding the foregoing, valid acceptance of the terms of the Exchange Offer may be effected by a participant in the Book-Entry Transfer Facility tendering Notes through the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") where the Exchange Agent receives an Agent's Message prior to the Expiration Date. Accordingly, such participant must electronically transmit its acceptance to the Book-Entry Transfer Facility through ATOP, and then the Book-Entry Transfer Facility will edit and verify the acceptance, execute a book-entry delivery to the Exchange Agent's account at the Book-Entry Transfer Facility and send an Agent's Message to the Exchange Agent for its acceptance. By tendering through ATOP, participants in the Book-Entry Transfer Facility will expressly acknowledge receipt of this Letter of Transmittal and agree to be bound by its terms and the Company will be able to enforce such agreement against such Book-Entry Transfer Facility participants. 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. Holders who wish to tender their Notes must complete this letter in its entirety. [_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________________ Account Number: ____________________________________________________________ Transaction Code Number: ___________________________________________________ Principal Amount of Tendered Notes: ________________________________________ If Holders desire to tender Notes pursuant to the Exchange Offer and (i) time will not permit this Letter of Transmittal, certificates representing Notes, an Agent's Message or other required documents to reach the Exchange Agent prior to the Expiration Date, or (ii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such Holders may effect a tender of such Notes in accordance with the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer-- Guaranteed Delivery Procedures." See Instruction 2 below. [_]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTION 2): Name of Registered or Acting Holder(s): ____________________________________ Window Ticket No. (if any): ________________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Eligible Institution that Guaranteed Delivery: __________________________________________________ If Delivered by Book-Entry Transfer, the Account Number: ________________________________________________________ Transaction Code Number: ___________________________________________________ [_]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. 2 PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE NOTES. Name: ______________________________________________________________________ Address: ___________________________________________________________________ ---------------------------------------------------------------------------- Attention: _________________________________________________________________ List below the Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amount of Notes should be listed on a separate signed schedule affixed hereto. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING BOX 1 DESCRIPTION OF NOTES - --------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT AGGREGATE PRINCIPAL AT MATURITY NAME(S) AND ADDRESS(ES) OF AMOUNT AT MATURITY TENDERED (MUST BE REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AN INTEGRAL MULTIPLE (PLEASE FILL IN, IF BLANK) NUMBER(S)* BY CERTIFICATE(S) OF $1,000)** - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- Total - --------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer. ** Unless indicated in the column labeled "Principal Amount at Maturity Tendered," any tendering Holder of Notes will be deemed to have tendered the entire aggregate principal amount at maturity represented by the column labeled "Aggregate Principal Amount at Maturity Represented by Certificate(s)." If the space provided above is inadequate, list the certificate numbers and principal amounts at maturity on a separate signed schedule and affix the list to this Letter of Transmittal. The minimum permitted tender is $1,000 in principal amount at maturity of Notes. All other tenders must be in integral multiples of $1,000. 3 BOX 2 BOX 3 SPECIAL REGISTRATION SPECIAL DELIVERY INSTRUCTIONS INSTRUCTIONS (See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6) To be completed ONLY if To be completed ONLY if certificates for Notes in a certificates for Notes in a principal amount at maturity not principal amount at maturity not tendered, or Exchange Notes issued tendered, or Exchange Notes issued in exchange for Notes accepted for in exchange for Notes accepted for exchange, are to be issued in a exchange, are to be sent to an name other than the name appearing address other than the address in Box 1 above. appearing in Box 1 above, or if Box 2 is filled in, to an address other than the address appearing in Box 2. Issue certificate(s) to: Name _______________________________ (Please Print) Deliver certificate(s) to: Address ____________________________ Name _______________________________ ------------------------------------ (Please Print) (Include Zip Code) ------------------------------------ Address ____________________________ (Tax Identification or Social ------------------------------------ Security Number) (Include Zip Code) ------------------------------------ (Tax Identification or Social Security Number) BOX 4 BROKER-DEALER STATUS [_]Check this box if the Beneficial Owner of the Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. IF THIS BOX IS CHECKED, A COPY OF THIS LETTER OF TRANSMITTAL MUST BE RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY GLOBE HOLDINGS, INC., ATTENTION LAWRENCE R. WALSH, VIA FACSIMILE (508) 674-3580. 