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As filed with the Securities and Exchange Commission on September 26, 1995
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
WALBRO CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 3714 38-1358966
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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6242 Garfield Street, Cass City, Michigan 48726, (517) 872-2131
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
LAMBERT E. ALTHAVER
Chairman, President and Chief Executive Officer
Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726, (517) 872-2131
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
HOWARD S. LANZNAR, ESQ.
LAWRENCE D. LEVIN, ESQ.
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
(312) 902-5200
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective date
registration statement for the same offering: [ ]
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [ ].
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CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Amount Proposed Maximum Proposed Amount of
Title of Each Class of to be Offering Price Maximum Aggregate Registration
Securities to be Registered Registered Per Unit(1) Offering Price Fee
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9 7/8% Senior Notes Due 2005, Series B . . . . . $110,000,000 100% $110,000,000 $37,931
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Subsidiary Guarantees(2) . . . . . . . . . . . . (3) (3) (3) (3)
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(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 of Regulation C under the Securities Act of 1933, as
amended.
(2) The Company's principal wholly-owned domestic subsidiaries, Walbro
Automotive Corporation and Walbro Engine Management Corporation, and the
wholly-owned domestic subsidiaries of Walbro Automotive Corporation,
Sharon Manufacturing Company and Whitehead Engineered Products, Inc.
(collectively, the "Guarantors"), have guaranteed on a senior unsecured
basis, jointly and severally, the payment of the principal of, premium,
if any, and interest on the 9 7/8% Senior Notes, Series B being
registered hereby (the "Subsidiary Guarantees"). The Guarantors are
registering the Subsidiary Guarantees. Pursuant to Rule 457(n) under the
Securities Act of 1933, as amended, no registration fee is required with
respect to the Subsidiary Guarantees.
(3) Not applicable.
---------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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WALBRO CORPORATION
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
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Form S-4 Item Number Heading or Subheading in Prospectus
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . . . Facing Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page of
Prospectus.
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page of Prospectus; Outside Back
Prospectus . . . . . . . . . . . . . . . . . . . . . Cover Page of Prospectus.
3. Risk Factors, Ratio of Earnings to Fixed Charges, and
Other Information . . . . . . . . . . . . . . . . . Prospectus Summary; Investment Considerations; The
Company; Selected Historical Financial Data; Combined
Pro Forma Financial Information.
4. Terms of the Transaction . . . . . . . . . . . . . . Prospectus Summary; The Exchange Offer; Description
of the Old Notes; Certain Federal Income Tax
Consequences of the Exchange Offer.
5. Pro Forma Financial Information . . . . . . . . . . Prospectus Summary; Selected Historical, Combined and
Pro Forma Financial Information.
6. Material Contracts With the Company Being Acquired . Not Applicable.
7. Additional Information Required For Reoffering by
Persons and Parties Deemed to be Underwriters . . . Not Applicable.
8. Interests of Named Experts and Counsel . . . . . . . Legal Matters; Experts.
9. Disclosure of Commission Position on Indemnification
For Securities Act Liabilities . . . . . . . . . . . Not Applicable.
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants . . . . Not Applicable.
11. Incorporation of Certain Information by Reference . Not Applicable.
12. Information With Respect to S-2 or S-3 Registrants . Prospectus Summary; Capitalization; The Company; The
Dyno Acquisition; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Historical, Combined and Pro Forma
Financial Data; Business; Description of New Notes;
Financial Statements.
13. Incorporation of Certain Information by Reference . Not Applicable.
14. Information With Respect to Registrants Other Than S-
2 or S-3 Companies . . . . . . . . . . . . . . . . . Not Applicable.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies . . . . . Not Applicable.
16. Information With Respect to S-2 or S-3 Companies . . Not Applicable.
17. Information With Respect to Companies Other Than S-2
or S-3 Companies . . . . . . . . . . . . . . . . . . Not Applicable.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
Are to be Solicited . . . . . . . . . . . . . . . . Not Applicable.
19. Information if Proxies, Consents or Authorizations
Are Not to be Solicited, or in an Exchange Offer . . Management.
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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 26, 1995
PRELIMINARY PROSPECTUS
Walbro Corporation
(LOGO WALBRO) OFFER TO EXCHANGE
9 7/8% Senior Notes due 2005, Series B
for all outstanding 9 7/8% Senior Notes due 2005, Series A
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON OCTOBER 31, 1995, UNLESS EXTENDED
Walbro Corporation, a Delaware corporation (the "Company"), hereby offers,
upon the terms and subject to conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"; together with the Prospectus, the "Exchange Offer"), to exchange
up to an aggregate principal amount of $110,000,000 of its 9 7/8% Senior Notes
Due 2005, Series B (the "New Notes") for up to an aggregate principal amount of
$110,000,000 of its outstanding 9 7/8% Senior Notes Due 2005, Series A (the
"Old Notes"). The terms of the New Notes are identical in all material
respects to those of the Old Notes, except for certain transfer restrictions
and registration rights relating to the Old Notes. The New Notes will be
issued pursuant to, and entitled to the benefits of, the Indenture (as defined)
governing the Old Notes. The New Notes and the Old Notes are sometimes
referred to collectively as the "Notes".
The New Notes will be senior unsecured obligations of the Company ranking
pari passu in right of payment with all existing and future senior unsecured
obligations of the Company. The New Notes will be guaranteed (the
"Guarantees") on a senior unsecured basis, jointly and severally, by each of
the Company's principal wholly-owned domestic operating subsidiaries (the
"Guarantors").
The New Notes and Guarantees will be effectively subordinated in right of
payment to all existing and future secured indebtedness of the Company and its
subsidiaries. The New Notes will rank pari passu in right of payment with the
Old Notes. As of June 30, 1995, after giving effect to the Initial Offering
(as defined herein), the Dyno Acquisition (as defined herein), and the
borrowings outstanding under the Credit Facility (as defined herein), the
Company and its subsidiaries had approximately $96.9 million of secured
indebtedness outstanding. In addition, the New Notes will be effectively
subordinated in right of payment to all existing and future liabilities,
including trade payables, of the Company's subsidiaries which are not
Guarantors, which, as of June 30, 1995, after giving effect to the
Transactions, totalled approximately $79 million (excluding intercompany
liabilities).
(Cover continued on next page)
SEE "INVESTMENT CONSIDERATIONS" ON PAGE 12 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS 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 SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1995.
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(Continued from Cover)
The New Notes will bear interest at the rate of 9 7/8% per annum, payable
semiannually on January 15 and July 15, commencing January 15, 1996 to holders
of record on the immediately preceding January 1 and July 1. Holders of the
New Notes will receive interest on January 15, 1996 from the date of initial
issuance of the New Notes, plus an amount equal to the accrued interest on the
Old Notes from the most recent date to which interest has been paid to the date
of exchange thereof. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the New Notes.
The New Notes are subject to redemption on or after July 15, 2000, at
the option of the Company, in whole or in part, at the redemption prices set
forth herein, plus accrued interest to the date of redemption. In addition,
prior to July 15, 1998, the Company may, at its option, redeem up to an
aggregate of 30% of the combined principal amount of the Notes originally
issued with the net proceeds from one or more Public Equity Offerings (as
defined herein) at the redemption price set forth herein plus accrued interest
to the date of redemption. In the event of a Change of Control (as defined
herein), the Company will be obligated to make an offer to purchase all of the
outstanding Notes at a redemption price equal to 101% of the principal amount
thereof plus accrued interest to the date of repurchase. In addition, the
Company will be obligated to make an offer to repurchase the Notes in the event
of certain asset sales. See "Description of the 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 October 31, 1995, unless extended by the Company in its sole discretion (the
"Expiration Date"). The Expiration Date will not in any event be extended to a
date later than November 30, 1996. Tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. In the event the Company terminates the Exchange Offer and
does not accept for exchange any Old Notes with respect to the Exchange Offer,
the Company will promptly return the Old Notes to the holders thereof. The
Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange, but is otherwise subject to certain
customary conditions. The Old Notes may be tendered only in integral
multiples of $1,000.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
July 21, 1995 (the "Registration Rights Agreement") by and among the Company,
the Guarantors and Smith Barney, Inc., A.G. Edwards & Sons, Inc., McDonald &
Company Securities, Inc. and Stifel, Nicolaus & Company, Incorporated, as the
initial purchasers (the "Initial Purchasers"), with respect to the initial sale
of the Old Notes. Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission"), the New Notes issued pursuant to the
Exchange Offer in exchange for Notes may be offered for resale, resold and
otherwise transferred by respective holders 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, of 1933, as amended (the "Securities
Act"), provided that the 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 and is not engaged in and
does not intend to engage in a distribution of the New Notes. 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 resales of the
New Notes received in exchange for Old Notes if such New Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
2
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Prior to the Exchange Offer, there has been no public market for the New
Notes. Although the Company has agreed pursuant to the Registration Rights
Agreement to use its best efforts to cause the New Notes to be listed on the
New York Stock Exchange, there can be no assurance as to the liquidity of any
markets that may develop for the New Notes, the ability of holders to sell the
New Notes, or the price at which holders would be able to sell the New Notes.
Future trading prices of the New Notes will depend on many factors, including
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities. Historically, the market for securities
similar to the New Notes, including non-investment grade debt, has been subject
to disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the New Notes, if
such market develops, will not be subject to similar disruptions. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the Notes offered hereby. However, the Initial Purchasers are not obligated
to do so and any market marking may be discontinued at any time without notice.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
3
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AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-4 (the
"Registration Statement," which term shall include all amendments, exhibits,
annexes and schedules thereto) pursuant to the Securities Act, and the rules
and regulations promulgated thereunder, covering the New Notes being offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to in the Registration Statement are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Company is subject to
the periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Periodic reports, proxy
statements and other information filed by the Company with the Commission may
be inspected at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional
offices located at the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New
York 10007. Copies of such material can be obtained from the Company or the
Guarantors upon request.
The Company has agreed to file with the Commission, to the extent
permitted, and distribute to holders of the New Notes reports, information and
documents specified in Sections 13 and 15(d) of the Exchange Act, so long as
the New Notes are outstanding, whether or not the Company is subject to such
informational requirements of the Exchange Act. While any New Notes remain
outstanding, the Company will make available, upon request, to any holder of
the New Notes, the information required pursuant to Rule 144A(d)(4) under the
Securities Act during any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act. Any such request should be directed to the
Secretary of the Company at 6242 Garfield Street, Cass City, Michigan 48726
(telephone number (517) 872-2131).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements of the Company and the notes thereto and the combined financial
statements of Dyno (as defined) and the notes thereto appearing elsewhere in
this Prospectus. Unless the context otherwise requires, the information
contained in this Prospectus gives effect to the Dyno Acquisition (as defined)
which was consummated on July 27, 1995 and all references in this Prospectus to
the Company or Walbro refer to Walbro Corporation, its consolidated
subsidiaries and the combined Dyno business.
THE COMPANY
Walbro is a global leader in the design, development and manufacture of
precision fuel systems and products for automotive and small engine markets
worldwide. The Company manufactures fuel pumps, fuel modules, fuel level
sensors, plastic fuel tanks and fuel rails for sale to automotive original
equipment manufacturers ("OEMs"). On July 27, 1995, Walbro acquired the fuel
systems business of Dyno Industrier A.S ("Dyno"), which is a leading European
plastic fuel-tank manufacturer. Products manufactured for the small engine
market include carburetors and ignitions for chain saws, outboard marine
engines, two-wheeled vehicles, industrial engines and lawn and garden
equipment, such as lawn mowers and weed trimmers. From 1989 to 1994, the
Company (excluding Dyno) increased net sales and the sum of operating income
(minus foreign currency exchange losses and other expenses, net) and
depreciation and amortization expenses ("EBITDA") at the compound rates of
approximately 19% and 21% per year, respectively, despite an automotive
industry downturn in 1990-1991. This growth was primarily due to the
introduction of new automotive products, penetration of additional automotive
platforms and a recovery in the small engine industry. The Company, including
Dyno on a pro forma basis, had 1994 net sales of $472.4 million and EBITDA of
$51.3 million.
WALBRO AUTOMOTIVE CORPORATION
Through its subsidiary, Walbro Automotive Corporation, the Company designs,
develops and manufactures fuel storage and delivery products for a broad range
of U.S. and foreign manufacturers of passenger automobiles and light trucks
(including minivans). The Company holds a strong market position in the U.S.
and, through the Dyno Acquisition (as defined) and Walbro's joint ventures in
France, Brazil, Japan and South Korea, has diversified its business across a
number of geographic markets. Management believes that, in the North American
automotive market, the Company manufactures fuel pumps for approximately 40% of
Ford Motor Company's ("Ford") automobiles and light trucks, including the
Taurus, Explorer, Windstar and F-Series Pickup. The Company manufactures all
fuel module requirements for Ford light trucks, and, according to management's
estimates, manufactures approximately 25% of Ford's fuel rail needs. In
addition, management estimates that the Company supplies Chrysler Corporation
("Chrysler") with approximately 70% of its fuel pump and fuel module
requirements, including all requirements for Chrysler's passenger cars and
minivans and most requirements for Chrysler's light trucks, including the Dodge
Ram Truck. Other automotive customers of the Company, including Dyno and the
Company's joint ventures, include Renault, Peugeot, Mercedes-Benz, Fiat, Volvo,
Rover, Saab, Volkswagen, Audi, Daewoo, Hyundai and Kia. Management believes
that the Company manufactures substantially all of the fuel tank systems for
Volvo and Saab and the fuel tank for the Mercedes 190/C Class, Volkswagen Polo
and Renault Twingo. Approximately 73% of the Company's 1994 revenues,
including Dyno on a pro forma basis, were generated by its automotive
operations.
The Company's strategy is to grow its position as a global supplier to the
automotive industry through the design, development and manufacture of
technologically advanced fuel systems and components which are delivered
worldwide. In anticipation of the increasing demand by OEMs for the supply of
integrated automotive systems, Walbro is supplying OEMs with an increasing
number of fuel storage and delivery
5
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components with the ultimate goal of being responsible for the complete fuel
storage and delivery system ("FSDS") which would integrate all of the
components necessary for fuel delivery. The Company's ability to assume
responsibility for the development of complete systems will allow OEMs to
reduce internal engineering costs, use fewer suppliers and assemble systems
rather than components. Once an OEM designates the Company to supply FSDS
components for a new vehicle program, the OEM usually will continue to purchase
those components from the Company for the life of the program, although not
necessarily for a redesign.
Through Dyno and Walbro's joint ventures in Europe, South America and East
Asia, Walbro is increasing its ability to design, develop, manufacture and
distribute fuel delivery components and systems worldwide and to support OEMs
as they produce vehicles for the global automotive market. The Company's FSDS
product development efforts focus on the regulatory and competitive challenges
facing its customers worldwide. For example, Walbro has used its technical
skills to develop plastic multi-layer fuel tanks and on-board running and vapor
recovery ("ORVR") devices, which are designed, in part, to assist OEMs in
complying with increasingly strict emission regulations.
WALBRO ENGINE MANAGEMENT CORPORATION
Through its subsidiary, Walbro Engine Management Corporation, the Company
designs, develops and manufactures diaphragm carburetors for portable engines
(such as those used in chain saws and weed trimmers), float feed carburetors
for ground supported engines (such as those used in lawn mowers and generators)
and ignition systems and other components for a variety of small engine
products. The Company believes that it is the world's largest independent
manufacturer of small engine carburetors, with an approximate 76% share of the
global diaphragm carburetor market including sales to such leading chain saw
and weed trimmer manufacturers as Poulan/Weedeater (a Division of Electrolux
A.B.), Homelite (a Division of Deere & Company), Stihl, Incorporated, McCulloch
(a Division of Shop Vac), Ryobi Ltd. and Kioritz (Echo) Corporation. Walbro
believes it has an approximate 14% share of the global float feed carburetor
market, including sales to Briggs & Stratton Corporation, the world's largest
small engine manufacturer, Kohler Company, Tecumseh Products Co., and to
Mercury Marine (a Division of Brunswick Corporation), a major manufacturer of
outboard marine engines. Walbro also manufactures replacement products for
both the automotive and small engine aftermarkets, sales of which are included
within its small engine product business. Approximately 27% of the Company's
1994 net sales, including Dyno on a pro forma basis, were generated by its
small engine operations.
The Company's strategy in the small engine sector is to enhance its
presence as a leading supplier of small engine carburetors, ignition systems
and other small engine products through the development of technologies which
assist customers in complying with new emission standards. The Company's
strategy also includes increasing its global presence, particularly in
developing countries such as The People's Republic of China, to profit from the
growing market for carburetors for two-wheeled vehicles and other small engine
applications in those countries and from infrastructure development which
requires gasoline-powered portable tools.
THE DYNO ACQUISITION
On July 27, 1995, the Company acquired the fuel systems business of Dyno
for approximately $124 million (the "Dyno Acquisition"). Dyno is a leading
designer, manufacturer and marketer of plastic mono-layer fuel tank systems and
components to many European vehicle manufacturers, including Renault,
Mercedes-Benz, Volvo, Peugeot, Saab, Rover, Volkswagen and Audi, and has
operations in France, Norway, Germany, Great Britain, Spain and Belgium. Dyno
produced approximately 1.5 million plastic fuel tanks in 1994, which management
estimates to be approximately 17% of the European plastic fuel tank market.
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In addition to manufacturing fuel tanks, Dyno manufactures plastic fill
pipes, fuel overflow containers, and other automobile blow-molded components
for cooling, heating and air conditioning systems. Management expects these
products, in the aggregate, to account for approximately 10% of Dyno's 1995
revenues.
Concurrently with the consummation of the Dyno Acquisition, (i) the Company
issued and sold the Old Notes (the "Initial Offering"), and (ii) the Company
and certain of its wholly-owned domestic and foreign subsidiaries entered into
a new bank revolving credit facility (the "New Credit Facility") with Comerica
Bank, as agent, and the other lenders named therein, providing for borrowings
of up to $135 million. The gross proceeds from the Initial Offering, along
with borrowings under the New Credit Facility, were used to acquire Dyno, retire
certain credit facilities and pay fees and expenses. The Initial Offering, the
Dyno Acquisition and the borrowings under the New Credit Facility are referred
to herein together as the "Transactions." See "Business -- Dyno Acquisition"
and "Description of Other Indebtedness."
The following table sets forth the sources and uses of funds in: (a) the
Initial Offering, (b) the Dyno Acquisition and (c) the New Credit Facility:
<TABLE>
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Amount
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(in thousands)
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Sources:
Initial Offering . . . . . . . . . . . . . . . . . . . . . $109,615
New Credit Facility(1) . . . . . . . . . . . . . . . . . . 36,385
--------
Total sources . . . . . . . . . . . . . . . . . . . . $146,000
Uses:
Dyno Acquisition(2) . . . . . . . . . . . . . . . . . . . $130,000
Retire certain credit facilities(3) . . . . . . . . . . . 11,000
Fees and expenses of the Initial Offering and New Credit
Facility . . . . . . . . . . . . . . . . . . . . . . . . 5,000
--------
Total uses . . . . . . . . . . . . . . . . . . . . . . $146,000
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(1) In connection with the Dyno Acquisition and the retirement of certain
credit facilities, the Company borrowed this amount under the $135,000 New
Credit Facility.
(2) Based on a purchase price of $124,000, adjusted to reflect estimated
closing adjustments and certain related fees and expenses of $6,000.
(3) Based on the outstanding principal balances as of June 30, 1995.
The Dyno Acquisition is a continuation of the Company's efforts to
strengthen its position as a key supplier of integrated fuel systems to the
global automotive market, and it will create the only integrated provider of
plastic fuel tank and fuel pump systems in Europe. The Dyno Acquisition is
expected to provide Walbro with a number of benefits, including:
- Further diversification of the Company's geographic markets and the
increased ability to participate in the current European automotive
market recovery. Walbro's international sales, on a pro forma basis
for the Dyno Acquisition, would have been 47% of the Company's net
sales (excluding joint ventures) in 1994 compared to 24% without Dyno.
- An increased opportunity for Walbro to sell its fuel system products
to Dyno's European-based OEM customers and for Dyno to sell its
products to the European operations of Chrysler, Ford and General
Motors.
- The ability to share blow molding process technology, especially with
respect to the eventual transfer of Walbro's multi-layer blow molding
technology to Dyno's European facilities.
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THE EXCHANGE OFFER
The New Notes . . . . . . . . . . . . . . The forms and terms of the New
Notes are identical in all
material respects to the terms of
the Old Notes for which they may
be exchanged pursuant to the
Exchange Offer, except for
certain transfer restrictions and
registration rights relating to
the Old Notes and except for
certain interest provisions
relating to the Old Notes
described below under "-- Terms
of New Notes."
The Exchange Offer . . . . . . . . . . . The Company is offering to
exchange up to $110,000,000
aggregate principal amount of 9
7/8% Senior Notes due 2005,
Series B (the "New Notes") for up
to $110,000,000 aggregate
principal amount of its
outstanding 9 7/8% Senior Notes
due 2005, Series A (the "Old
Notes"). Old Notes may be
exchanged only in integral
multiples of $1,000.
Expiration Date; Withdrawal of
Tender . . . . . . . . . . . . . . . . The Exchange Offer will expire at
5:00 p.m., New York City time,
on, 1995, or such later date and
time to which it is extended by
the Company. The tender of Old
Notes pursuant to the Exchange
Offer may be withdrawn at any time
prior to the Expiration Date. Any
Old Notes not accepted for
exchange for any reason will be
returned without expense to the
tendering holder thereof as
promptly as practicable after the
expiration or termination of the
Exchange Offer.
Certain Conditions to the Note
Exchange Offer . . . . . . . . . . . . The Exchange Offer is subject to
certain customary conditions,
which may be waived by the
Company. See "The Exchange Offer
-- Certain Conditions to the
Exchange Offer."
Procedures for Tendering Old Notes . . . Each holder of Old Notes wishing
to accept the Exchange Offer must
complete, sign and date the
Letter of Transmittal, or a
facsimile thereof, in accordance
with the instructions contained
herein and therein, and mail or
otherwise deliver such Letter of
Transmittal, or such facsimile,
together with such 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, (i) any
Exchange Notes to be received by
it will be acquired in the
ordinary course of its business,
(ii) it has no arrangement with
any person to participate in the
distribution of the New Notes and
(iii) it is not an "affiliate,"
as defined in Rule 405 of the
Securities Act, of the Company
or, if it is an affiliate, it
will comply with the registration
and prospectus delivery
requirements of the Securities
Act to the extent applicable.
Interest on the New Notes . . . . . . . . The New Notes will bear interest
at the rate of 9 7/8% per annum,
payable semiannually on January
15 and July 15, commencing
January 15, 1996 to holders of
record on the immediately
preceding January 1 and July 1,
respectively. Holders of the
New Notes will receive interest
on January 15, 1996 from the
date of initial
8
<PAGE> 11
issuance of the New Notes, plus an
amount equal to the accrued
interest on the Old Notes from
the most recent date to which
interest has been paid to the
date of exchange thereof.
Interest on the Old Notes
accepted for exchange will cease
to accrue upon issuance of the
New Notes.
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
such Old Notes in the Exchange
Offer should contact such
registered holder promptly
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 his
Old Notes, either make
appropriate arrangements to
register ownership of the Old
Notes in such owner's name or
obtain a properly completed bond
power from the registered holder.
The transfer of registered
ownership may take considerable
time and may not be able to be
completed prior to the Expiration
Date.
Guaranteed Delivery
Procedures . . . . . . . . . . . . . . Holders of Notes who wish to
tender their Old Notes and whose
Old Notes are not immediately
available or who cannot deliver
their Old Notes, the Letter of
Transmittal or any other
documents required by the Letter
of Transmittal to the Exchange
Agent, 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."
Registration Requirements . . . . . . . . The Company has agreed to use its
best efforts to consummate by
November 15, 1995 the registered
Exchange Offer pursuant to which
holders of the Old Notes will be
offered an opportunity to
exchange their Old Notes for the
New Notes which will be issued
without legends restricting the
transfer thereof. In the event
that applicable interpretations
of the staff of the Commission
do not permit the Company to
effect the Exchange Offer or in
certain other circumstances,
the Company has agreed to file
a Shelf Registration Statement
covering resales of the Old
Notes and to use its best
efforts to cause such Shelf
Registration Statement
to be declared effective under
the Securities Act and, subject
to certain exceptions, keep such
Shelf Registration Statement
effective until three years after
the effective date thereof.