4 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount at maturity of Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount at maturity of 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 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) with respect to the tendered Notes with the full power of substitution to (i) present such Notes and all evidences of transfer and authenticity to, or transfer ownership of, such Notes on the account books maintained by the Book-Entry Transfer Facility to, or upon, the order of, the Company, (ii) deliver certificates for such Notes to the Company and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Company and (iii) present such Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Notes, all in accordance with the terms of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Notes tendered hereby and that the Company will acquire good, valid and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims, when the same are acquired by the Company. The undersigned hereby further represents that any Exchange Notes acquired in exchange for Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned, that neither the undersigned nor any other such person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the undersigned nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. In addition, the undersigned and any such person acknowledge that (a) any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must, in the absence of an exemption therefrom, comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the Exchange Notes and cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in no-action letters and (b) failure to comply with such requirements in such instance could result in the undersigned or such person incurring liability under the Securities Act for which the undersigned or such person is not indemnified by the Company. 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 Notes tendered hereby. 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 Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for 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 Exchange 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. Unless otherwise notified in accordance with the instructions set forth herein in Box 4 under "Broker-Dealer Status," the Company will assume that the undersigned is not a Participating Broker-Dealer. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Notes when, as and if the Company has given notice thereof to the Exchange Agent. If any Notes tendered herewith are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Notes will be returned, without expense, to the undersigned at the address shown below or to a different address as may be indicated herein in Box 3 under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. 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 representative, successors and assigns. 5 The undersigned understands that tenders of 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, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." Unless otherwise indicated in Box 2 under "Special Registration Instructions," please issue the certificates representing the Exchange Notes issued in exchange for the Notes accepted for exchange and any certificates for Notes not tendered or not exchanged, in the name(s) of the registered holder of the Notes appearing in Box 1 above. Similarly, unless otherwise indicated in Box 3 under "Special Delivery Instructions," please send the certificates, if any, representing the Exchange Notes issued in exchange for the Notes accepted for exchange and any certificates for Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below in the undersigned's signature(s). In the event that the box entitled "Special Registration Instructions" and the box entitled "Special Delivery Instructions" both are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Notes accepted for exchange in the name(s) of, and return any certificates for Notes not tendered or not exchanged to, the person(s) so indicated. The undersigned understands that the Company has no obligation pursuant to the "Special Registration Instructions" and "Special Delivery Instructions" to transfer any Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Notes so tendered. Holders who wish to tender their Notes and (i) whose Notes are not immediately available or (ii) who cannot deliver the Notes, an Agent's Message, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date, may tender their Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2. 6 The lines below must be signed by the registered holder(s) exactly as their name(s) appear(s) on the 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 Notes to which this Letter of Transmittal relate are held of record by two or more joint holders, then all such holders must sign this Letter of Transmittal. SIGNATURES x ----------------------------------------------------- ---------------------- Date x ----------------------------------------------------- ---------------------- Date Area Code and Telephone Number: _____________________ 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, then such person must (i) set forth his or her full title below and (ii) submit evidence satisfactory to the Company of such person's authority so to act. See Instruction 5. Name(s): _____________________________________________________________________ (Please Print) Capacity: ____________________________________________________________________ Address: _____________________________________________________________________ (Include Zip Code) MEDALLION SIGNATURE GUARANTEE (If required by Instruction 5) Certain Signatures must be Guaranteed by an Eligible Institution Signature(s) Guaranteed by an Eligible Institution: __________________________ (Authorized Signature) ------------------------------------------------------------------------------ (Title) ------------------------------------------------------------------------------ (Name of Firm) ------------------------------------------------------------------------------ (Address, Include Zip Code) ------------------------------------------------------------------------------ (Area Code and Telephone Number) 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account with the Book-Entry Transfer Facility), as well as a properly completed and duly executed copy of this Letter of Transmittal (or, in the case of a book-entry transfer, an Agent's Message), a Substitute Form W-9 and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of certificates for Notes and all other required documents is at the election and sole risk of the tendering holder and delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holder may wish to use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. Neither the Company nor the Exchange Agent is under an obligation to notify any tendering holder of the Company's acceptance of tendered Notes prior to the completion of the Exchange Offer. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes but whose Notes are not immediately available and who cannot deliver their certificates for Notes (or comply with the procedures for book-entry transfer prior to the Expiration Date), the Letter of Transmittal and any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Notes according to the guaranteed delivery procedures set forth below. Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member 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 (an "Eligible Institution"); (ii) prior to the Expiration Date, the Exchange Agent must have received from the holder and the Eligible Institution a properly 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 or numbers of the tendered Notes, and the principal amount at maturity of tendered Notes and stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) (or, in the case of a book-entry transfer, an Agent's Message), together with the tendered Notes (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account with the Book- Entry Transfer Facility) and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) the certificates representing the tendered Notes in proper form for transfer (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account with the Book-Entry Transfer Facility), together with this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and all other documents required by the Letter of Transmittal must be received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by a Holder who attempted to use the guaranteed delivery procedure. 3. TENDER BY HOLDER. Only a registered holder of Notes may tender such Notes in the Exchange Offer. Any beneficial owner of Notes who is not the registered holder and who wishes to tender should arrange with such Holder to execute and deliver this Letter of Transmittal on such owner's behalf or must, prior to completing and executing this Letter of Transmittal and delivering such Notes, either make appropriate arrangements to register ownership of the Notes in such owner's name or obtain a properly completed bond power from the registered holder. 8 4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral multiples of $1,000 in principal amount at maturity. If less than the entire principal amount at maturity of Notes is tendered, the tendering holder should fill in the principal amount at maturity tendered in the column labeled "Principal Amount at Maturity Tendered" of the box entitled "Description of Notes" (Box 1) above. The entire principal amount at maturity of Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount at maturity of Notes is not tendered, Notes for the principal amount at maturity of Notes not tendered and Exchange Notes exchanged for any Notes tendered will be sent to the holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal, as soon as practicable following the Expiration Date. 5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by the registered holder(s) of the Notes tendered herewith, the signatures must correspond with the name(s) as written on the face of the tendered Notes without alteration, enlargement, or any change whatsoever. If any of the tendered Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Notes are held in different names on several Notes, it will be necessary to complete, sign, and submit as many separate copies of the Letter of Transmittal documents as there are names in which tendered Notes are held. If this Letter of Transmittal is signed by the registered holder, and Exchange Notes are to be issued and any untendered or unaccepted principal amount at maturity of Notes are to be reissued or returned to the registered holder, then, the registered holder need not and should not endorse any tendered Notes nor provide a separate bond power. In any other case, the registered holder must either properly endorse the Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal (executed exactly as the name(s) of the registered holder(s) appear(s) on such Notes), with the signature(s) on the endorsement or bond power guaranteed by an Eligible Institution unless such certificates or bond powers are signed by an Eligible Institution. If this Letter of Transmittal or any Notes or bond powers 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 evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal. No medallion signature guarantee is required if this Letter of Transmittal is signed by the registered holder(s) of the Notes tendered herewith and the Exchange Notes (and any Notes not tendered or not accepted) are to be issued directly to such registered holder(s) and neither the "Special Registration Instructions" (Box 2) nor the "Special Delivery Instructions" (Box 3) has been completed. In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. 6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box, the name and address in which the Exchange Notes and/or substitute Notes for principal amounts at maturity not tendered or not accepted for exchange are to be sent, if different from the name and address or account of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification number or social security number of the person named must also be indicated and the tendering holders should complete the applicable box. If no such instructions are given, the Exchange Notes (and any Notes not tendered or not accepted) will be issued in the name of and sent to the registered holder of the Notes. 7. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the sale and transfer of Notes to it or its order pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the transfer and sale of Notes to the Company or its order pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption from taxes therefrom is not submitted with this Letter of Transmittal, the amount of transfer taxes will be billed directly to such tendering holder. 9 Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Notes listed in this Letter of Transmittal. 