Certain Federal Income Tax
Considerations . . . . . . . . . . . . For a discussion of certain
federal income tax considerations
relating to the exchange of the
New Notes for the Old Notes, see
"Certain Federal Income Tax
Considerations Relating to the
Exchange Offer."
Use of Proceeds . . . . . . . . . . . . . There will be no proceeds to the
Company from the exchange of
Notes pursuant to the Exchange
Offer.
9
<PAGE> 12
Exchange Agent . . . . . . . . . . . . . Bankers Trust Company is the
Exchange Agent. The address and
telephone number of the Exchange
Agent are set forth in "The
Exchange Offer -- Exchange
Agent."
TERMS OF THE NEW NOTES
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that the New Notes are registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof. See
"Description of the Old Notes."
New Notes . . . . . . . . . . . . . . . . $110 million aggregate principal
amount of 9 7/8% Senior Notes due
2005, Series B of the Company.
Maturity . . . . . . . . . . . . . . . . July 15, 2005.
Interest Payment Dates . . . . . . . . . January 15 and July 15,
commencing January 15, 1996.
Ranking . . . . . . . . . . . . . . . . . The New Notes will be senior
unsecured obligations of the
Company ranking pari passu in
right of payment with all
existing and future senior
unsecured obligations of the
Company and are effectively
subordinated in right of payment
to all existing and future
secured indebtedness of the
Company and its subsidiaries. As
of June 30, 1995, after giving
effect to the Transactions, the
Company and its subsidiaries had
approximately $96.9 million of
secured indebtedness outstanding,
including $36.4 million of
indebtedness outstanding under
the New Credit Facility
and the $45 million aggregate
principal amount of the
Company's 7.68% Senior Notes due
2004 (the "2004 Notes"), which
are secured by the inventory,
accounts receivable and certain
intangibles of the Company and
its domestic subsidiaries and by
a pledge of 100% of the capital
stock of the Company's
wholly-owned domestic
subsidiaries and of up to 65% of
the capital stock of the
Company's wholly-owned foreign
subsidiaries, including the
subsidiaries which will own Dyno.
In addition, the New Notes will
be effectively subordinated in
right of payment to all existing
and future liabilities, including
trade payables, of the Company's
subsidiaries which are not
Guarantors, which, as of June 30,
1995, after giving effect to the
Transactions, would have totalled
approximately $79 million
(excluding intercompany
liabilities).
Guarantees . . . . . . . . . . . . . . . The New Notes will be guaranteed
on a senior unsecured basis,
jointly and severally, by the
Company's principal wholly-owned
domestic operating subsidiaries,
including Walbro Automotive
Corporation and Walbro Engine
Management Corporation. See
"Description of New Notes --
Guarantees" and Note 20 of the
Notes to the Company's
Consolidated Financial
Statements.
Optional Redemption . . . . . . . . . . . Except as provided below, the New
Notes are not redeemable at the
Company's option prior to July
15, 2000. Thereafter, the New
Notes will be redeemable, in
whole or in part, at the option
of the
10
<PAGE> 13
Company, at the redemption prices
set forth herein plus accrued
interest to the date of
redemption. In addition, prior
to July 15, 1998, the Company
may, at its option, redeem up to
an aggregate of 30% of the
principal amount of the combined
Notes originally issued with the
net proceeds from one or more
Public Equity Offerings at the
redemption price set forth herein
plus accrued interest to the date
of redemption. See "Description
of the Old Notes -- Optional
Redemption."
Change of Control . . . . . . . . . . . . In the event of a Change of
Control, the Company will be
obligated to make an offer to
purchase all of the outstanding
Notes at a redemption price
of 101% of the principal amount
thereof plus accrued interest to
the date of repurchase. See
"Description of the Notes --
Change of Control."
Offer to Repurchase . . . . . . . . . . . The Company will be required in
certain circumstances to make an
offer to repurchase the New Notes
at a price equal to 100% of the
principal amount thereof, plus
accrued interest to the date of
repurchase, with the net cash
proceeds of certain asset sales.
See "Description of the New Notes
-- Certain Covenants --
Disposition of Proceeds of Asset
Sales."
Certain Covenants . . . . . . . . . . . . The indenture under which Old
Notes were issued and the New
Notes will be issued (the
"Indenture") contains covenants
including, but not limited to,
covenants with respect to
limitations on the following
matters: (i) the incurrence of
additional indebtedness, (ii) the
issuance of preferred stock by
subsidiaries, (iii) the creation
of liens, (iv) sale and leaseback
transactions, (v) restricted
payments, (vi) the sales of
assets and subsidiary stock,
(vii) mergers and consolidations,
(viii) payment restrictions
affecting subsidiaries and (ix)
transactions with affiliates.
See "Description of the New Notes
-- Certain Covenants."
Investment Considerations . . . . . . . . Holders of Old Notes should
carefully consider the matters
set forth under the caption
"Investment Considerations" prior
to making a decision with respect
to the Exchange Offer. See
"Investment Considerations."
11
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth summary historical financial data of the
Company (excluding Dyno) and pro forma condensed consolidated financial data of
the Company and Dyno. The summary historical financial data of the Company for
each of the five years ended December 31 was derived from the audited
consolidated financial statements of the Company. The summary historical
financial data of the Company for both of the six-month periods ended June 30
derived from the unaudited consolidated financial statements of the Company
which, in the opinion of the Company's management, reflect all adjustments
necessary for a fair presentation of the financial position and results of
operations for the periods. The information contained in this table should be
read in conjunction with "Pro Forma Unaudited Condensed Consolidated Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Walbro Corporation," "Selected Financial and Operating Data --
Dyno," "Management's Discussion and Analysis of Results of Operations -- Dyno,"
and the consolidated financial statements of the Company and the combined
financial statements of Dyno included elsewhere herein.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
-------------------------------- ---------------------------------------------------------------------
Pro
Pro forma forma
1995(1) 1995 1994 1994(1) 1994 1993 1992 1991 1990
--------- --------- --------- ---------- --------- --------- --------- --------- ---------
Statement of
Income Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............... $ 296,123 $ 188,291 $ 166,181 $ 472,352 $ 325,205 $ 273,463 $ 241,416 $ 200,130 $ 166,678
Cost of sales ........... 234,991 150,585 131,308 374,745 261,501 216,804 185,712 158,743 134,295
Gross profit ............ 61,132 37,706 34,873 97,607 63,704 56,659 55,704 41,387 32,383
Selling and administrative
expenses .............. 41,510 24,152 19,353 67,909 39,318 33,043 33,614 26,961 20,946
Reorganization and
restructuring charges . -- -- -- -- -- 1,760 -- 2,230 --
Operating income 19,622 13,554 15,520 29,698 24,386 21,856 22,090 12,196 11,437
Interest expense, net ... 9,486 2,538 1,537 17,530 3,771 2,559 3,113 6,014 6,474
Equity in (income)
loss of joint ventures (2,074) (2,074) (592) (2,609) (2,609) 89 (179) 465 2,128
Net income(2) ........... 8,044 8,923 8,960 6,009 14,595 9,667 12,526 4,838 1,097
Net income per share(3) . .94 1.04 1.04 .70 1.70 1.13 1.63 .98 .26
Weighted average shares
outstanding ........... 8,599,490 8,599,490 8,608,474 8,602,077 8,602,077 8,537,375 7,675,974 4,952,951 4,289,161
Ratio of earnings to
fixed charges ......... 1.8x 4.2x 7.3x 1.4x 4.6x 6.4x 4.7x 2.0x 1.6x
OTHER DATA:
Depreciation and
amortization .......... 12,667 7,838 6,935 23,600 14,672 11,339 10,339 6,996 7,708
Capital expenditures .... 26,861 20,730 7,280 27,548 18,844 20,260 14,681 9,717 6,621
EBITDA(4) ............... 31,758 20,861 21,798 51,315 36,345 31,128 31,513 19,192 19,145
Ratio of EBITDA to
interest expense,
net(4) ................ 3.4x 8.2x 14.2x 2.9x 9.6x 12.2x 10.1x 3.2x 3.0x
BALANCE SHEET DATA:
(at end of period)
Total assets ............ $ 468,484 $ 287,489 $ 238,244 $ 257,366 $ 215,295 $ 193,020 $ 161,243 $ 143,026
Total long-term debt,
less current portion .. 221,719 86,322 59,690 66,136 52,392 49,638 62,777 83,443
Total debt .............. 234,708 94,354 67,445 81,548 58,175 59,349 70,922 85,529
Total stockholders'
equity(5)(6) .......... 136,190 136,230 122,695 127,915 114,146 99,910 50,339 27,424
</TABLE>
(1) The summary unaudited pro forma condensed consolidated statements of
operations and other data for the period ended June 30, 1995 and the year
ended December 31, 1994 gives effect to the Transactions as if they had
occurred on January 1, 1994. The summary unaudited pro forma financial
data are not necessarily indicative of future operating results or
financial position.
(2) The Company adopted SFAS 106 as of January 1, 1993. As a result, the
Company recorded a one-time after tax charge of $2,900 for the cumulative
effect of this accounting change in the year ended December 31, 1993.
(3) Primary and fully diluted income per share were the same in all periods
presented except the year ended December 31, 1992 when fully diluted
income per share was $1.58 based on weighted average shares outstanding
of 8,160,472.
(4) "EBITDA" represents, for any period, the sum of operating income (minus
foreign currency exchange losses and other expenses, net) and
depreciation and amortization. EBITDA is not intended to be a
performance measure that should be regarded as an alternative either to
operating income or net income as an indicator of operating performance
or to cash flow as a measure of liquidity. The Company has included
information concerning EBITDA as it understands that it is used by
certain investors as one measure of an issuer's historical ability to
service its debt.
(5) Reflects cash dividends declared of $1,713, $1,712, $3,426, $3,403,
$3,192, $610 and $1,836 in the six months ended June 30, 1995 and 1994
and the years ended December 31, 1994, 1993, 1992, 1991 and 1990,
respectively.
(6) The Company adopted SFAS 115 as of January 1, 1994. As a result, the
Company recorded an increase to stockholders' equity of $2,096 (net of
income taxes) as of January 1, 1994.
12
<PAGE> 15
INVESTMENT CONSIDERATIONS
Prospective investors should consider carefully the following factors
regarding an investment in the New Notes.
SUBSTANTIAL LEVERAGE
After giving effect to the Transactions on a pro forma basis, the Company
has consolidated indebtedness that is substantial in relation to its
stockholders' equity and significantly greater than its existing indebtedness.
After giving effect to the Transactions on a pro forma basis, as of June 30,
1995, the Company would have $234.7 million of total debt and $136.2 million of
stockholders' equity.
Additionally, as of June 30, 1995, after giving effect to the
Transactions on a pro forma basis, the Company and its subsidiaries would have
approximately $96.9 million of secured indebtedness outstanding, including
$36.4 million of borrowings under the New Credit Facility and the $45 million
aggregate principal amount of the 2004 Notes. Such secured indebtedness,
though ranking pari passu with the Notes, has a lien on specified assets of
the Company or its subsidiaries, as the case may be. As a result, in an
insolvency proceeding, holders of secured indebtedness would have claims
against the assets of the Company or its subsidiaries, as the case may be,
securing their indebtedness to satisfy their claims, and such assets would be
applied to the payment of such claims before claims of holders of unsecured
senior indebtedness, such as the Notes, would be satisfied. Because the
inventory, accounts receivable and certain intangibles of the Company and its
domestic subsidiaries and capital stock of the Company's subsidiaries have been
pledged to the lenders under the New Credit Facility and the 2004 Notes to
secure the Company's borrowings thereunder, in the event of an insolvency of
the Company, such lenders would have a claim to such assets, while the holders
of the New Notes would have no claim over specific assets of the Company and
its subsidiaries.
The Company's indebtedness will have several important consequences for
the holders of the Notes, including but not limited to the following: (i) a
substantial portion of the Company's cash flow from operations must be
dedicated to debt service requirements (principal and interest) on its
indebtedness and will not be available for other purposes; (ii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, or to refinance the New Notes or for
general corporate purposes may be impaired; (iii) the Company's leverage may
increase its vulnerability to economic downturns and limit its ability to
withstand competitive pressures; and (iv) the Company's ability to capitalize
on significant business opportunities may be limited.
The Company's ability to make payments with respect to the Notes and
to satisfy its other debt obligations will depend on its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond the
Company's control. The Company believes, based on current circumstances, that
the Company's cash flow, together with available borrowings under the New
Credit Facility, will be sufficient to permit the Company to meet its operating
expenses and to service its debt requirements as they become due. Significant
assumptions underlie this belief, including, among other things, that the
Company will succeed in implementing its business strategy and there will be no
material adverse developments in the business, liquidity or capital
requirements of the Company. If the Company is unable to service its
indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness or seeking additional
equity capital. There can be no assurance that any of these strategies could
be effected on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Walbro Corporation
- -- Liquidity and Capital Resources." The Indenture will, among other things,
limit the incurrence of additional indebtedness by the Company and its
subsidiaries. However, this limitation is subject to a number of important
qualifications.
13
<PAGE> 16
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture restricts the ability of the Company and its subsidiaries
to, among other things, incur additional indebtedness, pay dividends or make
certain other restricted payments or investments, consummate certain asset
sales, enter into certain transactions with affiliates, incur liens, or merge
or consolidate with any other person or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of their assets. The
Indenture also imposes limitations on the Company's ability to restrict the
ability of its subsidiaries to pay dividends or make certain payments to the
Company or any of its subsidiaries. In addition, the New Credit Facility
contains other and more restrictive covenants. The agreement under which the
2004 Notes were issued (the "2004 Note Agreement") requires, and the New Credit
Facility requires the Company to maintain specified financial ratios and
satisfy certain financial tests. The Company's ability to meet such financial
ratios and tests may be affected by events beyond its control, and there can be
no assurance that the Company will meet such tests. A breach of any of these
covenants could result in an event of default under the 2004 Note Agreement or
the New Credit Facility. In an event of default under the 2004 Note Agreement
or the New Credit Facility, the lenders thereunder could elect to declare all
amounts borrowed, together with accrued interest, to be immediately due and
payable and the lenders under the New Credit Facility could terminate all
commitments thereunder. If any such indebtedness were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to repay
in full such indebtedness and the other indebtedness of the Company, including
the New Notes. See "Description of the New Notes -- Certain Covenants" and
"Description of Other Indebtedness."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer laws, if any Guarantor, at the time it
incurs a Guarantee, (a)(i) was or is insolvent or rendered insolvent by reason
of such incurrence, (ii) was or is engaged in a business or transaction for
which the assets remaining with such Guarantor constituted unreasonably small
capital or (iii) intended or intends to incur, or believed or believes that it
would incur, debts beyond its ability to pay such debts as they mature and (b)
received or receives less than reasonably equivalent value or fair
consideration, the obligations of such Guarantor under its Guarantee could be
avoided, or claims in respect of such Guarantee could be subordinated to all
other debts of such Guarantor. Among other things, a legal challenge of a
Guarantee on fraudulent conveyance grounds may focus on the benefits, if any,
realized by such Guarantor as a result of the issuance by the Company of the
Old Notes. To the extent that any Guarantee were a fraudulent conveyance or
held unenforceable for any other reason, the holders of the Notes would
cease to have any claim in respect of a Guarantor and would be solely creditors
of the Company and any other Guarantors whose Guarantees were not avoided or
held unenforceable. In such event, the claims of the holders of the Notes
would be subject to the prior payment of all liabilities of the Guarantor whose
Guarantee was avoided. There can be no assurance that, after providing for all
prior claims, there would be sufficient assets to satisfy the claims of the
holders of the Notes relating to any avoided portion of a Guarantee.
Each Guarantor agrees, jointly and severally with the other Guarantors,
to contribute to the obligations of any Guarantor under a Guarantee of the
Notes. Further, the Guarantee of each Guarantor will provide that it is
limited to an amount that would not render the Guarantor thereunder insolvent.
The Company believes that the Guarantors will receive equivalent value at the
time the indebtedness is incurred under the Guarantees. In addition, the
Company believes that none of the Guarantors will be, at the time of or as a
result of the issuance of the Guarantees, insolvent, that none of the
Guarantors is or will be engaged in a business or transaction for which its
remaining assets constitute unreasonably small capital and that none of the
Guarantors will have intended or will intend to incur debts beyond its ability
to pay such debts as they mature. Since each of the components of the question
of whether a Guarantee is a fraudulent conveyance is inherently fact based and
fact specific,
14
<PAGE> 17
there can be no assurance that a court passing on such questions would agree
with the Company.
HOLDING COMPANY STRUCTURE
The Company derives all of its operating income and cash flow from its
subsidiaries. The Company must rely upon cash distributions from its
subsidiaries to generate the funds necessary to meet its obligations, including
the payment of principal and interest on the Notes.
Any right of the holders of the Notes to participate in the assets of
a non-Guarantor subsidiary of the Company upon any liquidation or
reorganization of such subsidiary will be subject to the prior claims of such
subsidiary's creditors, including the lenders under the New Credit Facility,
holders of the 2004 Notes and trade creditors. Accordingly, the Notes are
structurally subordinated to all liabilities, including trade payables, of the
non-Guarantor subsidiaries of the Company. As of June 30, 1995, after giving
effect to the Transactions on a pro forma basis, the non-Guarantors would have
outstanding liabilities, including trade payables, of approximately $79
million. In addition, 100% of the capital stock of the Company's wholly-owned
domestic subsidiaries and up to 65% of the capital stock of its wholly-owned
foreign subsidiaries are pledged as collateral to the lenders under the New
Credit Facility and the holders of the 2004 Notes. Accordingly, upon any
liquidation or reorganization of the Company, the holders of the New Notes will
have no claim against such capital stock until the lenders under the New Credit
Facility and the holders of the 2004 Notes are paid in full.
DEPENDENCE ON PRINCIPAL CUSTOMERS
Sales to the Company's two largest customers, Ford and Chrysler,
accounted for the following respective percentages of the Company's
consolidated net sales, excluding Dyno: 30% and 23% in 1994; 30% and 21% in
1993; and 33% and 20% in 1992. On a pro forma basis, including Dyno, Ford and
Chrysler accounted for 21% and 16% of the Company's consolidated net sales in
1994, respectively. Although the Company has ongoing supply relationships with
both Ford and Chrysler, there can be no assurance that sales to either of these
customers will continue at the same levels; further, continuation of the
relationships is dependent upon the customers' satisfaction with the price,
quality and delivery of the Company's products. While management believes its
relationships with its customers are mutually satisfactory, if either of these
customers were to reduce substantially or discontinue its purchases, the
Company would be adversely affected. See "Business -- Walbro Automotive
Corporation -- Automotive Markets and Customer Base."
COMPETITION
The automotive fuel system and small engine supply industries in which
the Company operates are highly competitive. There can be no assurance that
the Company's products will continue to compete successfully with the products
of other companies, including the automotive OEMs themselves, many of whom are
significantly larger and have greater financial and other resources available
to them. In addition, the Company is under constant pressure from its major
customers to reduce product costs. Management believes that the Company's
experience in engineering and implementing cost reduction programs and its
ability to develop proprietary new products and to control manufacturing and
development costs should allow the Company's product prices to remain
competitive. However, there can be no assurance that the Company will be able
to improve or maintain its profit margins on sales to vehicle manufacturers and
small engine producers.
CYCLICAL NATURE OF AUTOMOTIVE AND SMALL ENGINE INDUSTRIES
The Company's principal operations are related directly to domestic and
foreign automotive vehicle and small engine consumer product sales. Sales and
production of automobiles and small engine
15
<PAGE> 18
products are cyclical and can be affected by the strength of a country's
general economy, prevailing interest rates and by other factors which may have
an adverse effect on the level of the Company's sales to automobile and small
engine product manufacturers.
IMPACT OF ENVIRONMENTAL REGULATIONS
The manufacturers of small engine products, such as lawn mowers and chain
saws, are confronting emission regulations for the first time. In 1992, the
California Air Resources Board promulgated comprehensive air quality
regulations limiting small engine emissions, which regulations became effective
in August 1995. A more stringent phase is scheduled to become effective in
1999. In addition, the Environmental Protection Agency ("EPA") has proposed
similar regulations scheduled to become effective in August 1996, with the more
stringent phase expected to become effective during the 1999 to 2001 period.
The implementation of the 1999 California air quality regulations and proposed
EPA regulations could significantly reduce the number of units the Company
sells of its current carburetor models, especially diaphragm carburetors, and
the Company's resulting net sales. Hand-held power equipment is most
vulnerable to a decrease in demand because the cost of compliance with these
emission standards could force manufacturers to replace gasoline-powered lawn
and garden equipment with electric-powered equipment. The Company is
attempting to produce products and systems which meet these emissions
requirements; however, there can be no assurance that the Company will develop
cost effective products to meet all of these regulations or that the ultimate
customer might not select electric-powered equipment instead. See "Business --
Walbro Engine Management Corporation -- Small Engine Industry Overview."
WARRANTY EXPOSURE AND RECALLS
The Company warrants to its OEM customers that its products are free from
defect and that they meet certain OEM designated specifications. The OEMs in
turn offer product warranties to their retail customers. In some instances of
common complaint, the automobile manufacturer will institute a voluntary recall
or will be required by a governmental agency to conduct a recall. As a result,
from time to time, the Company and Dyno have received claims against them and
requests for payment from their OEM customers to remedy complaints made by the
ultimate consumers. The Company plans to implement product recall insurance in
selected European markets. There can be no assurance that the Company will not
incur substantial warranty or recall expense in the future. Such complaints
and the related expenses may have a material adverse effect on the Company's
relationship with its OEM customers, its financial condition and results of
operations. See "Business -- Walbro Automotive Corporation -- Automotive
Warranty and Other Product Exposure."
INTEGRATION OF DYNO; INCREASED FOREIGN OPERATIONS
As a result of the Dyno Acquisition, management will have to integrate
into its current business a large, complex manufacturing operation in six
countries which was previously connected with a large Norwegian company.
Management believes that it has or can obtain the resources necessary to
integrate this business and capitalize on the strengths of Dyno. Walbro's
implementation strategies, however, are subject to numerous contingencies, some
of which are beyond management's control. These contingencies include general
and regional economic conditions, competition and changes in regulation and
interest rates. Even if management is able to successfully integrate this
business, Walbro will significantly increase its dependence on international
operations, specifically those in Europe, and therefore the Company is subject
to various political, economic and other uncertainties. Among others, the
Company's operations are subject to the risks of taxation policies, foreign
exchange restrictions, changing political conditions and governmental
regulations. Accordingly, no assurance can be given that any of the Company's
strategies will prove to be effective or that management's goals will be
achieved. In addition, the Company will receive a substantial portion of its
revenues in currencies other than U.S. Dollars. Fluctuations in the exchange
rates of these currencies with respect to the U.S. Dollar could
16
<PAGE> 19
have an adverse effect on the Company's financial results. From time to time
the Company engages in hedging programs intended to reduce the Company's
exposure to currency fluctuations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Walbro Corporation --
Foreign Currency Transactions."
CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON TRADING MARKET
FOR OLD NOTES
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 Notes as set forth in the legend thereon as a consequence
of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act and applicable state
laws, or pursuant to an exemption therefrom. Subject to the obligation by the
Company to file a Shelf Registration Statement covering resales of Old Notes in
certain circumstances, the Company does not intend to register the Old Notes
under the Securities Act and, after consummation of the Exchange Offer, will
not be obligated to do so. In addition, any holder of Old Notes who tender 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.
Additionally, as a result of the Exchange Offer, it is expected that a
substantial decrease in the aggregate principal amount of Old Notes outstanding
will occur. As a result, it is unlikely that a liquid trading market will
exist for the Old Notes at any time. This lack of liquidity will make
transactions more difficult and may reduce the trading price of the Old Notes.
See "The Exchange Offer" and "Description of the Old Notes Registration
Rights."
ABSENCE OF PUBLIC MARKET
There has not previously been any public market for the New Notes.
Although the Company has agreed pursuant to the Registration Rights Agreement
to use its best efforts to cause the New Notes to be listed on the New York
Stock Exchange, there can be no assurance as to the liquidity of any markets
that may develop for the New Notes, the ability of holders to sell the New
Notes, or the price at which holders would be able to sell the New Notes.
Future trading prices of the New Notes will depend on many factors, including
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities. Historically, the market for securities
similar to the New Notes, including non-investment grade debt, has been subject
to disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the New Notes, if
such market develops, will not be subject to similar disruptions. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes offered hereby. However, the Initial Purchasers are not
obligated to do so and any market making may be discontinued at any time
without notice.
17
<PAGE> 20
USE OF PROCEEDS OF NEW NOTES
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the New Notes offered hereby. In
consideration for issuing the New Notes as contemplated in this Prospectus, the
Company will receive, in exchange, Old Notes in like principal amount. The
form and terms of the New Notes are identical in all material respects to the
form and terms of the Old Notes, except as otherwise described herein under
"The Exchange Offer -- Terms of the Exchange Offer." The Old Notes surrendered
in exchange for the New Notes will be retired and cancelled and cannot be
reissued. Accordingly, issuance of the New Notes will not result in any
increase in the outstanding debt of the Company.
CAPITALIZATION
The following table sets forth the Company's capitalization at June 30,
1995, and as adjusted to reflect: (a) the Initial Offering, (b) the Dyno
Acquisition and (c) the New Credit Facility.
<TABLE>
<CAPTION>
As of June 30, 1995
--------------------------------
As adjusted
for the
Actual Transactions
------------ --------------
(In thousands)
<S> <C> <C>
Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . $8,032 $12,989(1)(3)
Long-term debt, less current portion:
New Credit Facility . . . . . . . . . . . . . . . . . . . . . . -- 36,385
Existing Credit Facilities . . . . . . . . . . . . . . . . . . 11,000 --
7.68% Senior Notes due 2004 . . . . . . . . . . . . . . . . . . 45,000 45,000(2)
9 7/8% Senior Notes due 2005 . . . . . . . . . . . . . . . . . -- 109,615
Other long-term debt, net(3) . . . . . . . . . . . . . . . . . 30,322 30,719
Total long-term debt, net of current portion . . . . . . . . . . . . 86,322 221,719
Total stockholders' equity(4) . . . . . . . . . . . . . . . . . . . . 136,230 136,190(5)
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . 230,584 370,898
</TABLE>
- -----------------
(1) Reflects cash overdraft and short-term notes payable assumed in
connection with the Dyno Acquisition.
(2) Pursuant to the 2004 Note Agreement, the 2004 Notes are equally and
ratably secured with the New Credit Facility by the Company's domestic
inventory, accounts receivable and certain intangibles and certain
capital stock of the Company's subsidiaries.
(3) Of these amounts, approximately $6,600 are secured by certain assets of
the Company or its subsidiaries.
(4) On June 30, 1995, the Company had 8,564,576 shares of common stock issued
and outstanding and the price of the Company's common stock was $18.00
per share as reported on the Nasdaq Stock Market.
(5) Reflects the write-off of deferred financing fees related to the
retirement of certain credit facilities of $55.
18
<PAGE> 21
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement by and among the Company,
the Guarantors and the Initial Purchasers, the Company has agreed (i) to file a
registration statement with respect to an offer to exchange the Old Notes for
senior debt securities of the Company with terms substantially identical to the
Old Notes (except that the New Notes will not contain terms with respect to
transfer restrictions) within 60 days after the date of original issuance of
the Old Notes and (ii) to use best efforts to cause such registration statement
to become effective under the Securities Act within 120 days after such issue
date. In the event that applicable law or interpretations of the staff of the
Commission do not permit the Company to file the registration statement
containing this Prospectus or to effect the Exchange Offer, or if certain
holders of the Old Notes notify the Company that they are not permitted to
participate in, or would not receive freely tradeable New Notes pursuant to,
the Exchange Offer, the Company will use its best efforts to cause to become
effective the Shelf Registration Statement with respect to the resale of the
Old Notes and to keep the Shelf Registration Statement effective until three
years after the effective date thereof. The interest rate on the Old Notes is
subject to increase under certain circumstances if the Company is not in
compliance with its obligations under the Registration Rights Agreement. See
"Old Notes Registration Rights." Pursuant to the Registration Rights
Agreement, the Company has agreed to use its best efforts to cause the Exchange
Notes to be listed on the New York Stock Exchange.
Each holder of the Old Notes who wishes to exchange such Old Notes for
New Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
New Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or, if it is an affiliate, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable. See "Old Notes Registration Rights."
RESALE 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, except as
described below, 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 a 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 does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention or for the purpose of participating in a distribution of the New
Notes cannot rely on such interpretation by the staff of the Commission and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Unless an
exemption from registration is otherwise available, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K under the
Securities Act. This Prospectus may be used for an offer to resell, resale or
other retransfer of New Notes only as specifically set forth herein. 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."
19
<PAGE> 22
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 for exchange any and
all Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes surrendered pursuant to the Exchange Offer. Old Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and
terms of the Old Notes except the New Notes will be registered under the
Securities Act and hence will not bear legends restricting the transfer
thereof. The New Notes will evidence the same debt as the Old Notes. The New
Notes will be issued under and entitled to the benefits of the Indenture, which
also authorized the issuance of the Old Notes, such that both series will be
treated as a single class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $110 million aggregate principal
amount of the Old Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Old Notes.
There will be no fixed record date for determining registered holders of Old
Notes entitled to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission
thereunder. Old Notes which are not tendered for exchange in the Exchange
Offer will remain outstanding and continue to accrue interest and will be
entitled to the rights and benefits such holders have under the Indenture and
the Registration Rights Agreement.
The Company shall be deemed to have accepted for exchange properly
tendered Notes when, as and if the Company shall have given oral or written
notice thereof to the Exchange Agent and complied with the provisions of
Section 2 of the Registration Rights Agreement. The Exchange Agent will act as
agent for the tendering holders for the purposes of receiving the New Notes
from the Company. The Company expressly reserves the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old Notes not
theretofore accepted for exchange, upon the occurrence of any of the conditions
specified below under "-- Certain Conditions to the Exchange Offer."
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "The Exchange Offer -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time on
October 31, 1995, 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.
20
<PAGE> 23
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 of Old Notes an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the then Expiration
Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "The Exchange
Offer -- Conditions" shall not have been satisfied, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent or (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders of Old
Notes. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders, and the Company will extend the Exchange Offer, depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, if the Exchange Offer would otherwise expire during such
period.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 9 7/8% per annum, payable
semi-annually, on each January 15 and July 15, commencing January 15, 1996.
Holders of New Notes will receive interest on January 15, 1996 from the date of
initial issuance of the New Notes, plus an amount equal to the accrued interest
on the Old Notes from the most recent date to which interest has been paid to
the date of exchange thereof for New Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to accept for exchange, or exchange any New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of any Old Notes for exchange, 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 Company's sole judgment, might materially
impair the ability of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted
by the staff of the Commission, which, in the Company's sole judgment,
might materially impair the ability of the Company to proceed with the
Exchange Offer; 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.
The Company expressly reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will
21
<PAGE> 24
be returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified above under "-- Certain Conditions to the Exchange
Offer." The Company will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Old Notes as
promptly as practicable, such notice in the case of any extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect to
the Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
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 facsimile thereof, have the signature thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. In addition,
either (i) Old Notes must be received by the Exchange Agent along with the
Letter of Transmittal, or (ii) a timely confirmation of book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at the Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth below under "The Exchange Offer -- Exchange Agent"
prior to 5:00 p.m., New York City time, on the Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration
Date will constitute an agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
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 OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
22
<PAGE> 25
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 of Old Notes 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 such owner's 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 of Old Notes. The transfer of
registered ownership may take considerable time and may not be able to be
completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case 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 Issuance
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 Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantor must be a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (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, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
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 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.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Notes or a timely Book-
23
<PAGE> 26
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are
not accepted for exchange for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Old Notes will be returned without expense to the tendering holder thereof (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such non-exchanged Notes will be credited
to an account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and 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 the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under "The Exchange Offer -- Exchange Agent" on or prior to the
Expiration Date or, if the guaranteed delivery procedures described below are
to be 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.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
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
registered 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 (3) New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the Old Notes or a Book-Entry Confirmation, as the
case may be, 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), as well as all tendered Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days
after the Expiration Date.
24
<PAGE> 27
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.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes were registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. 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
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) 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 under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and request for assistance, request 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:
<TABLE>
<S> <C>
By Overnight Courier or Hand Delivery: By Registered or Certified Mail:
Bankers Trust Company Bankers Trust Company
Corporate Trust & Agency Group Corporate Trust & Agency Group
Receipt & Delivery Window Reorganization Department
123 Washington Street-1st Floor P.O. Box 1458
New York, New York 10006 Church Street Station
New York, New York 10008-1458
</TABLE>
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<PAGE> 28
By Facsimile:
(212) 250-3290
(212) 250-6275
(For Eligible Institutions Only)
Confirm by Telephone:
(212) 250-6270
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, 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 broker-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 and are estimated in the aggregate to be
approximately $100,000. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Notes pursuant to the Exchange Offer. If, however, certificates
representing Old Notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of Notes tendered, or if tendered Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment
of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
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 the exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register
26
<PAGE> 29
the Old Notes under the Securities Act. Based on interpretations by the staff
of the Commission, New Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by holders 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 holders' business and such
holders have no arrangement or understanding with respect to the distribution
of the New Notes to be acquired pursuant to the Exchange Offer. Any holder who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. In addition, to comply with
the securities laws of certain jurisdictions, if applicable, the New Notes may
not be offered or sold unless they have been registered or complied with. The
Company has agreed, pursuant to the Registration Rights Agreement and subject
to certain specified limitations therein, to register or qualify the New Notes
for offer or sale under the securities or blue sky laws of such jurisdictions
as any holder of the New Notes reasonably requests in writing.
27
<PAGE> 30
THE COMPANY
Walbro is a global leader in the design, development and manufacture of
precision fuel systems and products for automotive and small engine markets
worldwide. The Company manufactures fuel pumps, fuel modules, fuel level
sensors, plastic fuel tanks and fuel rails for sale to OEMs. The Company
acquired Dyno, which is a leading European plastic fuel tank manufacturer, on
July 27, 1995. Products manufactured for the small engine market include
carburetors and ignitions for chain saws, outboard marine engines, two-wheeled
vehicles, industrial engines and lawn and garden equipment, such as lawn mowers
and weed trimmers. From 1989 to 1994, the Company (excluding Dyno) increased
net sales and EBITDA at the compound rates of approximately 19% and 21% per
year, respectively, despite an automotive industry downturn in 1990-1991. This
growth was primarily due to the introduction of new automotive products,
penetration of additional automotive platforms and a recovery in the small
engine industry. The Company, including Dyno on a pro forma basis, had 1994
net sales of $472.4 million and EBITDA of $51.3 million.
Through its subsidiary, Walbro Automotive Corporation, the Company
designs, develops and manufactures fuel storage and delivery products for a
broad range of U.S. and foreign manufacturers of passenger automobiles and
light trucks (including minivans). The Company holds a strong market position
in the U.S. and, through the Dyno Acquisition and Walbro's joint ventures in
France, Brazil, Japan and South Korea, has diversified its business across a
number of geographic markets. Management believes that, in the North American
automotive market, the Company manufactures fuel pumps for approximately 40% of
Ford's automobiles and light trucks, including the Taurus, Explorer, Windstar
and F-Series Pickup. The Company manufactures all fuel module requirements for
Ford light trucks, and, according to management's estimates, manufactures
approximately 25% of Ford's fuel rail needs. In addition, management estimates
that the Company supplies Chrysler with approximately 70% of its fuel pump and
fuel module requirements, including all requirements for Chrysler's passenger
cars and minivans and most requirements for Chrysler's light trucks, including
the Dodge Ram Truck. Other automotive customers of the Company, including Dyno
and the Company's joint ventures, include Renault, Peugeot, Mercedes-Benz,
Fiat, Volvo, Rover, Saab, Volkswagen, Audi, Daewoo, Hyundai and Kia.
Management believes that the Company manufactures substantially all of the fuel
tank systems for Volvo and Saab and the fuel tank for the Mercedes 190/C Class,
Volkswagen Polo and Renault Twingo. Approximately 73% of the Company's 1994
net sales, including Dyno on a pro forma basis, were generated by its
automotive operations.
Through its subsidiary, Walbro Engine Management Corporation, the Company
designs, develops and manufactures diaphragm carburetors for portable engines
(such as those used in chain saws and weed trimmers), float feed carburetors
for ground supported engines (such as those used in lawn mowers and generators)
and ignition systems and other components for a variety of small engine
products. The Company believes that it is the world's largest independent
manufacturer of small engine carburetors, with an approximate 76% share of the
global diaphragm carburetor market including sales to such leading chain saw
and weed trimmer manufacturers as Poulan/Weedeater (a Division of Electrolux,
A.B.), Homelite (a Division of Deere & Company), Stihl, Incorporated, McCulloch
(a Division of Shop Vac), Ryobi Ltd. and Kioritz (Echo) Corporation. Walbro
believes it has an approximate 14% share of the global float feed carburetor
market, including sales to Briggs & Stratton Corporation, the world's largest
small engine manufacturer, Kohler Company, Tecumseh Products Co., and to
Mercury Marine (a Division of Brunswick Corporation), a major manufacturer of
outboard marine engines. Walbro also manufactures replacement products for
both the automotive and small engine aftermarkets, sales of which are included
within its small engine product business. Approximately 27% of the Company's
1994 net sales, including Dyno on a pro forma basis, were generated by its
small engine operations.
The Company was incorporated in Michigan in 1950 and reincorporated in
Delaware in 1972. The Company's principal executive offices are located at
6242 Garfield Street, Cass City, Michigan 48726-1325, and its telephone number
is (517) 872-2131.
28
<PAGE> 31
THE DYNO ACQUISITION
THE DYNO ACQUISITION
On July 27, 1995, the Company purchased Dyno for a purchase price equal
to approximately $124 million.
Concurrently with the consummation of the Dyno Acquisition, (i) the
Company completed the Initial Offering and (ii) the Company and certain of its
subsidiaries entered into the New Credit Facility with Comerica Bank, as agent,
and the other lenders named therein, providing for borrowings of up to $135
million.
USE OF PROCEEDS FROM THE INITIAL OFFERING
The gross proceeds from the Initial Offering were used, along with the
borrowings under the New Credit Facility, to acquire Dyno, retire certain
current credit facilities and pay fees and expenses relating to the Initial
Offering and New Credit Facility.
The following table sets forth the sources and uses of funds in: (a) the
Initial Offering, (b) the Dyno Acquisition and (c) the New Credit Facility:
<TABLE>
<CAPTION>
Amount
--------------
(in thousands)
<S> <C>
Sources:
Initial Offering . . . . . . . . . . . . . . . . . . . . . . . $109,615
New Credit Facility . . . . . . . . . . . . . . . . . . . . . . 36,385
--------
Total sources . . . . . . . . . . . . . . . . . . . . . . . $146,000
Uses:
Dyno Acquisition(1) . . . . . . . . . . . . . . . . . . . . . . $130,000
Retire certain credit facilities(2) . . . . . . . . . . . . . . 11,000
Fees and expenses of the Initial Offering and New Credit
Facility . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
--------
Total uses . . . . . . . . . . . . . . . . . . . . . . . . . $146,000
- ------------------------
</TABLE>
(1) Based on a purchase price of $124,000, adjusted to reflect estimated
closing adjustments and certain related fees and expenses of $6,000.
(2) Based on the outstanding principal balances as of June 30, 1995.
29
<PAGE> 32
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL DATA
The following Pro Forma Unaudited Condensed Consolidated Statements of
Operations for the six months ended June 30, 1995 and the year ended December
31, 1994 present pro forma operating results as if the Transactions had
occurred as of January 1, 1994. The Pro Forma Unaudited Condensed Consolidated
Balance Sheet as of June 30, 1995 gives effect to the Transactions as if they
had occurred on that date. The pro forma adjustments are described in the
notes thereto. The Pro Forma Unaudited Condensed Consolidated Financial Data
should be read in conjunction with the Company's and Dyno's historical
financial statements and related notes thereto included elsewhere in this
Prospectus. The Pro Forma Unaudited Condensed Consolidated Financial Data do
not purport to represent either future results or the results that would have
occurred if the Transactions had occurred on the dates indicated, nor do they
give effect to any matters other than those described in the notes thereto.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended June 30, 1995
-------------------------------------------------------------
Company Dyno
Historical Historical(1) Adjustments Pro Forma
---------- ------------- ----------- ---------
(Unaudited dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . $ 188,291 $107,832 $ -- $ 296,123
Cost of sales . . . . . . . . . . . . . . 150,585 85,065 (659)(2) 234,991
---------- -------- ------- ----------
Gross margin . . . . . . . . . . . . . . 37,706 22,767 659 61,132
Selling and administrative expenses . . . 24,152 17,358 -- 41,510
---------- -------- ------- ----------
Operating income . . . . . . . . . . . . 13,554 5,409 659 19,622
Interest expense, net . . . . . . . . . . 2,538 1,036 5,912 (3) 9,486
Other expense, net . . . . . . . . . . . 416 285 -- 701
---------- -------- ------- ----------
Income before taxes and other . . . . . . 10,600 4,088 (5,253) 9,435
Provision for income taxes . . . . . . . 3,751 1,556 (1,842)(5) 3,465
Equity in (income) loss of joint
ventures . . . . . . . . . . . . . . . . (2,074) -- -- (2,074)
---------- -------- ------- ----------
Net income . . . . . . . . . . . . . . . $ 8,923 2,532 (3,411) 8,044
========== ======== ======= ==========
Net income per share . . . . . . . . . . $ 1.04 $ .94
========== ==========
Weighted average shares outstanding . . . 8,599,490 8,599,490
EBITDA(6) . . . . . . . . . . . . . . . . $ 20,861 $ 10,897 $ 31,758
Ratio of EBITDA to interest expense, net 8.2x 3.4x
<CAPTION>
Year ended December 31, 1994
-------------------------------------------------------------
Company Dyno
Historical Historical(1) Adjustments Pro Forma
---------- ------------- ----------- ---------
(Unaudited dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . $ 325,205 $147,147 $ -- $ 472,352
Cost of sales . . . . . . . . . . . . . 261,501 112,514 730 (2) 374,745
---------- -------- -------- ----------
Gross margin . . . . . . . . . . . . . 63,704 34,633 (730) 97,607
Selling and administrative expenses . . 39,318 29,541 (950)(4) 67,909
---------- -------- -------- ----------
Operating income . . . . . . . . . . . 24,386 5,092 220 29,698
Interest expense, net . . . . . . . . . 3,771 2,792 10,967 (3) 17,530
Other expense, net . . . . . . . . . . 2,713 984 -- 3,697
---------- -------- -------- ----------
Income before taxes and other . . . . . 17,902 1,316 (10,747) 8,471
Provision for income taxes . . . . . . 5,824 2,329 (3,174)(5) 4,979
Minority interest . . . . . . . . . . . 92 -- -- 92
Equity in (income) loss of joint
ventures . . . . . . . . . . . . . . . (2,609) -- -- (2,609)
---------- -------- -------- ----------
Income (loss) before extraordinary item 14,595 (1,013) (7,573) 6,009
---------- -------- -------- ----------
Extraordinary item -- gain on
forgiveness of debt . . . . . . . . . . -- 4,691 (4,691) --
---------- -------- -------- ----------
Net income . . . . . . . . . . . . . . $ 14,595 $ 3,678 $(12,264) $ 6,009
========== ======== ======== ==========
Net income per share . . . . . . . . . $ 1.70 $ .70
========== ==========
Weighted average shares outstanding . . 8,602,077 8,602,077
EBITDA(6) . . . . . . . . . . . . . . . $ 36,345 $ 14,020 $ 950 $ 51,315
Ratio of EBITDA to interest expense, net 9.6x 2.9x
</TABLE>
30
<PAGE> 33
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(1) The Dyno historical information represents amounts derived from the
unaudited combined financial statements of Dyno for the six months ended
June 30, 1995 and the audited combined financial statements of Dyno for
the year ended December 31, 1994, included elsewhere in this Prospectus,
translated from Norwegian Kroner ("NOK") to U.S. Dollars at the average
exchange rates of 6.38 NOK and 7.05 NOK to one U.S. Dollar for the six
months ended June 30, 1995 and the year ended December 31, 1994,
respectively.
(2) Adjustments consist of pro forma adjustments to the historical expenses
of Dyno to reflect estimated adjustments to depreciation and amortization
expense resulting from the revaluation of Dyno net assets acquired. The
adjustments include the following items:
<TABLE>
<CAPTION>
Six months Year ended
ended December 31,
June 30, 1995 1994
------------- ------------
<S> <C> <C>
Depreciation and amortization expense on revalued assets . . . . $ 4,829 $ 9,658
Elimination historical depreciation and amortization expense
on assets . . . . . . . . . . . . . . . . . . . . . . . . . (5,488) (8,928)
------- -------
Elimination of interest expense on certain credit facilities . . $ (659) $ 730
======= =======
</TABLE>
(3) Reflects interest expense changes resulting from new indebtedness
incurred in conjunction with the Transactions. Amortization of deferred
financing fees was calculated based on a ten year amortization period for
fees related to the Initial Offering and a five year amortization period
for fees related to the New Credit Facility. In addition, the remaining
balance of deferred financing fees on the existing credit agreement is
assumed to be written off. In connection with the Dyno Acquisition,
certain liabilities are not being assumed by the Company, consisting
principally of certain borrowings of long-term debt, amounts payable to
related entities, certain notes payable and subordinated loans. As such,
interest expense incurred on these borrowings not being assumed has been
eliminated in the pro forma presentation.
<TABLE>
<CAPTION>
Six months Year ended
ended December 31,
June 30, 1995 1994
------------- ------------
<S> <C> <C>
Interest expense on the Old Notes, at 9 7/8%, including
amortization of original issue discount of $10 and $39,
respectively . . . . . . . . . . . . . . . . . . . . . . . $ 5,450 $10,901
Estimated interest on New Credit Facility borrowings . . . . . . 1,988 4,294
Elimination of interest expense on certain credit facilities (452) (1,629)
Elimination of interest expense on Dyno borrowings
not assumed . . . . . . . . . . . . . . . . . . . . . . . . (1,326) (3,104)
Fee amortization on Old Notes . . . . . . . . . . . . . . . . . . 218 436
Fee amortization on New Credit Facility . . . . . . . . . . . . . 64 129
Write-off of unamortized deferred financing fees . . . . . . . . (30) (60)
------- -------
- -
$ 5,912 $10,967
======= =======
</TABLE>
(4) Reflects the elimination of a $950 charge recorded in 1994 related to a
litigation claim against Dyno Industrier A.S in France which is still
pending. In accordance with the agreement to acquire Dyno, Dyno
Industrier A.S will retain all obligations related to this claim.
31
<PAGE> 34
(5) Reflects estimated income tax adjustments resulting from the pro forma
adjustments as follows:
<TABLE>
<CAPTION>
Six Months Year Ended
ended December 31,
June 30, 1995 1994
------------- ------------
<S> <C> <C>
Income tax effects of adjustments in Notes 2 and 4 above at
Dyno's estimated effective income tax rate of 38.1% and
177.1%, respectively . . . . . . . . . . . . . . . . . . . $ 251 $ 390
Income tax effects of adjustments in Note 3 above at the
Company's estimated effective income tax rate of 35.4% and
32.5%, respectively . . . . . . . . . . . . . . . . . . . . (2,093) (3,564)
------- -------
$(1,842) $(3,174)
======= =======
</TABLE>
(6) "EBITDA" represents, for any period, the sum of operating income (minus
foreign currency exchange losses and other expenses, net) and
depreciation and amortization. EBITDA is not intended to be a
performance measure that should be regarded as an alternative either to
operating income or net income as an indicator of operating performance
or to cash flow as a measure of liquidity. The Company has included
information concerning EBITDA as it understands that it is used by
certain investors as one measure of an issuer's historical ability to
service its debt.