8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder of any Notes which are accepted for exchange must provide the Company (as payor) with its correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is his or her social security number. If the Company is not provided with the correct TIN, the Holder may be subject to a $50 penalty imposed by Internal Revenue Service. (If withholding results in an over-payment of taxes, a refund may be obtained.) Certain holders (including, among other, 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" for additional instructions. To prevent backup withholding, each tendering holder must provide such holder's correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report interest or dividends or (ii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the Notes are registered in more than one name or are not in the name of the actual owner, see the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for information on which TIN to report. The Company reserves the right in its sole discretion to take whatever steps are necessary to comply with the Company's obligation regarding backup withholding. 9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of tendered Notes will be determined by the Company, in its sole discretion, which determination will be final and binding. The Company reserves the right to reject any and all Notes not validly tendered or any Notes, the Company's acceptance of which would, in the opinion of the Company or its counsel, be unlawful. The Company also reserves the right to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Notes as to any ineligibility of any holder who seeks to tender Notes in the Exchange Offer. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Notes must be cured within such time as the Company shall determine. The Company will use reasonable efforts to give notification of defects or irregularities with respect to tenders of Notes, but shall not incur any liability for failure to give such notification. 10. 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 tendered Notes. 11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or contingent tender of Notes will be accepted. 12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose Notes have been mutilated, lost, stolen, or destroyed should contact the Exchange Agent at the address indicated above for further instruction. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for information and for additional copies of the Prospectus may be directed to the Exchange Agent at the address set forth on the first page of this Letter of Transmittal. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. 14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF NOTES. Subject to the terms and conditions of the Exchange Offer, the Company will accept for exchange all validly tendered Notes as soon as practicable after the Expiration Date and will issue Exchange Notes therefor as soon as practicable thereafter. For purposes of the Exchange Offer, the Company shall be deemed to have accepted tendered Notes when, as and if the Company has given notice thereof to the Exchange Agent. If any tendered Notes are not exchanged pursuant to the Exchange Offer for any reason, such unexchanged Notes will be returned, without expense, to the undersigned at the address shown above or at a different address as may be indicated under "Special Delivery Instructions." 10 15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited withdrawal rights set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of Tenders." PAYOR'S NAME: GLOBE MANUFACTURING CORP. - ------------------------------------------------------------------------------- Part 1--PLEASE PROVIDE Social Security Number YOUR TAXPAYER or TIN IDENTIFICATION NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW SUBSTITUTE / / FORM W-9 --------------------------------------------------------- DEPARTMENT OF THE TREASURY Part 2--Check the box if you are NOT subject to backup withholding under the provisions of section 3408(a)(1)(C) of the 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 backup withholding. [_] Part 3-- INTERNAL REVENUE Awaiting SERVICE TIN ^ [_] PAYER'S REQUEST --------------------------------------------------------- FOR TAXPAYER Name (if joint names, list first and circle the name IDENTIFICATION of the person or entity whose number you enter in Part NUMBER ("TIN") I below. See instructions if your name has changed.) --------------------------------------------------------- --------------------------------------------------------- CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE. Address --------------------------------------------------------- City, State and ZIP Code --------------------------------------------------------- SIGNATURE ___________ DATE ______________ List account number(s) here (optional) 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 ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 EX-99.2 17 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO GLOBE HOLDINGS, INC. 14% SENIOR DISCOUNT NOTES DUE 2009 This form must be used by a holder of 14% Senior Discount Notes due 2009 (the "Notes") of Globe Holdings, Inc. (the "Company"), who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed delivery procedures described in the section of the Prospectus entitled "The Exchange Offer-- Guaranteed Delivery Procedures," and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes to tender Notes pursuant to such guaranteed delivery procedures must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange Offer. Capitalized terms not defined herein have the meanings ascribed to them in the Letter of Transmittal. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (THE "EXCHANGE AGENT") By Registered or Certified Mail: Overnight Courier: Norwest Bank Minnesota, National Norwest Bank Minnesota, National Association Association P.O. Box 1517 Norwest Center Minneapolis, Minnesota 55480-1517 6th and Marquette Avenue Attention: Corporate Trust Services Minneapolis, Minnesota 55479-0113 Attention: Corporate Trust Services By Hand: Facsimile Transmission: Norwest Bank Minnesota, National (For Eligible Institutions Only) Association (612) 667-4927 NorthStar East, 12th Floor Confirm by Telephone: 608 Second Avenue South, North Star (612) 667-9764 East Minneapolis, Minnesota 55479-0113 DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal 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 signature box on the Letter of Transmittal. LADIES AND GENTLEMEN: The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount at maturity of Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal. The undersigned hereby tenders the Notes listed below:
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR ACCOUNT NUMBER AT THE BOOK- AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL ENTRY AMOUNT AT MATURITY AMOUNT AT MATURITY FACILITY REPRESENTED TENDERED - ------------------------------------------------------- - ------------------------------------------------------- - -------------------------------------------------------
PLEASE SIGN AND COMPLETE - -------------------------------------------------------------------------------- Signatures of Registered Holder(s) Date: , 1998 or Address: ___________________________ Authorized Signatory: ______________ ------------------------------------ ------------------------------------ Area Code and Telephone No.: _______ ------------------------------------ Name of Registered Holder(s): ______ This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as their name(s) appear on certificates for Notes or on a security position listing as the owner of Notes, or by person(s) authorized to become 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): ________________________________________________________________ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 2 GUARANTEE (Not to be used for signature guarantee) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees that either the Notes tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Notes into the Exchange Agent's account at Book-Entry Transfer Facility as described in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures"), together with a properly completed Letter of Transmittal (or facsimile thereof) (or, in the case of a book-entry transfer, an Agent's Message) and any other required documents will be received by the Exchange Agent by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date. Name of Firm: ______________________ ------------------------------------ Authorized Signature Address: ___________________________ Name: ______________________________ ------------------------------------ Title: _____________________________ Area Code and Telephone No.: _______ Date: , 1998 - -------------------------------------------------------------------------------- DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL. 3 INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. Delivery of this Notice of Guaranteed Delivery. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedures, see Instruction 2 of the Letter of Transmittal. 2. Signatures on this Notice of Guaranteed Delivery. If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Notes referred to herein, the signature must correspond with the name(s) written on the face of the Notes without alteration, enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Notes, the signature must correspond with the name shown on the security position listing as the owner of the Notes. If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Notes listed or a participant of the Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers, signed as the name of the registered holder(s) appears on the Notes or signed as the name of the participant shown on the Book-Entry Transfer Facility's security position listing. If this Notice of Guaranteed Delivery is signed 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 should so indicate when signing and submit with the Letter of Transmittal evidence satisfactory to the Company of such person's authority to so act. 3. Requests for Assistance or Additional Copies. Requests for information and additional copies of the Prospectus may be directed to the Exchange Agent at the address set forth on the first page of this Notice of Guaranteed Delivery. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. 4 EX-99.3 18 TENDER INSTRUCTIONS INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF GLOBE HOLDINGS, INC. 14% SENIOR DISCOUNT NOTES DUE 2009 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus, dated , 1998 (the "Prospectus"), of Globe Holdings, Inc. (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount at maturity of its 14% Senior Discount Notes due 2009, Series B (the "Exchange Notes"), for each $1,000 principal amount at maturity of its outstanding 14% Senior Discount Notes due 2009 (the "Notes"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the Exchange Offer with respect to the Notes held by you for the account of the undersigned. The aggregate face amount of the Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $ of the 14% Senior Discount Notes due 2009. With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): [_]TO TENDER the following Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT AT MATURITY OF NOTES TO BE TENDERED): $ [_]NOT TO TENDER any Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (fill in state) , (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iv) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Act"), in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission set forth in no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer--Resale of the Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Notes. (Continued on back) PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE NOTES. [_]Check this box if the Beneficial Owner of the Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. IF THIS BOX IS CHECKED, A COPY OF THESE INSTRUCTIONS MUST BE RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY GLOBE HOLDINGS, INC., ATTENTION LAWRENCE R. WALSH, VIA FACSIMILE (508) 674- 3580. SIGN HERE Name of beneficial owner(s): ________________________________________________ Signature(s): _______________________________________________________________ Name (please print): ________________________________________________________ Address: ____________________________________________________________________ ----------------------------------------------------------------------- ----------------------------------------------------------------------- Telephone number: ___________________________________________________________ Taxpayer Identification or Social Security Number: __________________________ Date: _______________________________________________________________________ -2- -----END PRIVACY-ENHANCED MESSAGE-----