32
<PAGE> 35
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of June 30, 1995
---------------------------------------------------------
Company Dyno
Historical Historical(1) Adjustments Pro Forma
---------- ------------- ----------- ---------
(Unaudited dollars in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . $ 3,419 $ 8,921 $ -- $ 12,340
Accounts receivable, net . . . . . . . . . . 69,928 37,522 -- 107,450
Inventories . . . . . . . . . . . . . . . . . 33,939 15,924 -- 49,863
Other current assets . . . . . . . . . . . . 8,688 7,025 -- 15,713
-------- ------- ------- --------
Total current assets . . . . . . . . . . . . 115,974 69,392 -- 185,366
-------- ------- ------- --------
Property, plant and equipment . . . . . . . . 163,692 111,871 (21,173)(2) 254,390
Accumulated depreciation . . . . . . . . . . (57,209) (47,525) 47,525 (2) (57,209)
-------- ------- ------- --------
Net property, plant and equipment . . . . . . 106,483 64,346 26,352 197,181
-------- ------- ------- --------
Goodwill . . . . . . . . . . . . . . . . . . 19,025 1,574 13,737 (2) 34,336
Other assets . . . . . . . . . . . . . . . . 46,007 3,183 2,411 (3)(4) 51,601
-------- ------- ------- --------
Total other assets . . . . . . . . . . . . . 65,032 4,757 16,148 85,937
-------- ------- ------- --------
Total assets . . . . . . . . . . . . . . . . $287,489 $138,495 $42,500 $468,484
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt . . . . . . . . . . . . . . . $ 8,032 $15,330 $(10,373)(4) $ 12,989
Other current liabilities . . . . . . . . . . 43,272 46,701 (7,976)(4) 81,997
-------- ------- ------- --------
Total current liabilities . . . . . . . . . . 51,304 62,031 (18,349) 94,986
-------- ------- ------- --------
Total long-term debt, less current portion . 86,322 18,003 117,394 (4)(5) 221,719
-------- ------- ------- --------
Other long-term liabilities . . . . . . . . . 13,633 8,467 (6,511)(4)(6) 15,589
-------- ------- ------- --------
Total long-term liabilities . . . . . . . . . 99,955 26,470 110,883 237,308
-------- ------- ------- --------
Total stockholders' equity . . . . . . . . . 136,230 49,994 (50,034)(2)(3) 136,190
-------- ------- ------- --------
Total liabilities and stockholders' equity . $287,489 $138,495 $42,500 $468,484
======== ======= ======= ========
</TABLE>
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(1) The Dyno historical information represents amounts derived from the
unaudited combined financial statements of Dyno for the six months ended
June 30, 1995, included elsewhere in this Prospectus, translated from NOK
to U.S. Dollars at the June 30, 1995 exchange rate of 6.16 NOK to one
U.S. Dollar.
(2) The purchase price of $130,000 in cash includes provisions for estimated
closing adjustments and fees and expenses estimated at $6,000. The Dyno
Acquisition was accounted for using the purchase method of accounting and
the total purchase cost was allocated first to assets and liabilities
based upon their respective fair market values, with the remainder
allocated to goodwill. Historical Dyno equity balances are eliminated
for purposes of the pro forma consolidated balance sheet. The allocation
of the purchase price reflected above is based on estimates and may
differ from the final allocation.
(3) Reflects fees of $5,000 related to the Initial Offering and the New
Credit Facility, net of the write-off of unamortized fees of $40 on the
retirement of borrowings under certain credit facilities.
(4) The assets acquired and liabilities assumed by the Company in the Dyno
Acquisition excluded certain long-term assets, a portion of long-term
debt (both current and non-current portions), amounts payable to related
entities, income taxes payable, deferred income taxes and certain
long-term liabilities.
(5) Reflects the effects of the Transactions as follows:
<TABLE>
<S> <C>
Issuance of the Old Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $109,615
Borrowings under the New Credit Facility . . . . . . . . . . . . . . . . . . . . . . 36,385
Retirement of the borrowings outstanding under certain credit facilities . . . . . . (11,000)
--------
Net increase in long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . $135,000
</TABLE>
(6) Reflects the recognition of deferred income taxes on the write-up of
property, plant and equipment computed at the statutory tax rate in
effect in each country where the stock is being acquired as follows:
Belgium -- 40%, France -- 33% and Spain -- 35%.
33
<PAGE> 36
SELECTED FINANCIAL AND OPERATING DATA -- WALBRO CORPORATION
(dollars in thousands, except share data)The following table sets forth
selected historical financial and operating data of the Company, excluding
Dyno. The selected historical financial data as of and for each of the five
years ended December 31 was derived from the audited consolidated financial
statements of the Company. The selected historical financial data as of and
for the six months ended June 30 was derived from the unaudited consolidated
financial statements of the Company which, in the opinion of management,
include all adjustments necessary for a fair presentation of the financial
position and results of operations for the periods. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Walbro Corporation" and the
consolidated financial statements of the Company and the notes thereto,
included elsewhere herein.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------------- ----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales . . . . . . . . . . . . $ 188,291 $ 166,181 $ 325,205 $ 273,463 $ 241,416 $ 200,130 $ 166,678
Cost of sales . . . . . . . . . . 150,585 131,308 261,501 216,804 185,712 158,743 134,295
Gross profit . . . . . . . . . . 37,706 34,873 63,704 56,659 55,704 41,387 32,383
Selling and administrative
expenses . . . . . . . . . . . . 24,152 19,353 39,318 33,043 33,614 26,961 20,946
Reorganization and
restructuring charges . . . -- -- -- 1,760 -- 2,230 --
Operating income . . . . . . . . 13,554 15,520 24,386 21,856 22,090 12,196 11,437
Interest expense, net . . . . . . 2,538 1,537 3,771 2,559 3,113 6,014 6,474
Equity in (income) loss of
joint ventures . . . . . . (2,074) (592) (2,609) 89 (179) 465 2,128
Net income(1) . . . . . . . . . . 8,923 8,960 14,595 9,667 12,526 4,838 1,097
Net income per share (2) . . . . 1.04 1.04 1.70 1.13 1.63 .98 .26
Weighted average shares
outstanding . . . . . . . . 8,599,490 8,608,474 8,602,077 8,537,375 7,675,974 4,952,951 4,289,161
Ratio of earnings to fixed
charges . . . . . . . . . . 4.2x 7.3x 4.6x 6.4x 4.7x 2.0x 1.6x
OTHER DATA:
Depreciation and amortization . . 7,838 6,935 14,672 11,339 10,339 6,996 7,708
Capital expenditures . . . . . . 20,730 7,280 18,844 20,260 14,681 9,717 6,621
EBITDA(3) . . . . . . . . . . . . 20,861 21,798 36,345 31,128 31,513 19,192 19,145
Ratio of EBITDA to interest
expense, net(3) . . . . . . 8.2x 14.2x 9.6x 12.2x 10.1x 3.2x 3.0x
BALANCE SHEET DATA:
(at end of period)
Total assets . . . . . . . . . . $ 287,489 $ 238,244 $ 257,366 $ 215,295 $ 193,020 $ 161,243 $ 143,026
Total long-term debt,
less current portion . . . 86,322 59,690 66,136 52,392 49,638 62,777 83,443
Total debt . . . . . . . . . . . 94,354 67,445 81,548 58,175 59,349 70,922 85,529
Total stockholders' equity(4)(5) 136,230 122,695 127,915 114,146 99,910 50,339 27,424
</TABLE>
- ----------------------
(1) The Company adopted SFAS 106 as of January 1, 1993. As a result, the
Company recorded a one-time after tax charge of $2,900 for the cumulative
effect of this accounting change in the year ended December 31, 1993.
(2) Primary and fully diluted income per share were the same in all periods
presented except the year ended December 31, 1992 when fully diluted
income per share was $1.58 based on weighted average shares outstanding
of 8,160,472.
(3) "EBITDA" represents, for any period, the sum of operating income (minus
foreign currency exchange losses and other expenses, net) and
depreciation and amortization. EBITDA is not intended to be a
performance measure that should be regarded as an alternative either to
operating income or net income as an indicator of operating performance
or to cash flow as a measure of liquidity. The Company has included
information concerning EBITDA as it understands that it is used by
certain investors as one measure of an issuer's historical ability to
service its debt.
(4) Reflects cash dividends declared of $1,713, $1,712, $3,426,
$3,403, $3,192, $610 and $1,836 in the six months ended June 30, 1995 and
1994 and the years ended December 31, 1994, 1993, 1992, 1991 and 1990,
respectively.
(5) The Company adopted SFAS 115 as of January 1, 1994. As a result, the
Company recorded an increase to stockholders equity of $2,096 (net of
income taxes) as of January 1, 1994.
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<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- WALBRO CORPORATION
The Company's business is operated in two segments: automotive and small
engine. Selected financial information about the Company's (excluding Dyno)
continuing operations by business segment is set forth below:
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31,
--------------------- ---------------------------------
1995 1994 1994 1993 1992
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net Sales
Automotive . . . . . . . . . . . . . . $113,298 $ 98,370 $198,260 $167,201 $152,347
Small Engine . . . . . . . . . . . . . 74,993 67,811 126,945 106,262 89,069
-------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . $188,291 $166,181 $325,205 $273,463 $241,416
======== ======== ======== ======== ========
Cost of Sales
Automotive . . . . . . . . . . . . . . $ 92,188 $ 79,459 $161,649 $133,989 $114,953
Small Engine . . . . . . . . . . . . . 58,397 51,849 99,852 82,815 70,759
-------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . $150,585 $131,308 $261,501 $216,804 $185,712
======== ======== ======== ======== ========
Gross Margin
Automotive . . . . . . . . . . . . . . $ 21,110 $ 18,911 $ 36,611 $ 33,212 $ 37,394
Small Engine . . . . . . . . . . . . . 16,596 15,962 27,093 23,447 18,310
-------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . $ 37,706 $ 34,873 $ 63,704 $ 56,659 $ 55,704
======== ======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
Six months ended June 30, 1995 compared to six months ended June 30, 1994
Net Sales. Net sales for the first six months of 1995 increased 13.3% to
$188.3 million compared to $166.2 million for the same period of 1994. Sales
of automotive products increased 13.5% to $111.7 million for the 1995 period
compared to $98.4 million for the 1994 period. The increased automotive
product sales were primarily the result of increased sales during the first
quarter of 1995, with strong demand for fuel modules used in light trucks which
had a sales increase during the first quarter of 1995 at 0.6%, while passenger
car sales declined by 7.0% compared to the first quarter of 1994.
Sales of small engine products increased 10.8% to $61.4 million for the
first six months of 1995 compared to $55.4 million for the same period of 1994.
Sales of diaphragm carburetors increased by 13.3% for the first six months of
1995 while sales of float feed carburetors decreased by 6.0% compared to the
same period of 1994. Most of the increased sales of diaphragm carburetors
occurred in the second quarter and were derived primarily from international
sales. Approximately 55% of the increased sales during the first six months of
1995 resulted from foreign currency fluctuations. The weather related decline
in U.S. sales of float feed carburetors during the second quarter of 1995 more
than offset the small increase in sales during the first quarter of 1995.
Ignition products and carburetors for two-wheeled vehicles in China represented
a significant portion of the small engine product sales increase for the first
six months of 1995.
Sales to the aftermarket increased 9.7% to $13.6 million for the first
six months of 1995 compared to $12.4 million for the same period of 1994.
Sales increased in all product areas due to the same reasons stated above for
the second quarter. Automotive fuel system products accounted for most of the
increased aftermarket sales.
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<PAGE> 38
Cost of Sales. Cost of sales for the first six months of 1995 increased
14.7% to $150.6 million compared to $131.3 million for the same period of 1994.
Cost of sales as a percent of net sales was 80.0% compared to 79.0% for the
first half of 1994. In automotive products, the cost of sales as a percent of
net sales increase resulted from lower sales volumes of fuel pumps and fuel
rails. In small engine products, the higher cost of sales as a percent of net
sales was due to lower float feed carburetor sales volume in the U.S. in
conjunction with higher cost of sales in Japan and Singapore caused by the
weaker U.S. Dollar.
Selling and Administrative Expenses. Selling and Administrative expenses
("S & A") S & A expenses increased by 24.8% for the first six months of 1995
compared to the same period of 1994. S & A expenses increased because of
increased spending for research and development and for expansion of the
Company's automotive systems center in Auburn Hills, Michigan. In addition,
S & A expenses increased in Japan and Singapore because of the weaker U.S.
Dollar.
Net Interest Expense. Net interest expense was 65.1% higher for the
first six months of 1995 compared to the same period of 1994. Interest expense
increased because of increased borrowings for capital expenditures and because
of higher interest rates paid on the October, 1994 senior notes (7.68%).
Provision for Income Taxes. The provision for income taxes was 24.3%
lower for the first six months of 1995 compared to the same period of 1994
because of lower taxable income and a lower effective tax rate of 35.4% for the
1995 six-month period compared to 37.2% for the same 1994 period.
Joint Venture Income. The equity in income from joint ventures was $2.07
million for the first six months of 1995 compared to the 1994 income of $.59
million for the same period, primarily because of increased sales and improved
profitability at Marwal Systems (in France) and Marwal do Brasil.
Net Income and Income Per Share. Net income for the first six months of
1995 was $8.9 million, a decrease of 1.1% compared to net income of $9.0
million for the same period of 1994. The decrease was due to the reasons
described above. Net income per share was $1.04, unchanged from the first six
months of 1994.
1994 compared to 1993, 1993 compared to 1992
Net Sales. The Company reported record sales in 1994 of $325.2 million,
an increase of 18.9%. The 1994 sales increase represents the 12th consecutive
year of sales increases. Sales in 1993 were $273.5 million compared to sales
of $241.4 million in 1992. The $51.7 million of additional sales in 1994 was
divided between the automotive market with $31.1 million of the increase, the
small engine market with $14.4 million of the increase and a $6.3 million
increase from aftermarket sales. On a percentage basis, automotive market
sales increased 18.6% in 1994 compared to a 9.8% increase in 1993, while sales
in the small engine market increased 16.5% in 1994 compared to a 21.3% increase
in 1993. Aftermarket sales increased 33.2% in 1994 compared to an increase of
10.9% in 1993.
Sales of the Company's original equipment automotive products hit a
record level of $198.3 million in 1994, up from $167.2 million in 1993 and
$152.3 million in 1992. The U.S. light vehicle sales market grew by 1.2
million units in 1994 to reach 15.1 million vehicles, an 8.4% increase. U.S.
light vehicle sales increased by 8.0% in 1993 and by 4.5% in 1992. In 1994,
the Company was able to increase automotive product sales by 18.6% while the
U.S. light vehicle market grew by 8.4%. Automotive product sales benefited
from the overall market growth, from increased penetration of existing products
and from the development of new products for new models in 1994. In addition,
the Company sold its first multi-layer plastic fuel tanks in 1994. For 1994,
fuel pumps reported a modest sales increase while fuel rail sales increased by
22.3% and fuel module (in-tank reservoir with fuel pump assembled) sales
increased by 32.2%. The Company expects the growth in sales of fuel modules to
continue as OEMs use fuel modules on more platforms. Fuel modules have also
gained acceptance in the European and the South American markets. The Company
currently produces primarily steel fuel rails. In the future, the Company
expects continued growth in the newer composite plastic fuel rails which the
Company also produces.
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<PAGE> 39
Although the U.S. light vehicle market grew significantly in 1993, the
Company's sales growth in 1993 was the result of many dynamic forces in the
marketplace, some positive and some negative. Sales by one major domestic
customer grew by 19.5% in 1993, resulting in increased demand for the Company's
products for existing platforms, and new models introduced during the year.
Another major domestic customer chose to restrict the growth of its purchases
of one of the Company's products because of increased in-house production. In
1993, fuel pumps and fuel rails reported modest sales increases, while fuel
module sales increased by 25.8%. Sales to the Company's unconsolidated joint
venture in Europe, Marwal Systems, declined by $4.0 million in 1993 because the
joint venture increased its own internal production of components formerly
supplied by the Company to the European automotive market. Sales to the
Company's joint venture in Brazil, Marwal do Brasil (formed in 1993), helped to
partially offset some of the decline in U.S. sales to Europe.
Automotive product sales in 1992 increased by 18.7% in a market which
grew by 4.5%, but the Company's two major domestic customers increased their
own sales by an average of 12% during the year. In addition, automotive
product sales were helped by a positive change in the product mix, the
introduction of new applications for all customers and increased sales to the
Company's unconsolidated European joint venture.
Sales of the Company's small engine products also hit a record level of
$101.8 million in 1994, up from $87.4 million in 1993 and $72.1 million in
1992. Overall sales growth of small engine products was 16.5% in 1994 compared
to 21.3% during 1993. Sales of diaphragm carburetors increased 7.4% in 1994
compared to 24.4% for 1993, from $46.9 million in 1992 to $58.3 million in 1993
to $62.6 million in 1994. U.S. diaphragm carburetor sales declined in the
second half of 1994 and were adversely affected by customer order delays
related to delays in the Company's customers' engine certifications by the
California Air Resources Board. U.S. sales increases in the first half of 1994
combined with increases in Europe and Asia during all of 1994 more than offset
the second half decline in the U.S. Sales growth in 1992 and 1993 for diaphragm
carburetors was the result of increased worldwide market penetration for the
Company's products resulting in part from one of the Company's major
competitors being adversely affected by the strong Yen.
Sales of float feed carburetors increased 27.7% in 1994 compared to a
7.7% increase for 1993, with $30.0 million of sales in 1994 versus $23.5
million in 1993 and $21.8 million in 1992. In 1994, float feed carburetor
sales increased to most customers with a 36% increase to the Company's largest
lawn and garden customer and a 36% increase in sales of marine carburetors. In
1993, sales of float feed carburetors were flat to the Company's two largest
customers compared to 1992.
Sales of small engine ignition systems added $7.1 million to small engine
sales in 1994 compared to $5.1 million in 1993 and $2.4 million in 1992 as
customer demand grew for this expanding family of products, new to the Company
since 1992. In addition, sales from the Company's new subsidiary in The
People's Republic of China, Fujian Hualong Carburetor, added $1.9 million to
small engine sales in 1994.
Management believes that ignition systems will play a more significant
role in the future as small engines become subject to more stringent emissions
regulations. These regulations could significantly affect unit sales of
existing products due to a shifting of the low cost segment of the portable
power equipment market from internal combustion engines to electric motors. In
addition, these regulations will require new levels of technology within the
tight cost constraints required by the small engine market. The Company,
however, believes it has the capability to assist engine manufacturers by
designing and producing ignition systems and fuel systems capable of meeting
these emission standards. Although certain of these regulations may have the
effect of reducing unit sales, the more sophisticated products
37
<PAGE> 40
required by stringent emissions regulations are expected to command higher unit
prices. See "Business -- Walbro Engine Management Corporation -- Small Engine
Industry Overview."
Since 1991, the Company's aftermarket business for both automotive
products and carburetors has been consolidated as a business unit within Walbro
Engine Management Corporation. Aftermarket sales have grown at an increasingly
higher rate with sales of $17.0 million in 1992, $18.9 million in 1993 and
$25.1 million in 1994. Each year, aftermarket sales have represented
approximately 7% to 8% of total Company sales. The 33.2% increase in 1994
sales was the result of the addition of several new aftermarket customers and
the expansion of the product offering for aftermarket sales.
Cost of Sales. The Company's cost of sales is composed primarily of
material, labor, and manufacturing and engineering overhead. Cost of sales was
$261.5 million in 1994 compared to $216.8 million in 1993 and $185.7 million in
1992. Cost of sales as a percent of sales was 80.4% in 1994 compared to 79.3%
in 1993 and 76.9% in 1992. In 1991, the Company reorganized its business into
Walbro Automotive Corporation and Walbro Engine Management Corporation. The
reorganization was designed to foster decentralized decision-making, improved
focus, accountability and to empower managers to adopt programs responsive to
their respective industries.
In 1993, cost of sales as a percent of sales for small engine products
continued the favorable trend downward. However, for automotive products,
percentage cost of sales increased resulting in an overall increase in the
percentage for the Company. The increased cost of sales for automotive
products resulted primarily from the Company's decision to enter the
multi-layer plastic fuel tank business by building a new manufacturing facility
in Ossian, Indiana, and its decision to consolidate two small fuel rail
manufacturing plants into one larger facility in Ligonier, Indiana. The
plastic fuel tank is a critical element of the Company's long-term strategy of
supplying fuel storage and delivery systems to the automotive market. However,
the short-term effect of building this facility was to increase cost of sales
in 1993 without any significant sales. Start-up expenses associated with the
fuel rail plant consolidation caused higher cost of sales for that year.
Automotive cost of sales was also adversely impacted by customer recall
expenses, some of which resulted from the start-up at the Ligonier facility.
Cost of sales as a percent of sales increased for both automotive and
small engine products in 1994. The increase for automotive products resulted
from continuing start-up costs at the Company's Ossian, Indiana plant, slightly
less than break-even results at the Company's Ligonier, Indiana plant and
additional costs of expanding production capacity at the Company's Meriden,
Connecticut plant. The start-up costs at the Company's Ossian, Indiana plant
are expected to continue through the remainder of 1995 as the production orders
for multi-layer plastic fuel tanks have not reached the break-even level. The
additional costs of expanding production at the Company's Meriden, Connecticut
plant are expected to decline in 1995 as new capacity comes on line and sales
volumes expand. The increase for small engine products was primarily the
result of the decline in U.S. diaphragm carburetor sales in the second half of
1994. A secondary factor for the increase for small engine products was the
higher cost of manufacturing carburetors in Japan and Singapore in light of the
weaker U.S. Dollar during 1994.
In December 1990, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 106 (SFAS 106), Employer's
Accounting for Post Retirement Benefits Other Than Pensions, and the Company
changed its method of accounting for these benefits in 1993 as required by SFAS
106. See Note 10 of the Company's Notes to Consolidated Financial Statements
for a detailed discussion of the impact of this change.
Selling and Administrative Expenses. Selling and administrative expenses
were $39.3 million in 1994, an increase of 19.0% compared to $33.0 million in
1993. The 1993 selling and administrative expenses decreased by 1.7% compared
to $33.6 million in 1992. As a percent of sales, selling and
38
<PAGE> 41
administrative expenses were 12.1% in 1994, 12.1% in 1993 and 13.9% in 1992.
In 1994, most expense categories increased to support the sales growth.
Research and development spending increased in 1994 by 28.6% to support the new
product development efforts required by emission regulations in both the small
engine and automotive industries. The accrual for incentive compensation at
Walbro Engine Management Corporation was increased in 1994 because of increased
profitability. The percentage decrease in 1993 resulted from strong sales
growth coupled with modest increases in most selling and administrative expense
categories, including research and development, which were offset by an
increase in miscellaneous income and a decline in the accruals for incentive
compensation tied to stockholder value.
Reorganization Charges. In 1993, the Company recorded a $1.8 million
reorganization charge reflecting the Company's actual and anticipated expenses
from reorganization of the executive management team at Walbro Automotive
Corporation. $1.0 million was paid in 1993 and the remaining $0.8 million was
paid in 1994. The Company does not anticipate incurring any additional
reorganization or restructuring charges in the near future. See Note 5 of the
Company's Notes to Consolidated Financial Statements.
Write Down of Long-Term Marketable Securities. In 1990, the Company
acquired 207,000 shares of Common Stock of Mitsuba Electric Company, its joint
venture partner in Mitsuba-Walbro Corporation located in Japan. The investment
was treated as a long-term marketable security for financial statement
presentation. In 1992, management determined that the decline in market value
was likely to be permanent and a charge to earnings of $1.1 million was
recorded. See Note 3 of the Company's Notes to Consolidated Financial
Statements.
Loss on Foreign Exchange Transactions. Foreign exchange contracts are
used primarily to manage the exposure to foreign currency losses from
operations in foreign countries, from investments in foreign joint ventures and
from commitments in foreign currencies. In 1992, the Company entered into
forward foreign exchange contracts to hedge currency exposure related to a
sales commitment to a foreign customer. The loss on these contracts was
treated as a hedge for accounting purposes and recorded as a deferred asset,
which is being recognized in income as the hedged transaction occurs. In 1993
and 1994, the Company entered into forward currency exchange contracts to
reduce its exposure against fluctuations in foreign currency rates and the
losses on these contracts were recorded as foreign currency exchange loss in
1993 and 1994. The foreign currency exchange loss in 1994 was $2.6 million,
$1.5 million in 1993 and $0.6 million in 1992. See Note 12 of the Company's
Notes to Consolidated Financial Statements.
Net Interest Expense. Net interest expense was $3.8 million in 1994, an
increase of $1.2 million, compared to $2.6 million in 1993. Net interest
expense declined by $0.5 million in 1993, continuing the trend from 1992, when
net interest expense declined by $2.9 million. The 1994 increase resulted from
higher interest rates and increased borrowings for additional working capital
and the full year effect of financing the Company's Ossian, Indiana plant.
During the fourth quarter of 1994, the Company issued $45 million of the 2004
Notes which contributed to the higher net interest expenses. The 1992 decline
resulted from improved operating results, lower short-term interest rates and a
net debt reduction of $11.6 million from the application of proceeds from the
Company's common stock offering of $22.1 million in March 1992. The 1993
decline in net interest expense resulted from lower short-term interest rates
and a debt reduction for part of the year. During the first half of 1993, the
remaining $6.6 million of 8% Convertible Subordinated Promissory Notes were
converted to shares of common stock. Later in 1993, additional debt was issued
to finance the Company's facility in Ossian, Indiana. The average cost of
borrowing was 7.9% in 1992, 4.9% in 1993 and 5.9% in 1994.
39
<PAGE> 42
Net Income and Income Per Share. Net income for 1994 was $14.6 million,
an increase of 16.1% compared to $12.6 million income before cumulative effect
of accounting change in 1993. Net income was $12.5 million for 1992. The
Company's adoption of SFAS 106 during 1993, resulted in a cumulative charge of
$2.9 million ($0.34 per share), net of tax. Therefore, net income for common
stockholders was $9.7 million in 1993. Net income per share was $1.70 for 1994
compared with income per share before cumulative effect of accounting change of
$1.47 for 1993 and $1.58 net income per share for 1992. Net income per share
for 1993 was $1.13. All per share data is fully diluted. Net income as a
percent of sales was 4.5% in 1994, 4.6% in 1993 (income before accounting
change as a percent of sales), and 5.2% in 1992. The decline in net income as
a percent of sales during 1994 was the result of higher cost of sales, higher
interest expense and foreign exchange losses as explained above. Although
sales increased by 13.3% in 1993, income was basically unchanged from 1992.
The 1993 income results reflected increased costs and expenses. Cost of sales
as a percentage increased because of start-up expenses at the Ligonier and
Ossian facilities, and because of automotive customer recall expenses. Other
factors affecting 1993 income were costs incurred from the reorganization at
Walbro Automotive Corporation and losses at joint ventures.
Joint Venture Income. As detailed below, the Company has actively
pursued joint venture opportunities as a means of expanding into new regions of
the world market. The joint venture structure allows the Company to share the
risks, capital requirements and early stage start-up losses with a partner,
while gaining access to new markets and the knowledge and relationships of its
joint venture partners.
The Company reported equity in income of joint ventures in 1992 of
$179,000, losses of $89,000 in 1993 and income of $2.6 million in 1994. The
loss in 1993 was due primarily to first year losses of $538,000 in Brazil and
the significant income in 1994 resulted from profits in all the Company's joint
ventures. The Company's income from Marwal Systems was $1.1 million in 1994
compared to a small profit in 1993 based on sales growth of 52.9% during 1994.
The Company's income from Marwal do Brasil was $1.1 million in 1994 compared to
the loss of $500,000 in 1993. Marwal do Brasil was in the start-up phase of
operations during 1993 with total sales of $2.3 million which grew to $22
million in 1994.
In February 1993, the Company acquired a 49% interest in Marwal do
Brasil, a Brazilian joint venture with Magneti Marelli S.p.A. of Italy, to
manufacture and market electronic fuel injection system components for the
South American automotive market.
In March 1993, the Company acquired all of the outstanding shares of
Walbro Korea Ltd., a joint venture with Siemens A.G. of Germany and Daesung
Ltd. of South Korea. This joint venture was originally formed to manufacture
and market electronic fuel injection system components for the South Korean
automotive market. In December 1994, the Company announced the signing of an
agreement to form a joint venture with Daewoo Precision Industries, Ltd. of
South Korea to manufacture electronic fuel pumps, fuel level sensors and fuel
modules for the Korean automobile market.
In January 1993, the Company sold its 50% interest in Orbital-Walbro
Corporation to its joint venture partner, Orbital Engine Company Ltd. of
Australia, in exchange for 3.7 million shares of Orbital Engine Company, Ltd.
stock and $5.5 million in cash.
INFLATION
Inflation potentially affects the Company in two principal ways. First,
a portion of the Company's debt is tied to prevailing short-term interest rates
which may change as a result of inflation rates, translating into changes in
interest expense. Second, general inflation can impact labor, parts and supply
costs. The Company has limited ability to pass on inflation-related cost
increases to its customers on a short-term basis. In addition, the markets
served by the Company are competitive in nature, and
40
<PAGE> 43
competition limits the pass-through of inflation-related cost increases in many
cases. In the past three years, however, inflation has not been a significant
factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
Approximately 24% of the Company's sales during the first six months of
1995 were derived from international manufacturing operations in Japan, The
People's Republic of China, Singapore and Mexico. The financial position and
the results of operations of the Company's subsidiaries in Japan, Walbro Japan,
Inc. and Walbro Automotive Japan, Inc. (8% of sales) and in The People's
Republic of China, Fujian Hualong Carburetor Co., Ltd. (1% of sales) are
measured in local currency of the countries in which they operate and
translated into U.S. Dollars. The effects of foreign currency fluctuations in
Japan and The People's Republic of China are somewhat mitigated by the fact
that expenses are generally incurred in the same currencies in which sales are
generated and the reported income of these subsidiaries will be higher or lower
depending on a weakening or strengthening of the U.S. Dollar.
For the Company's subsidiary in Singapore, Walbro Singapore Pte. Ltd.,
(6% of sales), the expenses are generally incurred in the local currency, but
sales are generated in U.S. Dollars; therefore, results of operations are more
directly influenced by a weakening or strengthening of the local currency. The
Company's subsidiary in Mexico, Walbro de Mexico, S.A. DE C.V. (9% of sales)
operates as a Maquiladora, or contract manufacturer, where only certain direct
manufacturing expenses are incurred in the local currency and sales are
generated in U.S. Dollars. Thus, results of operations of the Company's
subsidiary in Mexico are also more directly influenced by a weakening or
strengthening of the local currency.
Approximately 13% of the Company's net assets at June 30, 1995, are based
in its foreign operations and are translated into U.S. Dollars at foreign
currency exchange rates in effect as of the end of each period. Accordingly,
the Company's consolidated shareholders' equity will fluctuate depending upon
the weakening or strengthening of the U.S. Dollar. In addition, the Company
has equity investments in unconsolidated joint ventures in France, Brazil,
Japan and Korea. The Company's reported income from these joint ventures will
be higher or lower depending upon a weakening or strengthening of the U.S.
Dollar.
The acquisition of Dyno in July 1995 will result in a significant
increase in the foreign component of the Company's operations. Specifically,
giving effect to the Dyno Acquisition on a pro forma basis, approximately 47%
of the Company's net sales for the six months ended June 30, 1995 and
approximately 39% of the Company's net assets at June 30, 1995 would have been
related to foreign operations.
The Company's strategy for management of currency risk relies primarily
upon the use of forward currency exchange contracts to manage its exposure to
foreign currency fluctuations related to its operations in foreign countries,
to manage its firm transaction commitments in foreign currencies and to hedge
its equity investment in certain foreign joint ventures. See Note 12 of the
Notes to the Company's Consolidated Financial Statements for a detailed
discussion of the Company's forward currency exchange contracts.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, the Company had outstanding $8.0 million in
short-term debt, including current portion of long-term debt, and $86.3 million
in long-term debt. As of June 30, 1995, the approximate minimum principal
payments required on the Company's long-term debt in each of the five fiscal
years subsequent to December 31, 1994 are $8.5 million in 1995, $1.0 million in
1996, $1.4 million in 1997, $7.5 million in 1998 and $7.1 million in 1999.
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<PAGE> 44
On July 27, 1995, the Company, through certain of its wholly-owned
subsidiaries, acquired Dyno. The net purchase price of the Dyno Acquisition
was approximately $124 million (approximately $138 million less approximately
$14 million in cash acquired by the Company). The Company financed the
acquisition through the combination of a private placement of $110 million in
aggregate principal amount of the Old Notes and the New Credit Facility with a
group of commercial banks. At August 1, 1995, the Company had available to it
approximately $86 million under the New Credit Facility. See Note 1 of the
Notes to consolidated Financial Statements for further discussion.
The Company's (including Dyno's) plans for 1995 capital expenditures for
facilities, equipment and tooling total approximately $45.l million, of which
approximately $23.4 million represents maintenance expenditures. The Company
intends to finance the capital expenditures with the New Credit Facility and
cash from operations.
Management believes that the Company's long term cash needs will continue
to be provided principally by operating activities supplemented, to the extent
required, by borrowing under the Company's existing and future credit
facilities. Management expects to replace these credit facilities as they
expire with comparable facilities.
As of June 30, 1995, accounts receivable amounted to $69.9 million, an
increase of $11.6 million, compared to $58.3 million at June 30, 1994. The
average collection period at June 30, 1995 was 63.3 days, slightly higher than
the average collection period during calendar 1994 and increased for the
reasons listed below for 1994. The average collection period in calendar year
1994 was 62.3 days compared to 56.8 days in 1993 and 55.0 days in 1992.
Approximately 55% of the accounts receivable increase in 1994 was due to
increased sales in 1994, while the remaining increase was due to long
collection periods. The average collection period in 1994 increased primarily
because of a substantial increase in fuel pump sales to the Company's Marwal
joint ventures, which received longer payment terms consistent with customary
payment practices in Europe and South America.
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<PAGE> 45
SELECTED FINANCIAL AND OPERATING DATA -- DYNO
(DOLLARS IN THOUSANDS)
The following table presents certain selected historical combined
financial information of Dyno, prepared in accordance with United States
generally accepted accounting principles, as of the dates and for the periods
indicated below and should be read in conjunction with the financial statements
of Dyno and the related notes thereto included elsewhere in this Prospectus.
The Dyno historical information represents amounts derived from the unaudited
combined financial statements of Dyno for the six months ended June 30, 1995
and 1994 and the audited combined financial statements of Dyno for the years
ended December 31, 1994 and 1993, included elsewhere in this Prospectus. The
statement of income data was translated from NOK to U.S. Dollars at the average
exchange rates of 6.38, 7.29, 7.05 and 7.09 NOK to one U.S. Dollar for the six
months ended June 30, 1995 and 1994 and the years ended December 31, 1994 and
1993, respectively. The balance sheet data was translated from NOK to U.S.
Dollars at the end of period exchange rates of 6.16, 6.93, 6.76 and 7.52 NOK to
one U.S. Dollar as of June 30, 1995 and 1994, December 31, 1994 and 1993,
respectively.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------------ -------------------------
1995 1994 1994 1993
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Statement of Income Data:
Revenues . . . . . . . . . . . . . . . . $107,832 $ 67,243 $147,147 $ 87,140
Cost of goods sold . . . . . . . . . . . 85,065 52,248 112,514 68,396
Gross profit . . . . . . . . . . . . . . 22,767 14,995 34,633 18,744
Selling, general and administrative
expenses . . . . . . . . . . . . . . . 17,358 13,929 29,541 24,055
Operating income (loss) . . . . . . . . . 5,409 1,066 5,092 (5,311)
Interest expense, net . . . . . . . . . . 1,036 (1,338) 2,792 2,516
Net income (loss) . . . . . . . . . . . . $ 2,532 $ (1,658) $ 3,678 $ (7,720)
Other Data:
Depreciation and amortization . . . . . . 5,488 4,234 8,928 6,361
Capital expenditures . . . . . . . . . . 6,131 4,945 8,704 25,673
EBITDA(1) . . . . . . . . . . . . . . . . 10,897 5,300 14,020 1,050
Balance Sheet Data:
(at end of period)
Total assets . . . . . . . . . . . . . . $138,495 $119,170 $124,146 $105,602
Long-term debt, less current portion. . . 18,003 13,056 14,796 20,785
Shareholders' and divisional equity . . . 49,994 19,327 42,540 10,293
</TABLE>
- -------------------------
(1) "EBITDA" represents, for any period, the sum of operating income plus
depreciation and amortization. EBITDA is not intended to be a
performance measure that should be regarded as an alternative either to
operating income or net income as an indicator of operating performance
or to cash flow as a measure of liquidity. The Company has included
information concerning EBITDA as it understands that it is used by
certain investors as one measure of an issuer's historical ability to
service its debt.
43
<PAGE> 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS -- DYNO
RESULTS OF OPERATIONS
Overview
The following discussion and analysis was prepared by management of the
Company. The management of Dyno Industrier A.S did not participate in the
preparation of this discussion or analysis. The combined financial statements
of Dyno are presented elsewhere herein in NOK. The percentage comparisons
listed below are based on NOK results.
Six months ended June 30, 1995 compared to six months ended June 30, 1994
Revenues. Dyno reported revenues of NOK 688 million ($108 million) in
the first six months of 1995, an increase of 40.4% compared to revenues of NOK
490 million ($67 million) for the same period in 1994. The increased revenues
were primarily the result of increased shipments of plastic fuel tanks and
plastic tank systems from plants in Spain, Belgium and Norway. These increases
represent the continued growth of new automotive platforms recently started in
those countries. European automobile sales increased by only 1.4% during the
first six months of 1995.
Cost of Goods Sold. Cost of goods sold consists mostly of material,
labor and overhead expenses. Cost of goods sold in the first six months of
1995 was NOK 543 million ($85 million) compared to NOK 381 million ($52
million) for the same period in 1994, an increase of 42.5%. Cost of goods sold
as a percent of revenues was 78.9% for the first six months of 1995 compared to
77.8% for the same period in 1994. The higher costs of goods sold as a percent
of revenues resulted in a lower gross margin of 21.1% for the first six months
of 1995 compared to 22.2% for the first six months of 1994. The lower gross
profit margin was primarily caused by the additional costs associated with the
startup of operations in Spain which began in the second half of 1994. There
were no revenues from Dyno's Spanish facility during the first six months of
1994 while the revenues during the first six months of 1995 contained lower
gross margins as compared to the other Dyno facilities. In addition, higher
material prices for plastic resin contributed to the higher cost of goods sold
during the first six months of 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses were NOK 111 million ($17 million) for the
first six months of 1995, an increase of 8.8% compared to NOK 102 million ($14
million) for the same period in 1994. As a percentage of revenues, SG&A
expenses were 16.1 the first six months of 1995, down significantly from 20.8%
for the same period in 1994 due to a small increase in SG&A expenses combined
with the 40.4% increase in revenues for the same period.
Provision for Income Taxes and Net Income. Income taxes increased the
amount of net loss for the first six months of 1994 because taxes were paid in
the countries where profits were earned but tax credits were not available in
the countries where losses were incurred. For the first six months of 1995,
the effective tax rate was 38.1%. As a result of the factors described above,
net income was NOK 16.2 million ($2.5 million) for the first six months of 1995
compared to a net loss of NOK 12.1 million ($1.7 million) for the first six
months of 1994.
44
<PAGE> 47
1994 compared to 1993
Revenues. Dyno reported revenues in 1994 of NOK 1,038 million ($147
million), an increase of 68% compared to 1993 revenues of NOK 618 million ($87
million). The NOK 420 million ($60 million) of increased revenues in 1994 was
generated in part by Dyno plants in Germany - NOK 175 million ($25 million);
Belgium - NOK 128 million ($18 million); Spain - NOK 52 million ($7 million);
United Kingdom - NOK 20 million ($3 million), while revenues in France were
unchanged in 1994.
Almost all of the increased revenues were from plastic fuel tanks and
plastic tank systems. The increase in revenues in 1994 in Germany, Belgium and
Spain was attributed to the installation of Dyno fuel tanks on new automotive
platforms introduced in those countries. In Belgium, 1994 represented the
first full year of tank production and in Spain, tank production began in the
fourth quarter. In addition, 1994 marked the first significant upturn in
European auto sales, which increased by 6.1% for the year, after two years of
recession.
Cost of Goods Sold. Cost of goods sold was NOK 793 million ($113
million) in 1994 compared to NOK 485 million ($68 million) in 1993, a 63.6%
increase. As a result, cost of goods sold as a percent of revenues was 76.5%
in 1994, compared to 78.5% in 1993. Start-up costs in Spain and Belgium and
expansion at its German plant contributed to the higher percentage cost of
goods sold in 1993. In addition, higher revenues in 1994 helped reduce the
percentage cost of goods sold in 1994. These factors resulted in a higher
gross profit in absolute terms, NOK 244 million ($35 million) in 1994 compared
to NOK 133 million ($19 million) in 1993, as well as a higher gross profit
percentage, 23.5% in 1994 versus 21.5% in 1993.
Selling, General and Administrative Expenses. SG&A expenses were NOK 208
million ($30 million) in 1994, an increase of 22.1% compared to NOK 171 million
($24 million) in 1993. As a percentage of revenues, SG&A expenses were 20.1%
in 1994, down significantly from 27.6% in 1993. The decline in percentage SG&A
expenses resulted from the substantial growth in sales during 1994.
Substantially all of the NOK 37 million ($6 million) increase in SG&A expenses
in 1994 was due to start-up costs at Dyno's Belgian and Spanish plants and
expansion at its German plant.
Provision for Income Taxes and Net Income. Income taxes had a
significant impact on net income (loss) in both 1994 and 1993. In 1993, tax
credits were not available to reduce the net loss. Also in 1994, the effective
tax rate was very high because tax credits were not available from France and
Spain to reduce the taxes paid in other countries resulting in income taxes
which were greater than taxable income. Net income for 1994 was NOK 26 million
($3.7 million) compared to a net loss of NOK 55 million ($7.7 million) in 1993.
In 1994, Dyno benefited from an extraordinary gain on forgiveness of debt in
the amount of NOK 33 million ($4.7 million), as intercompany debt at Dyno's
subsidiary in France was forgiven by its parent company. Before this
extraordinary item in 1994, Dyno reported a loss of NOK 7 million ($1.0
million).
45
<PAGE> 48
BUSINESS
GENERAL
Walbro is a global leader in the design, development and manufacture of
precision fuel systems and products for automotive and small engine markets
worldwide. The Company manufactures fuel pumps, fuel modules, fuel level
sensors, plastic fuel tanks and fuel rails for sale to OEMs. On July 27, 1995,
the Company acquired Dyno, which is a leading European plastic fuel-tank
manufacturer. Products manufactured for the small engine market include
carburetors and ignitions for chain saws, outboard marine engines, two-wheeled
vehicles, industrial engines and lawn and garden equipment, such as lawn mowers
and weed trimmers. From 1989 to 1994, the Company (excluding Dyno) increased
net sales and EBITDA at the compound rates of approximately 19% and 21% per
year, respectively, despite an automotive industry downturn in 1990-1991. This
growth was primarily due to the introduction of new automotive products,
penetration of additional automotive platforms and a recovery in the small
engine industry. The Company had 1994 net sales of $472.4 million and EBITDA
of $51.3 million.
Through its subsidiary, Walbro Automotive Corporation, the Company
designs, develops and manufactures fuel storage and delivery products for a
broad range of U.S. and foreign manufacturers of passenger automobiles and
light trucks (including minivans). The Company holds a strong market position
in the U.S. and, through the Dyno Acquisition and Walbro's joint ventures in
France, Brazil, Japan and South Korea, has diversified its business across a
number of geographic markets. Management believes that, in the North American
automotive market, the Company manufactures fuel pumps for approximately 40% of
Ford's automobiles and light trucks, including the Taurus, Explorer, Windstar
and F-Series Pickup. The Company manufactures all fuel module requirements for
Ford light trucks, and, according to management's estimates, manufactures
approximately 25% of Ford's fuel rail needs. In addition, management estimates
that the Company supplies Chrysler with approximately 70% of its fuel pump and
fuel module requirements, including all requirements for Chrysler's passenger
cars and minivans and most requirements for Chrysler's light trucks, including
the Dodge Ram Truck. Other automotive customers of the Company, including Dyno
and the Company's joint ventures, include Renault, Peugeot, Mercedes-Benz,
Fiat, Volvo, Rover, Saab, Volkswagen, Audi, Daewoo, Hyundai and Kia.
Management believes that the Company manufactures substantially all of the fuel
tank systems for Volvo and Saab and the fuel tank for the Mercedes 190/C Class,
Volkswagen Polo and Renault Twingo. Approximately 73% of the Company's 1994
net sales, including Dyno on a pro forma basis, were generated by its
automotive operations.
Through its subsidiary, Walbro Engine Management Corporation, the Company
designs, develops and manufactures diaphragm carburetors for portable engines
(such as those used in chain saws and weed trimmers), float feed carburetors
for ground supported engines (such as those used in lawn mowers and generators)
and ignition systems and other components for a variety of small engine
products. The Company believes that it is the world's largest independent
manufacturer of small engine carburetors, with an approximate 76% share of the
global diaphragm carburetor market including sales to such leading chain saw
and weed trimmer manufacturers as Poulan/Weedeater (a Division of Electrolux,
A.B.), Homelite (a Division of Deere & Company), Stihl, Incorporated, McCulloch
(a Division of Shop Vac), Ryobi Ltd. and Kioritz (Echo) Corporation. Walbro
believes it has an approximate 14% share of the global float feed carburetor
market, including sales to Briggs & Stratton Corporation, the world's largest
small engine manufacturer, Kohler Company, Tecumseh Products Co., and to
Mercury Marine (a Division of Brunswick Corporation), a major manufacturer of
outboard marine engines. Walbro also manufactures replacement products for
both the automotive and small engine aftermarkets, sales of which are included
within its small engine product business. Approximately 27% of the Company's
1994 net sales, including Dyno on a pro forma basis, were generated by its
small engine operations.
46
<PAGE> 49
DYNO
On July 27, 1995, the Company acquired Dyno for approximately $124
million. Dyno is a leading designer, manufacturer and marketer of plastic
mono-layer fuel tank systems and components to many European vehicle
manufacturers, including Renault, Mercedes-Benz, Volvo, Peugeot, Saab, Rover,
Volkswagen and Audi, and has operations in France, Norway, Germany, Great
Britain, Spain and Belgium. Dyno produced approximately 1.5 million plastic
fuel tanks in 1994, which management estimates to be approximately 17% of the
European plastic fuel tank market.
In addition to manufacturing fuel tanks, Dyno manufactures plastic fill
pipes, fuel overflow containers, and other automobile blow-molded components
for cooling, heating and air conditioning systems. Management expects these
products, in the aggregate, to account for approximately 10% of Dyno's 1995
revenues.
Dyno has increased its revenues and EBITDA from $87.1 million and $1.1
million, respectively, in 1993 to $147.1 million and $14.0 million,
respectively, in 1994 (based on the average Norwegian Kroner/U.S. Dollar
exchange rates for each of 1993 and 1994). Dyno has achieved this growth by
capitalizing on the European OEMs' increased use of plastic instead of steel
fuel tanks. Plastic blow molding techniques are especially suited for the
short automobile production runs common in Europe. In addition, Dyno's results
have improved as production in its Spanish, Belgium and German plants has
increased to absorb the fixed start-up costs associated with the first two of
these locations and the expansion costs at its German facility and as Dyno has
added new platforms.
The Dyno Acquisition is a continuation of the Company's efforts to
strengthen its position as a key supplier of integrated fuel systems to the
global automotive market, and it will create the only integrated provider of
plastic fuel tank and fuel pump systems in Europe. The Dyno Acquisition is
expected to provide Walbro with a number of benefits, including:
. Further diversification of the Company's geographic markets and the
increased ability to participate in the current European automotive
market recovery. Walbro's international sales, on a pro forma basis for
the Dyno Acquisition, would have been 47% of the Company's net sales
(excluding joint ventures) in 1994 compared to 24% without Dyno.
. An increased opportunity for Walbro to sell its fuel system products to
Dyno's European-based OEM customers and for Dyno to sell its products to
the European operations of Chrysler, Ford and General Motors.
. The ability to share blow molding process technology, especially with
respect to the eventual transfer of Walbro's multi-layer blow molding
technology to Dyno's European facilities.
WALBRO AUTOMOTIVE CORPORATION
AUTOMOTIVE INDUSTRY OVERVIEW
A number of trends within the global automotive market have had and will
continue to have a fundamental impact on the Company's future profitability and
growth prospects, including: the shift by OEMs to the purchase of "systems"
rather than individual components, the globalization of the OEM supplier base,
the expansion of OEM supplier responsibilities and increased emissions
regulation. These trends have contributed to a consolidation of OEM suppliers
which the Company expects will continue.
Purchase of Integrated Systems. North American automotive OEMs are
relying increasingly on suppliers who can provide entire systems rather than a
number of different parts. OEMs can reduce
47
<PAGE> 50
internal engineering efforts and their number of suppliers by assembling
systems rather than components. Management believes the engineering and
technological challenges facing systems suppliers will continue to grow as
these systems become more complex. To strengthen the Company's position as a
major supplier of automotive fuel systems, the Company is investing in its
engineering and testing capabilities and actively pursuing its systems
philosophy. The Company believes that the systems approach will also be
adopted outside North America and that the acquisition of Dyno, which shares
the Company's systems philosophy, will allow the Company to provide systems to
the European market in the future.
Globalization of the OEM Supplier Base. Several OEMs, including Ford,
Walbro's largest customer, are introducing automobile models which are designed
for the world automotive market ("World Cars"). This departure from the
historical practice of designing separate models for each regional market will
require suppliers to establish international development and manufacturing
facilities capable of providing system components with consistent quality on a
worldwide basis. Through the Dyno Acquisition and the Company's joint
ventures, the Company believes it is well positioned as a major supplier of
fuel systems to the world automotive markets.
Expansion of OEM Supplier Responsibilities. Since the 1980s, Ford,
Chrysler and General Motors have been actively reducing their supplier base to
key suppliers who accept significant responsibility for product management and
meet increasingly strict standards for product quality, on time delivery and
manufacturing costs. These suppliers are expected to control all aspects of
production of system components, including design, development, component
sourcing, manufacturing, quality assurance, testing and delivery to the
customer's assembly plant. The Company believes that many suppliers do not
have the resources to meet these OEM requirements and that the automotive OEM
supplier market will be divided among a smaller group of high quality key
suppliers. The Company has received a number of quality awards from its OEM
customers, including the Ford Q1 Award and Chrysler QE Award, and believes that
this supplier consolidation provides an opportunity for the Company's increased
penetration of the OEM market.
Increasing Emissions Regulation. Beginning in the late 1970s, U.S.
environmental regulations, including fuel economy regulations and the Clean Air
Act and its Amendments, have had a significant impact on fuel systems and the
controls placed on mobile source emissions. As a result, U.S. automotive fuel
systems have evolved from mechanically controlled carbureted systems to more
sophisticated, electronically controlled systems. The resulting system is
composed of an electronic fuel injection system and several subsystems which
provide emission control functions as well as improved performance and fuel
economy. Governmental action in many other parts of the world is forcing a
similar transition to engine management systems which produce less emissions.
For example, the European Economic Community, which previously had less
stringent automotive exhaust regulations, adopted exhaust standards effective
January 1, 1993 which are comparable to 1983 U.S. requirements.
Compliance with these regulations has resulted in efforts to recover
vapor emissions and the development of new "flexible" fuels such as ethanol and
methanol blends. In response to these changes, Walbro has developed a number
of products including ORVR systems, electric pumps designed for electronic fuel
injection systems and plastic fuel tanks which reduce hydrocarbon permeation
and are corrosion resistant to flexible fuels.
AUTOMOTIVE BUSINESS STRATEGY
The Company intends to capitalize on trends in the automotive industry
through the development of its fuel systems technology and expansion of its
product line and customer base. The key elements of the Company's strategy
include:
48
<PAGE> 51
Systems Approach to Product Development. The Company is utilizing its
expertise in fuel pump technology to develop integrated fuel delivery systems
which reduce evaporative emissions, are compatible with the corrosive nature of
flexible fuels and provide customers with the cost savings and convenience of
purchasing complete systems rather than numerous individual components. The
Company's "systems" approach to product development is designed to allow the
Company to increase the Walbro product content on each vehicle in which
Walbro's products are installed while providing customers with substantial
performance and cost benefits. This system approach has provided the Company
with the capability to equip an automobile with up to $100 in Walbro products
in 1995 compared to $15 in 1987, while providing quality improvements for its
OEM customers. The 1995 Ford Windstar with a three-liter engine, for example,
is equipped with $54 of Walbro products, whereas a similar Ford model was
equipped with only $15 of Walbro products in 1987. The Company's ability to
assume responsibility for the development of fuel delivery systems allows OEMs
to reduce internal engineering efforts and use fewer suppliers through the
assembly of systems rather than components.
Global Capabilities. The Company's international manufacturing and
market presence will allow the Company to offer its current and future fuel
systems technology to the global automotive market. The Dyno Acquisition
significantly expands Walbro's presence in Europe and provides the Company with
additional resources and marketing contacts to supply integrated fuel systems
to both European and North American OEMs assembling vehicles in Europe and
European OEMs assembling vehicles in the United States. Dyno's plastic tank
manufacturing capability will assist Walbro in pursuing its systems strategy in
Europe and in serving OEM customers as they confront new environmental and
regulatory challenges worldwide and introduce World Cars designed for sale to
the global automotive market. In addition, the Company has entered into joint
ventures with foreign manufacturers in Brazil, France, Japan and South Korea
which enable the Company to access those foreign markets. In the future, the
Company may make additional strategic acquisitions of, or enter into strategic
alliances with, fuel systems product manufacturers whose products could be
integrated with the Company's existing product line as part of the Company's
focus on systems development and global capabilities.
Technical and Product Development Capabilities. The Company's engineers
focus their research and development efforts to respond to the technical
challenges facing their customers. The Company has designed its current line
of FSDS products in response to U.S. fuel economy and emission regulations and
changing consumer demands over the past two decades. Management believes that
the Company is well positioned to capitalize on the emergence of more stringent
global emission regulations through the development of a new generation of
products and systems with greater fuel efficiency, reduced component weight,
improved durability, fuel vapor control and flexible fuel compatibility.
Examples of these products include the idle air solenoid, which regulates
engine idle speed in concert with the engine management system, and ORVR
systems, which capture fuel vapors generated in the fuel tank and
systematically route them to the carbon canister for storage and use.
The Company has made substantial investments in fuel system technology,
product design and test capability and technical personnel to lead the
advancement of FSDS technology and respond to customer needs. The Company's
new state-of-the-art systems center in Auburn Hills, Michigan provides the
Company with the full-service product management capability which OEMs require
of key suppliers and provides the Company with a competitive advantage in the
development of proprietary fuel systems technology. Similarly, the Company
intends to build a new systems center in Europe to provide product design and
test capabilities to both Dyno and the Company's Marwal Systems joint venture,
thereby enabling the Company to be a full-service FSDS supplier to European and
North American OEMs manufacturing vehicles in Europe.
49
<PAGE> 52
AUTOMOTIVE PRODUCTS
The Company's product development engineers design fuel storage and
delivery systems in response to customer needs and in anticipation of evolving
trends in the market. Today's electronic fuel injection system equipped
engines demand an uninterrupted supply of fuel under pressure and some vehicles
require complex fuel tank configurations. The Company specializes in
technology employed in the FSDS and currently manufactures and sells fuel
pumps, fuel modules, fuel level sensors, plastic fuel tanks, bracket assemblies
and fuel rails.
In response to the environmental and fuel efficiency demands on today's
automobiles, the Company has developed, and is continually taking steps to
improve, an electric pump designed to deliver fuel under pressure to electronic
fuel injection equipped engines. The pump is fastened to a bracket and flange
assembly, which allows the pump to be mounted in the fuel tank. The assembly
has been increasingly replaced with a single integrated unit, called a fuel
module, which performs all of the functions of the assembly described above.
The fuel module is a complete, value-added package for specific applications
composed of a fuel pump, plastic reservoir, fuel level sensor and related
parts. These injection-molded plastic units fit inside the fuel tank, ensuring
continuous fuel delivery under low fuel conditions, maximum vehicle driving
range and enhanced fuel delivery under high temperature conditions, all at a
reduced noise level. Although vehicles were not equipped with fuel modules
until 1988, approximately 28% of cars and light trucks currently sold by
General Motors, Ford and Chrysler in North America use fuel modules. Walbro
supplies approximately 70% of all of the fuel modules purchased in North
America, principally to Ford and Chrysler.
Approximately 20% of North American automobiles and 65% of European
automobiles produced in 1994 contain plastic fuel tanks. Plastic fuel tanks
offer several advantages over conventional steel tanks, including lighter
weight, greater corrosion resistance to new, cleaner-burning fuels like
methanol and the ability to be produced in unusual shapes to better use
available space. In anticipation of customer demand in North America for more
sophisticated fuel tanks, the Company built a new facility in Ossian, Indiana
in 1993 to produce plastic multi-layer fuel tanks. Walbro began production of
three-layer plastic fuel tanks during the third quarter of 1994 for the 1995
Ford Windstar. The multi-layer construction of Walbro's new, six-layer plastic
tank substantially eliminates fuel permeation, making this one of the first
plastic tanks which complies with future EPA permeability requirements due to
become effective beginning in model year 1996. The first production run of
six-layer tanks will begin in Fall of 1995 for the 1996 GM T600 Truck.
Through Dyno, the Company is currently producing single-layer plastic
tanks for the Mercedes-Benz 190/C Class, Audi V8, Saab 900, Volvo 850,
Volkswagen Polo, Renault Twingo, Peugeot 306 and Peugeot 309. As Dyno's
customers require more sophisticated fuel tanks, the Company will likely
supplement a portion of Dyno's single-layer blow molding machines with
multi-layer blow-molding machines to provide the Company's OEM customers in
Europe with advanced, plastic fuel tank process technology.
The Company also produces metal and plastic fuel rails suitable for a
variety of engine applications. An extension of the FSDS concept, these
under-hood components, located on the engine, deliver fuel to the individual
fuel injectors used in electronic multi-point fuel injection systems. Some of
the Company's fuel rails include a patented, award-winning "low profile" design
that allows lower hood lines for better aerodynamics and improved fuel economy,
as well as offering cost savings. Extending the Company's fuel rail
technology, the Company has designed a plastic fuel rail which is superior to
metal fuel rails in cost, weight and handling of more corrosive flexible fuels.
In 1994, Ford began to install this new rail on the three-liter engine in the
Windstar. In 1995, Chrysler began to install this rail on the V-8 engine for
its Dodge Ram and Dakota trucks.
50
<PAGE> 53
An important advantage of the Company's systems philosophy is that it
assists customers in responding to developments in safety and environmental
standards. For example, current safety and environmental regulations call for
a FSDS that minimizes or eliminates the escape of fuel vapors during refueling,
storage and operation. In January 1994, the EPA announced regulations
governing ORVR systems as mandated by the 1990 Clean Air Act. The regulations
require installation of devices which trap hydrocarbon vapors on a phase-in
basis for passenger cars beginning in model year 1998 and for light trucks in
model year 2001. In anticipation of these regulations, the Company developed a
variety of ORVR devices which help prevent fuel vapor loss from fuel delivery
systems. These devices are expected to enter production during 1996.
AUTOMOTIVE MARKETS AND CUSTOMER BASE
The Company currently provides a wide variety of products to a diverse
customer base in a number of geographic areas. The following table depicts a
summary of the various customers and platforms for which the Company will
supply products during 1995:
<TABLE>
<CAPTION>
Customer Platform Product
- -------------------------- --------------------------------------------------------- ---------------------
<S> <C> <C>
FORD Aerostar, Cougar, Econoline, Escort/Lynx, Explorer, Fuel Pump
F-Series Pickup, Mustang, Ranger, Sable, Thunderbird,
Taurus, Windstar
Econoline, F-Series Pickup Fuel Module
Aerostar, Cougar, Crown Victoria, Grand Marquis, Fuel Rail
Mustang, Ranger, Sable, Taurus, Thunderbird, Town Car,
Windstar
Mustang, Ranger Oil Separator
Windstar Fuel Tank
FORD(1) F-100, BE-6 Fuel Module
CHRYSLER Cirrus/Stratus, Dodge Ram Truck, K-Base Passenger Car, Fuel Pump/Module
LH (Intrepid, Vision, Concord, New Yorker and LHS), Assembly
Minivan, Neon
Minivan Service Pump/Module
Dodge Dakota and Dodge Ram Truck Plastic Fuel Rail
GENERAL MOTORS T600 Truck Fuel Tank
Firebird/Camaro V6 Steel Fuel Rail
BOSCH GM SATURN Reservoir without Pump
HYUNDAI Various Platforms Fuel Pump
KIA Various Platforms Fuel Pump
DAEWOO J-Car, T-Car (Lemans), V-Car Fuel Pump
RENAULT(1) R19, CL10 Fuel Module
RENAULT(2) R5, R9/R11, R-19, Twingo, X-54, X-06 Fuel Pump/Module
PEUGEOT(2) 106, 205, 306, 405, 504, 505, 605 Fuel Pump, Bracket
Assembly and Level
Sensor
FIAT(2) Dedra, Miero, Panda, Punto, Tempra, Tipo, Uno Fuel Pump, Bracket
Assembly and Level
Sensor
VOLVO AND NEDCAR(2) 300, 400 Fuel Module, Fuel
V40/D40 Pump, Bracket
Assembly and Level
Sensor
SAAB(2) 900, 9000, I16 Fuel Pump
ROVER(2) R8, 200, 400 Fuel Pump, Bracket
Assembly and Level
Sensor
</TABLE>
51
<PAGE> 54
<TABLE>
<CAPTION>
Customer Platform Product
- ------------------------- ------------------------------------------------------ ------------------
<S> <C> <C>
AUTOLATINA(1) BE-6 (Escort/Logas) Fuel Sending Unit
FIASA(1) Tempra, Uno, 178 Fuel Module
VOLKSWAGEN(1) AB9 (Golf Family), Santana Family, CE-14 Fuel Sending Unit
WEBER USA Harley Davidson Motorcycle Fuel Pump
</TABLE>
- -------------------------
(1) South American customers supplied by Marwal do Brasil.
(2) European customers supplied by Marwal Systems, S.A.
The following table depicts a summary of the various customers and
platforms for which Dyno will supply products during 1995:
<TABLE>
<CAPTION>
Customer Platform Product
- ------------------------- ------------------------------------------------------ ----------------------
<S> <C> <C>
MERCEDES-BENZ 190/C Class, Truck Glendewagen, Light Truck Fuel Tank, Filler
Pipe, Expansion Tank
RENAULT Twingo, Safrane, Espace Fuel Tank, Filler
Pipe, Air Duct
VOLVO AND 850, 940/960, DX400 Fuel Tank,
NEDCAR Condensor, Water
Container, Expansion
Tank, Air Ducts, Air
Inlets, Connecting
Pipe
SAAB 900, 9000, 640 Fuel Tank, Air Hose,
Air Duct
PEUGEOT 306, 309, 405, 505 Fuel Tank
LAND ROVER Discovery, Defender Fuel Tank, Air
Intake, Demister
Nozzle, Filler Pipe,
Catchment Bottle
VOLKSWAGEN Polo Fuel Tank
AUDI 100 Diesel, V8 Fuel Tank
</TABLE>
North America. Net sales (excluding Dyno) to the Company's largest
customer, Ford, accounted for 30% of the Company's consolidated net sales in
1994, 30% in 1993 and 33% in 1992. Net sales (excluding Dyno) to Chrysler
accounted for 23%, 21% and 20% of the Company's consolidated net sales in 1994,
1993 and 1992, respectively. Including the Dyno Acquisition, on a pro forma
basis net sales to Ford and Chrysler would have accounted for 21% and 16%,
respectively, of the Company's consolidated net sales in 1994. Both of these
customers have ongoing supply relationships with the Company which are subject
to continued satisfactory price, quality and delivery. The Company is the
primary outside supplier of fuel pumps, the core of the FSDS, to Ford and
Chrysler. In the past, the Company has capitalized on its fuel system
components penetration to supply additional fuel system products, such as fuel
modules and fuel rails, to Ford and Chrysler, and to assume a key role in the
development of new fuel system products, such as ORVR devices. General Motors
currently develops and produces substantially all of its fuel storage and
delivery systems internally.
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<PAGE> 55
Europe. In 1991, Walbro began operations in Europe with the
establishment of its Marwal Systems joint venture with Magneti Marelli S.p.A.
of Italy in France. This joint venture has expanded to pursue ventures in
Brazil and Mexico. Marwal's net sales were $104.4 million in 1994 to customers
which included Peugeot, Renault, Fiat, Rover, Volvo, Saab and Nissan.
Following the Dyno Acquisition, on a pro forma basis, Walbro's international
sales (excluding joint ventures) have increased from approximately 24% to
approximately 47% of the Company's consolidated net sales, and Walbro will
become the only integrated FSDS company in Europe. Dyno will provide Walbro
with the immediate opportunity to increase its participation in the improving
European automotive market. In addition, Walbro intends to use its
relationships with Chrysler and Ford to increase Dyno's sales to American
manufacturers in Europe. Similarly, Walbro intends to take advantage of Dyno's
relationships with Mercedes-Benz, Renault, Volkswagen, Peugeot and other
European manufacturers to enhance Walbro's marketing efforts with these
European manufacturers.
South America and East Asia. In South America and East Asia, the Company
has established joint ventures to expand its presence in these automotive
manufacturing markets. In January 1993, operations began at the Company's
Marwal do Brasil joint venture in Brazil, which targets the South American
automotive market of approximately two million units per year. In November
1994, the Company established Korea Automotive Fuel Systems Ltd., a joint
venture with Daewoo Precision Industries Ltd. in South Korea, to manufacture
and market fuel sending units (which include a fuel pump, bracket and level
sensor) for the domestic Korean automotive market (estimated at approximately
1.5 million units per year) and additional export markets established by Korean
OEMs. In December 1986, the Company entered into a joint venture in Japan
known as Mitsuba-Walbro, Inc. with Mitsuba Electric Manufacturing Company.
Although the Company does not currently supply products to the Japanese
manufacturing plants located in the U.S., management believes that the
Mitsuba-Walbro joint venture and its marketing efforts in the Japanese market
will enhance the Company's long-term prospects of obtaining future business
from the U.S. operations of the Japanese OEMs.
AUTOMOTIVE COMPETITION
The Company competes with several other manufacturers, including the OEMs
themselves, all of which have greater sales and financial resources than the
Company. In the fuel pump market, the Company's major competitors include
Robert Bosch GmbH, Nippondenso Co., Ltd., VDO (a division of Mannesmann) and
Delphi Automotive Systems (GM's component group). In the fuel rail market, the
Company's major competitors include Delphi, Ford, Handy & Harman and Siemens
A.G. Walbro believes that it has limited competition in the fuel module
market. The Company's largest competitors in the plastic fuel tank market
include Kautex Werke Reinold Hagen A.G., Solvay S.A., Plastic Omnium
Industries, Inc. and Ford. Steel tanks, manufactured primarily by the OEMs,
also compete with the Company's plastic fuel tanks.
The Company principally competes for new business both at the beginning
of the development of new models and upon the redesign of existing models. New
model development generally begins two to five years prior to a product
introduction. Once a producer has been designated to supply parts for a new
program, an OEM usually will continue to purchase those parts from the
designated producer for the life of the program, although not necessarily for a
redesign. Competitive factors in the market for fuel storage and delivery
products include product quality and reliability, cost and timely delivery,
technical expertise and development capability and new product innovation.
AUTOMOTIVE SALES AND ENGINEERING SUPPORT
Sales of the Company's FSDS products to automotive OEMs are made directly
by the Company's sales/engineering force, who not only sell the products but
assist customers with related engineering matters. Because of the automobile
design process, Walbro is able to determine a few years in advance
53
<PAGE> 56
the models for which it will supply products. Walbro's sales/engineering force
works closely with the Company's engineering departments and systems center in
Auburn Hills in the research, design, development and improvement of new
products. Upon completion of the Company's systems center in Europe, Dyno and
Marwal will also have additional design and research capabilities to provide
OEMs in Europe with full-service product management. Because the Company has
the capacity to provide comprehensive engineering resources with respect to its
product line and assume increasing responsibility for the development of FSDS
products, the Company has been successful in responding to the decisions by
OEMs to consolidate suppliers and reduce internal engineering resources.
AUTOMOTIVE WARRANTY AND OTHER PRODUCT EXPOSURE
The design and manufacture of fuel systems entails an inherent risk that
a governmental authority or a customer may require the recall of one of the
Company's products or a product in which one of the Company's products has been
installed. The Company has taken and intends to continue to take all
reasonable precautions to avoid the risk of exposure to an expensive recall
campaign which could have a material adverse effect on the business and
financial condition of the Company. Dyno through its former parent, Dyno
Industrier A.S, carried recall insurance against losses of up to 50 million
NOK, or approximately $7 million, which insurance covered certain costs
incurred in connection with a recall. The Company is uncertain whether it will
insure its European operations against recall losses following the Dyno
Acquisition, and does not believe that recall insurance in the United States is
cost effective.
AUTOMOTIVE ACQUISITION AND JOINT VENTURE STRATEGY
As part of a long-term strategy for growth and expansion into new
geographic and product markets, the Company may undertake select acquisitions
and strategic alliances in the form of joint ventures. The Company may make
select acquisitions of fuel system product manufacturers such as Dyno whose
products can be integrated with the Company's traditional products as part of
the Company's system development focus. These acquisitions would contribute
new product technology and open new markets to the Company. In evaluating
these acquisitions, the Company seeks high quality operations which fit with
the Company's expertise in markets where the Company has an established
customer base and a clear vision of opportunities, thus decreasing transition
costs and other financial risks associated with corporate acquisitions.
Similarly, each of the Company's joint ventures provides the Company with the
opportunity to benefit from established customer relationships or a unique
technological advancement which the Company could not develop on its own
without the risk and expense of establishing marketing and manufacturing
organizations alone. In management's opinion, the Company's joint ventures
ultimately reduce the cost of penetrating new markets and limit the Company's
financial exposure with respect to these operations. At the present time the
Company has no specific agreements with respect to any such acquisitions or
joint ventures.
WALBRO ENGINE MANAGEMENT CORPORATION
SMALL ENGINE INDUSTRY OVERVIEW
The small engine industry is facing a number of environmentally driven
changes which will require an increased emphasis on fuel systems technology and
the development of new fuel systems products. Growth opportunities outside of
the U.S. are expected to be driven by growth in the use of two-wheeled vehicles
and the increased use of gasoline-powered portable equipment in developing
countries.
Emphasis on Engine Management Systems and New Product Development.
Historically, exhaust emission of gasoline-powered small engines was
unregulated. In 1992, the California Air Resources Board promulgated
comprehensive air quality regulations limiting small engine emissions, which
regulations became effective in August 1995. A more stringent phase is
scheduled to become effective
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<PAGE> 57
in 1999. In addition, the EPA has proposed similar regulations scheduled to
become effective in August 1996, with the more stringent phase expected to
become effective during the 1999 to 2001 period. The products designed to meet
these new emission standards in the small engine market will require more
sophisticated product research and new product capabilities. The increased
technological content and sophistication required to meet emission regulations
is expected to result in lower unit sales with greater value added per product
and higher unit prices.
Growing Demand in Developing Countries. The Company expects significant
growth in the demand for float feed carburetors in developing countries as per
capita income increases and two-wheeled vehicles become more affordable.
Production of two-wheeled vehicles in The People's Republic of China, for
example, increased from approximately 49,000 units in 1980 to approximately 3.4
million in 1993 and approximately 5.2 million in 1994. In addition, management
believes demand for diaphragm carburetors used in gasoline-powered portable
tools is also expected to grow in these developing countries. The
inaccessibility of electrical power distribution and geographic isolation of
many of these projects, such as the clearing of land and highway construction,
hinder the use of electric-powered equipment.
SMALL ENGINE BUSINESS STRATEGY
To respond to the promulgation of increasingly strict emission
regulations in the small engine industry, the Company is working to develop a
small engine management system which will comply with new emission standards.
As the leading developer of fuel systems technology for portable engines,
Walbro is well positioned to draw upon its expertise in carburetor and ignition
system design and development, as well as its experience in responding to
emissions-driven challenges in the automotive sector. The Company's advanced
product design and development facilities in Michigan and Japan, which are
equipped with sophisticated emission measurement instruments, provide the
Company with the facilities necessary to develop more sophisticated small
engine management systems.
In addition to developing new technologies, the Company intends to grow
its small engine business through expansion into foreign markets. Walbro's
presence in developing countries such as The People's Republic of China will
allow it to benefit from the growing market for carburetors for two-wheeled
vehicles and from infrastructure development which requires portable power
tools.
SMALL ENGINE PRODUCTS
The Company was founded as a manufacturer of carburetors for small engine
products such as lawn mowers and marine engines, and later expanded its
customer base to include manufacturers of chain saws, weed trimmers, snow
blowers and two-wheeled vehicles. The Company's carburetor technology has
continually evolved, with the Company now manufacturing diaphragm and float
feed carburetors, ignition systems and other components for small engine
products and aftermarket applications. Walbro's diaphragm carburetor, float
feed carburetor and ignition system sales accounted for 49%, 25% and 6%,
respectively, of the Company's 1994 small engine revenues. The remaining 20%
of small engine revenue consisted of aftermarket sales.
The diaphragm carburetor uses a diaphragm and a series of interconnected
passages to draw and regulate the amount of fuel delivered to the engine from
the fuel tank. The Company manufactures several basic models of diaphragm
carburetors from which are derived numerous variations. Diaphragm carburetors
are used on chain saw and weed trimmer engines because they will operate in any
position and minimize vapor lock. The Company believes that it is the world's
largest manufacturer of small engine diaphragm carburetors.
55
<PAGE> 58
The float feed carburetor uses a float in a reservoir of fuel to regulate
the amount of fuel delivered to the engine. In contrast to the diaphragm
carburetor, which operates in all positions, the float feed carburetor operates
only in an upright position. The Company manufactures several basic models of
float feed carburetors from which are derived numerous variations. The
Company's float feed carburetors are used on engines for lawn mowers, garden
tractors, two-wheeled vehicles, marine outboard engines, generators and
industrial engines.
The ignition system uses rotating magnets in a flywheel, which induce an
electrical charge in the ignition module. The ignition module releases this
charge to the spark plug. The Company's ignition systems are used
predominantly in chain saw and weed trimmer applications.
In response to California and proposed EPA air quality regulations, the
Company began to integrate its carburetor and ignition technology to develop an
engine management system which will electronically control both fuel delivery
and ignition functions to limit exhaust emissions. The Company has
successfully refined existing carburetors through the incorporation of
extremely close tolerances which provide more accurate control of the fuel/air
mixture to meet the first set of standards due to take effect in California in
1995 and nationwide in 1996. Company engineers are developing new technology
to meet the subsequent requirements which will become effective in California
in 1999 and nationwide during the period 1999 to 2001. This development effort
focuses on complete engine management systems that control air flow, fuel
delivery and ignition timing to enhance fuel efficiency and reduce pollution.
SMALL ENGINE MARKETS AND CUSTOMER BASE
The Company sells its small engine products in a global market.
Carburetors and small engine ignitions are sold by Walbro's sales/engineering
staff directly to engine manufacturers. The Company sells a major portion of
its diaphragm carburetors to most of the leading chain saw and weed trimmer
manufacturers, including Poulan/Weedeater (a Division of Electrolux, A.B.),
Homelite (a Division of Deere & Company), Stihl, Incorporated, McCulloch (a
Division of Shop Vac), Ryobi Ltd. and Kioritz (Echo) Corporation. The Company
sells float feed carburetors to several of the leading manufacturers of small
engines, including Briggs & Stratton Corporation, the world's largest small
engine manufacturer. Mercury Marine (a Division of Brunswick Corporation), a
major outboard engine manufacturer, buys all of its outboard engine carburetors
from the Company. Eight of the Company's small engine customers in 1994
collectively accounted for approximately 60% of small engine product sales and
approximately 16% of the Company's net sales, including Dyno on a pro forma
basis.
One of Walbro's opportunities for growth in the small engine industry is
the Chinese market. In January 1994, the Company acquired a 60% interest in
Fujian Hualong Carburetor Co., Ltd. (Fujian) which manufactures and markets
carburetors for two-wheeled vehicles in The People's Republic of China. In
addition, the Company is building a new manufacturing facility near Beijing to
provide additional capacity to take advantage of growth in the two-wheeled
vehicle market.
SMALL ENGINE COMPETITION
The Company has several competitors that manufacture diaphragm
carburetors for the global small engine market, including Zama Industries,
Ltd., Tillotson Commercial Motors Ltd. and Dell' orto, some of which are
divisions of large diversified organizations which have total sales and
financial resources exceeding those of the Company. In the market for float
feed carburetors, the Company has several competitors, including Briggs &
Stratton and Tecumseh, both of which have greater sales and financial resources
than the Company. The Company's major competitor in the ignition systems
market is Phelon.
56
<PAGE> 59
AFTERMARKET PRODUCTS
The Company's aftermarket sales of both automotive and small engine
products are consolidated within the small engine business. The Company sells
automotive aftermarket products for both carbureted vehicle applications and
electronic fuel injection vehicle applications through independent
distributors, such as Federal Mogul and Standard Motor Products, and jobbers
and dealers worldwide. Some automotive products are also sold to national
manufacturing and distribution organizations for sale under private brand names
or to industrial customers for use in special applications. Aftermarket sales
accounted for $25.1 million in 1994 compared to $11.3 million in 1990.
The Company sells automotive aftermarket products to support its OEM
customers and to benefit from higher margins on aftermarket sales. Management
believes that the overall market size for automotive electronic fuel injection
systems components sold to the aftermarket will continue to grow as the
population of vehicles equipped with electronic fuel injection systems ages.
The Company sells its own brand name small engine aftermarket products
through independent distributors, jobbers and dealers worldwide. Some of these
products are also sold to national manufacturing and distribution organizations
for sale under private brand names or to industrial customers for use in
special applications.
MANUFACTURING AND FACILITIES
The Company (including Dyno and the Company's joint ventures) conducts
operations in approximately 1.65 million square feet of space in a total of 25
locations. The Company believes that substantially all of its property and
equipment is in good condition. The Company has not experienced significant
limitations on its ability to transfer products between, or sell products in,
various countries.
Each of the Company's manufacturing facilities practices advanced
inventory control procedures and has installed statistical process controls to
insure high levels of quality. In that regard, some of Walbro's factories have
received the Ford Q1 Award and the Chrysler QE Award. In connection with its
sales to Saab, which is partially owned by General Motors, Dyno's Norway
facility has been named a General Motors Supplier of the Year four years in a
row beginning in 1991. Various other Company factories have been recognized by
Mercury Marine, Stihl and Federal Mogul for excellence in product quality and
delivery.
When justified by volume, the Company has invested in labor-saving
automated machining, assembly and testing equipment. For example, the
operation in Meriden, Connecticut employs computer controlled molding machines
to form the Company's plastic in-tank reservoirs. These machines are
individually programmable so that variations can be reduced and refined as part
of the continuous control process. Another example is the Caro, Michigan
manufacturing facility's automated fuel pump assembly line, which is capable of
producing 1,000 pumps per hour using only six persons. Over the past several
years, the Company has reduced the cost to manufacture its fuel pumps at this
facility by reducing both labor and material costs. In Ettlingen, Germany Dyno
uses a fully automated assembly line for production of plastic fuel tanks for
the Mercedes-Benz 190/C Class. In addition to these examples of purchased
automation, the Company designs and builds major portions of its own machining
and assembly equipment. This in-house capability permits close control over
the manufacturing process and helps the Company stay competitive in both cost
and quality.
PATENTS, RESEARCH AND PRODUCT DEVELOPMENT
The Company owns approximately 150 U.S. patents and 600 international
patents in the fuel systems field and has a number of applications pending.
These patents include proprietary ownership of
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<PAGE> 60
designs for control devices for engines and engine systems, fuel pumps, fuel
rails, fuel regulators, fuel level sensors, fuel reservoirs and fuel system
vapor control devices, carburetors and throttle bodies, as well as ancillary
devices for engine and vehicle applications.
Although these patents are significant to the Company, management
believes that in many cases the adaptation and use of the technology involved
and the proprietary process technology employed to manufacture these products
are more important. The Company maintains a systems center in Michigan for the
research, design and development of new products. The Company's engineering
departments also engage in design, development and testing. In 1994, 1993 and
1992, the Company (excluding Dyno) spent approximately $12.2 million, $9.5
million and $9.0 million, respectively, for engineering and research and
product development. After giving effect to the Dyno Acquisition on a pro
forma basis, the Company has spent approximately $13.8 million in 1994 for
engineering and research and product development.
COMPONENTS, MATERIALS AND INVENTORY
The Company has a number of sources for the components used in
manufacturing its products. The suppliers who manufacture components often
utilize tools and dies owned by the Company. If a supplier were to discontinue
supplying any component, it could take the Company some time to replace the
supplier; however, the Company believes its operations would not be materially
adversely affected.
The Company's principal customers provide it with estimates of their
annual needs and make monthly purchase commitments. As a result, the Company
does not experience material backlog. Consequently, the Company manages its
manufacturing facilities on a just-in-time supply basis and does not maintain a
finished product inventory of any significance. The Company does not believe
the Dyno Acquisition will have a material effect on the Company's materials
sourcing or inventory management.
EMPLOYEES
As of September 1, 1995, the Company, including Dyno, had approximately
4,100 employees. The Company believes that its relations with its employees
are satisfactory. All of Dyno's approximately 900 plant employees are
unionized. All of the Company's United States plant employees are
non-unionized except approximately 450 employees at its Michigan locations.
The Company's three-year contract with the bargaining unit for these Michigan
plants expires in November 1995. Management anticipates that it will be able
to renegotiate this union contract successfully without a material adverse
effect on the Company.
REGULATION
The Company's operations are subject to increasingly stringent
environmental laws and regulations governing air emissions, waste water
discharges, the generation, treatment, storage, disposal and remediation of
hazardous substances and wastes, and employee health and safety. Certain of
these laws can impose joint and several liability for releases or threatened
releases of material upon certain statutorily defined parties, including the
Company, regardless of fault or the lawfulness of the original activity or
disposal.
The Company believes it is currently in material compliance with
applicable environmental laws and regulations. The Company's compliance with
environmental laws and regulations has not materially affected the results of
its operations or the conduct of its business; however, the Company cannot
predict the future effects of such laws and regulations.
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<PAGE> 61
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and principal executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Lambert E. Althaver
64 Chairman of the Board, President, Chief Executive Officer and
Director
Robert H. Walpole 55 Vice President and a Director; President of Walbro Engine
Management Corporation
Gary L. Vollmar 44 Vice President; President of Walbro Automotive Corporation
Richard H. Whitehead, III 51 Vice President
Daniel L. Hittler 60 Chief Administrative Officer and Secretary
Michael A. Shope 51 Chief Financial Officer and Treasurer
William T. Bacon, Jr. 72 Director
Frank E. Bauchiero 60 Director
Herbert M. Kennedy 66 Director
Vernon E. Oechsle 52 Director
Robert D. Tuttle 70 Director
John E. Utley 54 Director
</TABLE>
The Company's Board of Directors consists of three classes of directors
serving three-year terms with one class standing for election at each annual
meeting of stockholders. Messrs. Bacon, Bauchiero and Oechsle have been
elected to serve for a term expiring in 1996. Messrs. Kennedy, Tuttle and
Walpole have been elected to serve for a term expiring in 1997. Mr. Althaver
and Mr. Utley have been elected to serve for a term expiring in 1998.
Lambert E. Althaver has been President since 1977, and Chief Executive
Officer of the Company since 1982 and became Chairman of the Board of the
Company in 1987. Mr. Althaver joined the Company in 1954 and has served as a
Director since 1968. Robert H. Walpole is the brother-in-law of Mr. Althaver.
Robert H. Walpole has been a Vice President of the Company since 1983 and
President of Walbro Engine Management Corporation since 1991. Mr. Walpole
joined the Company in 1970 and has served as a Director since 1983. Mr.
Walpole is the brother-in-law of Lambert E. Althaver.
Gary L. Vollmar has been President of Walbro Automotive Corporation since
1993. He has served as a Vice President of the Company since 1989 and was
Chief Financial Officer from 1989 to 1993. Prior to joining the Company in
1978 as Controller, Mr. Vollmar was a practicing Certified Public Accountant.
Richard H. Whitehead, III became a Vice President of the Company in 1988.
From 1988 to 1990, Mr. Whitehead served as the Vice President/General Manager
of the Company's Meriden, Connecticut operations. Mr. Whitehead was the
President of Whitehead Engineered Products, Inc. from 1980 to 1988, prior to
its acquisition by the Company.
Daniel L. Hittler has served as Chief Administrative Officer since 1994
and Secretary of the Company since 1993. He was Director of Administration
from 1992 to 1994. He was the Director of Technical Planning from 1989 to
1992.
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Michael A. Shope has served as Chief Financial Officer of the Company
since December 1993 and as Treasurer since April 1994. From 1986 to 1993 he
was the Treasurer of Libbey-Owens-Ford Co., a manufacturer of glass for
automotive and industrial applications.
William T. Bacon, Jr. has served as a Director of the Company since 1972.
Mr. Bacon has been associated with the Chicago Corporation since 1994. Mr.
Bacon also served as an Honorary Director of Stifel Financial Corp. (the parent
of Stifel, Nicolaus & Company, Incorporated, one of the Initial Purchasers)
from 1984 to 1994. Prior to that, he was a Managing Partner of Bacon Whipple &
Co., Inc. He is a director of Safecard Services, Incorporated.
Frank E. Bauchiero became a Director of the Company in 1990. Mr.
Bauchiero has been the President-Industrial, North American Operations, Dana
Corporation since December 1990. Mr. Bauchiero was a Dana Group Vice President
from 1987 to 1990. Dana Corporation manufactures automotive product systems,
mobile off-highway equipment and industrial equipment. Mr. Bauchiero also
serves as a director for Regal Beloit, M&I Bank of Beloit, Madison Kipp Corp.
and Rockford Products Corporation.
Herbert M. Kennedy has served as a Director of the Company since 1981.
In July 1995, Mr. Kennedy retired as a Professor of Business Administration at
Principia College, a position Mr. Kennedy had held since before 1989.
Vernon E. Oechsle became a Director of the Company in October 1994. He
has been Chief Operating Officer of Quanex Corporation, a manufacturer of
specialty steel and aluminum products, since 1993. From 1990 to 1992, he was
Chief Executive Officer of Allied Signal Automotive. Before that he was Group
Executive of Automotive and Trucks for Dana Corporation and President of
Hayes-Dana, Dana's Canadian subsidiary.
Robert D. Tuttle became a Director of the Company in 1981. Mr. Tuttle is
also a Director of FMB Corp., CMS Energy Corporation, Woodhead Industries, Inc.
and Guardsman Products, Inc. From before 1989 to 1991, Mr. Tuttle was Chairman
and Chief Executive Officer of SPX Corporation, which produces specialty tools
and diagnostic equipment and distributes automotive components.
John E. Utley became a Director of the Company in 1993. Mr. Utley has
also served as a director and Chairman of the Board of Kelsey-Hayes Company
since 1991 and was its President from 1989 to 1991. He is a Senior Vice
President of Varity Corporation. Kelsey-Hayes Company produces anti-lock
braking systems, traction systems and wheel assemblies for the automotive
industry. He also serves as Chairman of the Board of Hayes Wheels
International, Inc.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Delaware General Corporation Law
("DGCL"), the Company has adopted provisions in its Certificate of
Incorporation which eliminate the personal liability of its directors to the
Company or its stockholders for monetary damages for breach of their duty of
due care to the fullest extent permitted by the DGCL, and which require the
Company to indemnify its directors and permit the Company to indemnify its
officers or employees to the fullest extent permitted by the DGCL, including
those circumstances in which indemnification would otherwise be discretionary,
except that the Company shall not be obligated to indemnify any such person (i)
with respect to proceedings, claims or actions initiated or brought voluntarily
by any such person and not by way of defense, or (ii) for any amounts paid in
settlement of an action indemnified against by the Company without the prior
written consent of the Company. The Company has a directors' and officers'
liability insurance policy.
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<PAGE> 63
EXECUTIVE COMPENSATION
The table below provides information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1994, 1993 and 1992 of the persons who were at December 31,
1994 (i) the Chief Executive Officer and (ii) the four other most highly
compensated (based upon combined salary and bonus) executive officers of the
Company (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards (1)
--------------------- ------------
Securities All Other
Name and Salary Bonus Underlying Compensation
Principal Position Year ($) ($) Options (#) ($)(2)
------------------------------- ---- -------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Lambert E. Althaver, 1994 $330,000 $ -0- 14,559 $11,575
Chairman, President and Chief 1993 305,000 -0- 11,244 11,229
Executive Officer 1992 280,008 13,147 8,076 2,220
Robert H. Walpole, 1994 242,000 -0- -0- 11,725
Vice President 1993 235,000 -0- -0- 10,244
1992 220,008 9,260 -0- 1,200
Gary L. Vollmar, 1994 200,000 -0- 8,824 8,849
Vice President 1993 166,670 -0- 6,452 7,705
1992 125,004 11,832 3,605 1,563
Richard H. Whitehead, III, 1994 170,000 -0- 7,500 5,006
Vice President 1993 165,000 -0- 6,083 6,866
1992 165,000 192,752 -0- -0-
Daniel L. Hittler, 1994 125,000 -0- 5,515 7,422
Secretary 1993 120,000 -0- 4,424 7,136
1992 112,008 -0- 3,230 1,750
</TABLE>
- --------------------
(1) None of the Named Officers had any restricted stockholdings as of
December 31, 1994.
(2) These amounts represent matching and retirement contributions made by the
Company pursuant to its salary savings plan, entitled the "Advantage
Plan."
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<PAGE> 64
The following table provides information on grants of stock options in
1994 to the Named Officers pursuant to the Company's Equity Based Long Term
Incentive Plan (the "Equity Plan"). No stock appreciation rights were granted
under the Equity Plan during 1994.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
Individual
Grants
--------------------------------------------------- Potential Realizable
Value at Assumed
Annual Rates of Stock
Number of Price Appreciation for
Securities % of Total Option Terms (2)
Underlying Options ----------------------
Options Granted to Exercise
Granted Employees Price Expiration
Name (#)(1) in 1994 ($/Sh) Date 5% ($) 10% ($)
- -------------------------- ---------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lambert E. Althaver 14,559 16.4% $17.00 12/6/2004 $155,636 $394,403
Robert H. Walpole 0 0 - - - -
Gary L. Vollmar 8,824 9.9 17.00 12/6/2004 94,329 239,042
Richard H. Whitehead, III 7,500 8.5 17.00 12/6/2004 80,175 203,175
Daniel L. Hittler 5,515 6.2 17.00 12/6/2004 58,955 149,401
</TABLE>
- --------------------------
(1) These options were granted under the Equity Plan, approved, as amended,
by the stockholders on April 19, 1995. The Named Officers may exercise
the options at a price of $17.00 per share at any time after June 5, 1995
through December 6, 2004. Each option includes the grant of a stock
performance award under the terms of which the Named Officer will receive
a target number of shares of Common Stock if the $17.00 share price
appreciates to $37.27 per share by December 6, 1999.
(2) Gains are reportable net of the option exercise price but before taxes
associated with exercise. These amounts represent certain assumed rates
of appreciation only. Actual gains, if any, on stock option exercise are
dependent on the future performance of Common Stock, as well as the
option holder's continued employment throughout the vesting period. The
amounts reflected in the Table may not necessarily be achieved.
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<PAGE> 65
The following table provides information for the Named Officers'
unexercised options at December 31, 1994. Included are options granted under
the Equity Plan and the 1983 Incentive Stock Option Plan. No options were
exercised by the Named Officers in 1994.
AGGREGATED OPTION EXERCISES IN 1994
AND YEAR-END 1994 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-
Unexercised Options at the-Money Options at
December 31, 1994 (#) December 31, 1994 ($)(1)
------------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Lambert E. Althaver 40,790 14,559 $135,563 $29,118
Robert H. Walpole 2,400 0 19,488 0
Gary L. Vollmar 19,916 8,824 63,671 17,648
Richard H. Whitehead, III 6,083 7,500 0 15,000
Daniel L. Hittler 9,154 5,515 12,180 11,030
</TABLE>
- ----------------------
(1) Based upon the difference between the exercise prices and the $19.00
closing price of the Common Stock on the Nasdaq National Market on
December 30, 1994.
The following table provides information on awards in 1994 to the Named
Officers pursuant to the Company's Equity Plan and its Engine Management
Corporation Incentive Compensation Plan.
LONG-TERM INCENTIVE PLANS AWARDS IN 1994
<TABLE>
<CAPTION>
Estimated Future
Payouts under
Non-Stock Price-Based
Plans
---------------------
Performance or
Number of Shares, Other Period Until
Units or Other Rights Maturation or Target
Name (#) Payout ($)
- ----------------------------------- --------------------- ------------------ ---------------------
<S> <C> <C> <C>
Lambert E. Althaver -0- N/A N/A
Robert H. Walpole 24 Units (1) 1 1/2 years $362,779
Gary L. Vollmar -0- N/A N/A
Richard H. Whitehead, III -0- N/A N/A
Daniel L. Hittler -0- N/A N/A
</TABLE>
- -----------------------
(1) Award granted under the Company's Engine Management Incentive
Compensation Plan, which provides an opportunity for participants to
share a pool of money (the "Pool") if Walbro Engine Management
Corporation meets cumulative financial performance goals ("EBIT Target")
over a five year period, commencing July 1, 1991. A total of 500 units
are being granted under the Plan, 100 each fiscal year. Each
participant, including the Named Officer, is entitled to the percentage
of the Pool calculated by dividing his total units granted by 500.
Threshold before any dollars are assigned to the Pool is 70% of the EBIT
Target. The value of the Pool as of the determination date is equal to
the product of the fair market value of Walbro Engine Management
Corporation (as determined by an independent investment advisor) and a
target
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<PAGE> 66
percentage. If the cumulative EBIT Target is achieved or exceeded, the
target percentage is 15%. If the performance is between 70% and 100% of
the EBIT Target, the target percentage is decreased proportionately.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has entered into employment agreements with Messrs. Althaver,
Hittler and Vollmar which have terms expiring on August 5, 1996 and provide
them minimum base salaries of $305,000, $120,000 and $150,000, respectively,
subject to review and increase by the Board of Directors Compensation Committee
(the "Compensation Committee"). Each employment agreement is renewable
automatically for twelve months, subject to cancellation by the Company prior
to the anniversary date. In addition, each is entitled to participate in the
Equity Plan. The Company has also entered into an employment agreement with
Mr. Walpole which has a term expiring on September 30, 1995 and provides him a
minimum base salary of $235,000, subject to review and increase by the
Compensation Committee. In addition, he is entitled to participate in the
Engine Management Incentive Compensation Plan. The Company also entered into
an employment agreement with Mr. Whitehead, which has a term expiring in May
1996 and provides him with a minimum base salary of $180,000 per year subject
to review by the Compensation Committee.
Each employment agreement includes a severance clause under the terms of
which the employee is entitled to severance pay if during the initial term of
the agreement or a renewal term, his employment is terminated by the Company
other than as a result of his (i) permanent disability or (ii) termination for
cause. The severance pay payable under the agreements is an amount equal to
the annual base compensation being paid to the Named Officer at the date of
termination, offset by the amount due under the portion of the employment
agreement that had not yet been performed, if any, and the amount of
compensation the Named Officer may receive from any other employers during the
twelve months immediately following the date notice of termination is given to
him by the Company.
In 1990, the Company entered into Severance Compensation Consulting
Agreements (the "Severance Agreements") with over 40 senior employees,
including each of the Named Officers. The Severance Agreements were the result
of a determination by the Board of Directors that it was important to, and in
the best interests of the Company and its stockholders to ensure that, in the
event of a possible change in control of the Company, the stability and
continuity of management will continue unimpaired, free of distraction incident
to any such change in control.
The Severance Agreements provide that if during a two-year period
following a Change in Control of the Company (as defined below), an employee's
employment is terminated by the Company other than for cause, death or
permanent disability, or if the employee terminates employment for good reason,
the employee will receive (1) a single sum payment equal to either three times
or two times (depending upon the individual employment agreement) the
employee's average compensation of the prior five calendar years (including
incentive bonus), and (2) 36 months of additional medical, dental, life,
disability and accident insurance and other perquisites substantially similar
to that in effect for the employee at the time of the Change in Control of the
Company. However, in no event can the payments and benefits exceed an amount
which would render them "parachute payments" under Section 280G of the Internal
Revenue Code. In order to assure an orderly transition in the event of a
Change in Control of the Company, the covered employees have agreed to remain
in the employ of the Company for a period of ninety (90) days following a
Change in Control of the Company. "Change in Control of the Company" is
defined to include certain reorganizations, consolidations or mergers of the
Company, certain sales or transfers of substantially all the assets of the
Company, approval by the stockholders of the Company of its liquidation or
dissolution, a change in the composition of the Company's Board of Directors
such that it is comprised of directors a majority of whom are not "Continuing
Directors" as defined in the agreements, or the acquisition by certain persons
of thirty percent or more of the combined voting power of the Company's
outstanding securities.
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<PAGE> 67
The Severance Agreements further provide that following a Change in
Control of the Company, if the employee terminates employment other than for
good reason and the Company could not have terminated the employee for cause,
death or disability, the employee may elect to serve as a consultant to the
Company for a one-year period following the termination of employment and will
be paid a single sum amount equal to the annual compensation, including bonus,
paid the individual during the immediately preceding calendar year. The
individual will also be provided an additional year of coverage with respect to
medical, dental, life, disability and accident insurance and other perquisites
substantially similar to the insurance and other perquisites at the time the
employee elects to render consulting services.
The Severance Agreements have a term of two years, renewable
automatically for additional twelve month periods, subject to cancellation by
the Company upon six months advance notice. If there has been a Change in
Control of the Company during the term of the Severance Agreements they would
expire two years after the Change in Control of the Company.
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<PAGE> 68
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of Common Stock by owners of more than five percent (5%) of the Common Stock,
each of the Directors, each of the Named Officers and all Directors and
executive officers of the Company as a group as of September 22, 1995:
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percentage
Names Ownership(1) of Class
- --------------------------------------------------- ----------------- ----------
<S> <C> <C>
David L. Babson & Co., Inc. 784,900(2) 9.2%
The Capital Guardian Trust Company and The Capital 447,000(3) 5.2%
Group Companies, Inc.
Lambert E. Althaver 214,108(4) 2.5%
William T. Bacon, Jr. 67,775(5) *
Frank E. Bauchiero 11,000(6) *
Daniel L. Hittler 17,507(7) *
Herbert M. Kennedy 12,500(8) *
Vernon E. Oechsle 11,000(9) *
Robert D. Tuttle 16,000(10) *
John E. Utley 10,500(11) *
Gary L. Vollmar 33,883(12) *
Robert H. Walpole 194,455(13) 2.3%
Richard H. Whitehead, III 14,046(14) *
All Directors and Executive Officers as a Group 608,383(15) 7.1%
(12 persons)
</TABLE>
- -------------------
* Indicates that the percentage beneficially owned does not exceed one
percent.
(1) The named stockholders have sole voting and dispositive power over all
shares except as otherwise noted and except as to those shares over which
beneficial ownership is disclaimed.
(2) As reported on a Schedule 13G dated February 10, 1995 filed with the
Commission by David L. Babson & Co., Inc. According to such Schedule
13G, David L. Babson & Co., Inc. has sole voting power with respect to
447,800 of these shares, shared voting power with respect to 337,100 of
these shares and sole dispositive power with respect to all 784,900 of
these shares. The address of the Stockholder is One Memorial Drive,
Cambridge, MA 02142-1300.
(3) As reported on a Schedule 13G dated February 8, 1995 filed with the
Commission by The Capital Group Companies, Inc. and The Capital Guardian
Trust Company. The Capital Guardian Trust Company is a wholly-owned
subsidiary of The Capital Group Companies, Inc. According to such
Schedule 13G, The Capital Group Companies, Inc. and The Capital Guardian
Trust Company each have sole voting power with respect to 277,000 of
these shares and no voting power with respect to the remaining 170,000
shares and have sole dispositive power with respect to all 447,000 of
these shares. The address of the Stockholder is c/o 333 S. Hope Street,
Los Angeles, CA 90071.
(4) Includes 74,643 shares owned by Mr. Althaver's wife. Mr. Althaver
disclaims beneficial ownership of these shares. Also includes 55,349
shares which are covered by presently exercisable options under the
Company's stock option plans and 17,734 shares held for the account of
Mr. Althaver by the trustee of the Company's Advantage Plan.
(5) Includes 3,300 shares owned by Mr. Bacon's wife and 5,025 shares owned by
Mr. Bacon's son. Mr. Bacon disclaims beneficial ownership of these
shares. Also includes 10,000 shares over which Mr. Bacon shares voting
power as co-trustee of two trusts for the benefit of the beneficiaries of
the estate of his deceased mother. Includes 10,000 shares which are
exercisable under the Equity Plan.
(6) Includes 10,000 shares which are exercisable under the Equity Plan.
(7) Includes 1,600 shares owned by Mr. Hittler's wife and 1,500 shares owned
by Mr. Hittler. Mr. Hittler disclaims beneficial ownership of these
shares. Also includes 131,169 shares which are covered by presently
exercisable options under the Company's stock option plans and 1,238
shares held for the account of Mr. Hittler by the trustee of the
Company's Employee Stock Ownership Plan.
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<PAGE> 69
(8) Includes 1,250 shares over which Mr. Kennedy has voting power as trustee
of a trust. Also includes 1,250 shares over which Mr. Kennedy's wife has
sole voting power as trustee of a trust and as to which Mr. Kennedy
disclaims beneficial ownership. Includes 10,000 shares which are
exercisable under the Equity Plan.
(9) Includes 10,000 shares which are exercisable under the Equity Plan.
(10) Includes 3,000 shares which Mr. Tuttle owns jointly with his wife, over
which Mr. Tuttle and his wife share voting and dispositive power.
Includes 10,000 shares which are exercisable under the Equity Plan.
(11) Includes 10,000 shares which are exercisable under the Equity Plan.
(12) Includes 28,740 shares which are covered by presently exercisable options
under the Company's stock option plans and 3,643 shares held for the
account of Mr. Vollmar by the trustee of the Company's Advantage Plan.
(13) Includes 79,385 shares over which Mr. Walpole shares voting power as
co-trustee of a trust for the benefit of the beneficiaries of the estate
of his deceased father. Includes 13,325 shares owned by Mr. Walpole's
wife. Mr. Walpole disclaims beneficial ownership of these shares. Also
includes 165 shares held for the account of Mr. Walpole by the trustee of
the Company's Advantage Plan.
(14) Includes 13,583 shares which are covered by presently exercisable options
under the Company's stock option plans. Also includes 463 shares held
for the account of Mr. Whitehead by the trustee of the Company's
Advantage Plan.
(15) Includes 178,050 shares which are covered by presently exercisable
options under the Company's stock option plans. Also includes 22,005
shares held for the account of three officers of the Company by the
trustee of the Company's Advantage Plan and includes 1,238 shares held
for one officer of the Company by the trustee of the Company's Employee
Stock Ownership Plan.
CERTAIN TRANSACTIONS
On September 1, 1995, Messrs. Althaver, Vollmar and Walpole were indebted
to the Company in the amount of $161,250, $145,125 and $112,875, respectively,
and each amount is the maximum indebtedness since January 1, 1994. The loans
carry interest at the prime rate in effect from time to time 8.75% on September
1, 1995. The principal amount of the indebtedness in each case relates to
loans made by the Company to the Named Officers and to approximately 24 other
employees (collectively, the "Borrowers") to permit them to repay individual
bank loans that came due. The bank loans originated approximately five years
ago to enable the Borrowers collectively to acquire approximately 84,500 shares
of the Company's common stock from UIS, Inc., which had acquired the shares in
1987 as part of an unsuccessful tender offer strategy.
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<PAGE> 70
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
In connection with the Initial Offering, the Company entered into the New
Credit Facility among the Company, certain of its subsidiaries, Comerica Bank,
as agent, and the other lenders named therein. The New Credit Facility
consists of a $135 million multicurrency revolving loan facility for the
Company and certain of its wholly-owned domestic and foreign subsidiaries,
including a $5 million swing line facility and a $17 million letter of credit
facility. The New Credit Facility has an initial term of five years, with
annual one year extensions of the revolving credit portion of the facility
available in the lenders' discretion.
At any time within three years after closing of the New Credit Facility,
the Company may convert up to $70 million of revolving loans under the New
Credit Facility to term loans in minimum amounts of $15 million and with
maturities not exceeding seven years from the closing of the New Credit
Facility.
Borrowings under the New Credit Facility bear interest at a per annum
rate equal to the agent's base rate or the prevailing interbank offered rate in
the applicable offshore currency market, plus an additional margin ranging from
0.5% to 1.75% based on certain financial ratios of the Company. The annual
letter of credit fee ranges from 0.5% to 1.5% based on the same financial
ratios. The Company may upon notice convert the interest rate applicable to
any term loan for its remaining term from a floating rate to a fixed rate
option, to be determined at the time of such conversion, based on the lenders'
funding rate in the interbank swap market. The Company is also required to pay
a quarterly unused facility fee.
The New Credit Facility is secured by first liens on the inventory,
accounts receivable and certain intangibles (excluding intellectual property)
of the Company and certain of its wholly-owned domestic subsidiaries and by a
pledge of 100% of the stock of wholly-owned domestic subsidiaries, and up to
65% of the stock of wholly-owned foreign subsidiaries. Collateral for the New
Credit Facility will secure the 2004 Notes on an equal and ratable basis. The
Company and its wholly-owned domestic subsidiaries guaranteed payment of
domestic and foreign borrowings under the New Credit Facility and the Company's
wholly-owned foreign subsidiaries guaranteed payment of foreign borrowings
under the New Credit Facility.
The New Credit Facility contains customary representations and warranties
and events of default and requires compliance with certain covenants by the
Company and its subsidiaries, including, among other things: (i) maintenance of
certain financial ratios and compliance with certain financial tests and
limitations; (ii) limitations on the payment of dividends, incurrence of
additional indebtedness and granting of certain liens; and (iii) restrictions
on mergers, acquisitions, asset sales, capital expenditures and investments.
SENIOR NOTES DUE 2004
In October 1994, the Company sold $45 million in principal amount of the
2004 Notes. The 2004 Notes require quarterly interest payments due January 1,
April 1, July 1 and October 1. The agreement requires the Company to maintain
consolidated adjusted net worth of $85 million, plus 25% of cumulative net
income for each year beginning in 1995, and a funded debt to total capital
ratio not greater than .65 to 1. The agreement also prohibits the Company from
consolidating or merging with another corporation except under certain
circumstances and from disposing of substantially all of its assets. The 2004
Note Agreement gives the holders of the 2004 Notes the option of having their
2004 Notes repurchased at the principal amount thereof in the event of a Change
of Control (as defined in the 2004 Note Agreement). In addition, the 2004 Note
Agreement contains events of default including (i) a default in the payment of
interest, (ii) a default in the payment of any principal or required prepayment
68
<PAGE> 71
or premium, (iii) defaults under certain other debt instruments, and (iv)
certain events of insolvency or bankruptcy of the Company or its subsidiaries.
The 2004 Notes will convert to secured notes upon the consummation of the
Transactions and will be secured equally and ratably with the New Credit
Facility by the Company's and its domestic subsidiaries' inventory, accounts
receivable and certain intangibles and by a pledge of 100% of the capital stock
of wholly-owned domestic subsidiaries and up to 65% of the capital stock of
wholly-owned foreign subsidiaries.
DESCRIPTION OF THE NEW NOTES
The New Notes will be issued, and the Old Notes were issued under an
Indenture dated as of July 27, 1995 (the "Indenture") among the Company, the
Guarantors and Bankers Trust Company, as trustee (the "Trustee"). For purposes
of the following summary, the Old Notes and the New Notes shall be collectively
referred to as the "Notes." The terms and conditions of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 as in effect on the date of the Indenture.
The following statements are summaries of the provisions of the Notes and the
Indenture and do not purport to be complete. Such summaries make use of
certain terms defined in the Indenture and are qualified in their entirety by
express reference to the Indenture. The definitions of certain capitalized
terms used in the following summary are set forth below under "-- Certain
Definitions." A copy of the Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Notes will be general unsecured obligations of the Company. The
maximum aggregate principal amount of the Notes to be issued under the
Indenture will be $110,000,000. The Notes will be guaranteed by each of the
Guarantors pursuant to the guarantees (the "Guarantees") described below. The
indebtedness represented by the Notes rank pari passu in right of payment with
all existing and future senior unsecured obligations of the Company. Each
Guarantee will be a general unsecured obligation of the applicable Guarantor
and will rank pari passu in right of payment with all existing and future
senior unsecured obligations of such Guarantor.
The Notes will be effectively subordinate in right of payment to all
existing and future liabilities, including trade payables, of the Company's
Subsidiaries which are not Guarantors. In addition, the Notes and the
Guarantees will be effectively subordinate in right of payment to all existing
and future secured Indebtedness of the Company and its Subsidiaries.
Substantially all of the operations of the Company are conducted by
Subsidiaries of the Company. As a result, the Company is dependent upon the
earnings and cash flow of its Subsidiaries to meet its obligations with respect
to the Notes. The Subsidiaries of the Company which are not Wholly-Owned
Restricted Subsidiaries and the Subsidiaries of the Company which are not
incorporated in the United States, any state therein or the District of
Columbia will not guarantee the Notes. Therefore, the Indebtedness represented
by the Notes will be structurally subordinated to all obligations of such
Subsidiaries. See "Investment Considerations -- Holding Company Structure."
The Notes will be issued only in registered form without coupons, in
denominations of $1,000 and integral multiples thereof. Principal of, premium,
if any, and interest on the Notes will be payable, and the Notes will be
transferable, at the office of the Company's agent in the City of New York
located at the corporate trust office of the Trustee. In addition, interest
may be paid at the option of the Company, by check mailed to the person
entitled thereto as shown on the register for the Notes. No service charge
will be made for any transfer, exchange or redemption of the Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith.
Any Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of Securities under the Indenture.
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<PAGE> 72
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on July 15, 2005. Interest on the Notes will
accrue at the rate of 9 7/8% per annum and will be payable semiannually on each
January 15 and July 15, commencing January 15, 1996, to the holders of record
of Notes at the close of business on the January 1 and July 1 immediately
preceding such interest payment date. Interest on the Old Notes will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the original date of issuance (the "Issue Date"). Holders
whose Old Notes are accepted for exchange will receive accrued interest thereon
to, but not including, the date of issuance of the New Notes, such interest to
be payable with the first interest payment on the New Notes, but will not
receive any payment in respect of interest on the Old Notes accrued after the
issuance of the New Notes. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after July 15, 2000. The Notes
may be so redeemed on not less than 30 nor more than 60 days' prior notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest, if any, to the redemption date, if
redeemed during the 12-month period beginning July 15 of the years indicated
below:
<TABLE>
<CAPTION>
Redemption
Year Price
----------------------------- ----------
<S> <C>
2000 . . . . . . . . . . . . 104.938%
2001 . . . . . . . . . . . . 103.292%
2002 . . . . . . . . . . . . 101.646%
2003 and thereafter . . . . . 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from
time to time, on or prior to July 15, 1998, the Company may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined) to
redeem up to an aggregate of 30% of the principal amount of Notes originally
issued, at a redemption price equal to 110% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of redemption. In order
to effect the foregoing redemption with the proceeds of a Public Equity
Offering, the Company shall send the redemption notice not later than 60 days
after the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Capital Stock (other than Redeemable Capital
Stock) of the Company pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission in accordance with
the Securities Act.
Mandatory Redemption upon a Change of Control and Certain Asset Sales.
In addition, as described below, the Company is obligated (a) upon the
occurrence of a Change of Control, to make an offer to purchase all outstanding
Notes at a purchase price of 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of purchase, and (b) to make an offer
to purchase Notes with a portion of the net cash proceeds of certain sales or
other dispositions of assets at a purchase price of 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. See "-- Certain Covenants -- Change of Control" and "-- Disposition
of Proceeds of Asset Sales."
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<PAGE> 73
Selection and Notice. In the event that less than all of the Notes are
to be redeemed at any time, selection of such Notes for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part. Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed
in part only, the notice of redemption that relates to such Note shall state
the portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon surrender for cancellation of the original
Note. On and after the redemption date, interest will cease to accrue on Notes
or portions thereof called for redemption, unless the Company defaults in the
payment of the redemption price therefor.
THE GUARANTEES
Each of the Guarantors will (so long as they remain Subsidiaries of the
Company) unconditionally guarantee on a joint and several basis all of the
Company's obligations under the Notes, including its obligations to pay
principal, premium, if any, and interest with respect to the Notes. Except as
provided in "Certain Covenants" below, the Company is not restricted from
selling or otherwise disposing of any of the Guarantors.
The Indenture provides that each Wholly-Owned Restricted Subsidiary
incorporated in the United States, any state therein or the District of
Columbia which incurs (as defined below) Indebtedness (other than to the
Company or a Wholly-Owned Restricted Subsidiary) in an aggregate principal
amount in excess of $5,000,000 will be a Guarantor for so long as such
Wholly-Owned Restricted Subsidiary has Indebtedness outstanding in excess of
$5,000,000 and, at the Company's discretion, any other Subsidiary may be a
Guarantor.
The Indenture provides that if all of the assets of any Guarantor or all
of the Capital Stock of any Guarantor is sold (including by issuance or
otherwise) by the Company or any of its Subsidiaries in a transaction
constituting an Asset Sale, and if the Net Cash Proceeds from such Asset Sale
are used in accordance with the covenant, "Disposition of Proceeds of Asset
Sales," then such Guarantor (in the event of a sale or other disposition of all
of the Capital Stock of such Guarantor) or the corporation or other entity
acquiring such assets (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) shall be released and
discharged of its Guarantee obligations.
CERTAIN COVENANTS
The Indenture contains the following covenants, among others:
Limitation on Indebtedness. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or in any manner become directly or indirectly liable,
contingently or otherwise, for the payment of (in each case, to "incur") any
Indebtedness (including, without limitation, any Acquired Indebtedness);
provided, however, that the Company or any Guarantor will be permitted to incur
Indebtedness (including, without limitation, Acquired Indebtedness) if, at the
time of such incurrence, and after giving pro forma effect thereto, the
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to
2:1.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may, to the extent specifically set forth below, incur each and
all of the following:
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<PAGE> 74
(a) Indebtedness of the Company evidenced by the Notes and
Indebtedness of any Guarantor evidenced by its Guarantee;
(b) Indebtedness of the Company and its Subsidiaries outstanding
on the Issue Date;
(c) Indebtedness of the Company and any Guarantor under the Credit
Agreement in an aggregate principal amount at any one time outstanding
not to exceed the greater of (x) the sum of (A) 80% of the accounts
receivable of the Company and its Restricted Subsidiaries on a
consolidated basis and (B) 60% of the inventory of the Company and its
Restricted Subsidiaries on a consolidated basis, and (y) $135,000,000;
(d)(i) Interest Rate Protection Obligations of the Company covering
Indebtedness of the Company or a Restricted Subsidiary of the Company and
(ii) Interest Rate Protection Obligations of any Restricted Subsidiary of
the Company covering Indebtedness of such Restricted Subsidiary;
provided, however, that, in the case of either clause (i) or (ii), (x)
any Indebtedness to which any such Interest Rate Protection Obligations
relate is otherwise permitted to be incurred under this covenant and (y)
the notional principal amount of any such Interest Rate Protection
Obligations does not exceed the principal amount of the Indebtedness to
which such Interest Rate Protection Obligations relate;
(e) Indebtedness of a Wholly-Owned Restricted Subsidiary owed to
and held by the Company or another Wholly-Owned Restricted Subsidiary, in
each case which is not subordinated in right of payment to any
Indebtedness of such Wholly-Owned Restricted Subsidiary, except that (i)
any transfer of such Indebtedness by the Company or a Wholly-Owned
Restricted Subsidiary (other than to the Company or to a Wholly-Owned
Restricted Subsidiary) and (ii) the sale, transfer or other disposition
by the Company or any Wholly-Owned Restricted Subsidiary of Capital Stock
of a Wholly-Owned Restricted Subsidiary which is owed Indebtedness of
another Wholly-Owned Restricted Subsidiary such that it ceases to be a
Wholly-Owned Restricted Subsidiary shall, in each case, be an incurrence
of Indebtedness by such Wholly-Owned Restricted Subsidiary subject to the
other provisions of this covenant;
(f) Indebtedness of the Company owed to and held by a Wholly-Owned
Restricted Subsidiary which is unsecured and subordinated in right of
payment to the payment and performance of the Company's obligations under
the Indenture and the Notes except that (i) any transfer of such
Indebtedness by a Wholly-Owned Restricted Subsidiary (other than to
another Wholly-Owned Restricted Subsidiary) and (ii) the sale, transfer
or other disposition by the Company or any Wholly-Owned Restricted
Subsidiary of Capital Stock of a Wholly-Owned Restricted Subsidiary which
holds Indebtedness of the Company such that it ceases to be a
Wholly-Owned Restricted Subsidiary shall, in each case, be an incurrence
of Indebtedness by the Company, subject to the other provisions of this
covenant;
(g) Indebtedness under Currency Agreements; provided that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within two business days of
incurrence;
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(i) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business;
(j) Indebtedness of Restricted Subsidiaries of the Company which
are not Guarantors not to exceed the sum of (x) 90% of the accounts
receivable of any such Restricted Subsidiary, (y) 70% of the inventory of
any such Restricted Subsidiary and (z) 10% of the Net Worth of any such
Restricted Subsidiary; provided that if any such Subsidiary shall sell or
otherwise transfer any of its accounts receivable, the Net Cash Proceeds
from any such sale or transfer shall be used to repay any Indebtedness of
such Subsidiary incurred pursuant to this clause (j);
(k) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries during any period of time when the Notes are rated
Investment Grade by S&P and Moody's (or if either S&P or Moody's does not
make a rating of the Notes publicly available, by either S&P or Moody's
and an equivalent rating by another Rating Agency) and no Default or
Event of Default shall have occurred and be continuing;
(l) Indebtedness of the Company or any Guarantor in addition to
that described in clauses (a) through (k) above, in an aggregate principal
amount outstanding at any time not exceeding $20,000,000; and
(m)(i) Indebtedness of the Company the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of the Company or any of its Restricted
Subsidiaries and (ii) Indebtedness of any Restricted Subsidiary of the
Company the proceeds of which are used solely to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of such
Restricted Subsidiary, in each case other than the Indebtedness
refinanced, redeemed or retired as described under "Use of Proceeds"
herein or incurred under clause (c), (d), (e), (f), (g), (h), (i), (j) or
(l) of this covenant; provided, however, that (x) the principal amount of
Indebtedness incurred pursuant to this clause (m) (or, if such
Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof, the original issue price of such Indebtedness) shall
not exceed the sum of the principal amount of Indebtedness so refinanced,
plus the amount of any premium required to be paid in connection with
such refinancing pursuant to the terms of such Indebtedness or the amount
of any premium reasonably determined by the Board of Directors of the
Company as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated purchase, plus the amount of reasonable
expenses in connection therewith, and (y) in the case of Indebtedness
incurred by the Company or any Guarantor pursuant to this clause (m),
such Indebtedness (A) has no scheduled principal payment prior to the
earlier of (1) the final maturity of the Indebtedness refinanced or (2)
the 91st day after the Final Maturity Date and (B) has an Average Life to
Stated Maturity greater than either (1) the Average Life to Stated
Maturity of the Indebtedness refinanced or (2) the remaining Average Life
to Stated Maturity of the Notes.
The Company will not, directly or indirectly, in any event incur any
Indebtedness which by its terms (or by the terms of any agreement governing
such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinate in right of payment to the Notes pursuant to subordination
provisions that are substantively identical to the subordination provisions of
such Indebtedness (or such agreement) that are most favorable to the holders of
any other Indebtedness of the Company.
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Limitation on Restricted Payments. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any of its
Restricted Subsidiaries or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of the Company or
any of its Restricted Subsidiaries (other than (x) dividends or
distributions payable solely in Capital Stock of the Company (other than
Redeemable Capital stock) or in options, warrants or other rights to
purchase Capital Stock of the Company (other than Redeemable Capital
Stock), (y) the declaration or payment of dividends or other
distributions to the extent declared or paid to the Company or any
Restricted Subsidiary of the Company and (z) the declaration or payment
of dividends or other distributions by any Restricted Subsidiary of the
Company to all holders of Common Stock of such Restricted Subsidiary on a
pro rata basis),
(b) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any of its Restricted
Subsidiaries (other than any such Capital Stock owned by a Wholly-Owned
Restricted Subsidiary),
(c) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Indebtedness owned by the Company or a Wholly-Owned Restricted
Subsidiary), or
(d) make any Investment (other than any Permitted Investment) in any
person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to the proposed Restricted Payment (the amount
of any such Restricted Payment, if other than cash, shall be the Fair Market
Value on the date of such Restricted Payment of the asset(s) proposed to be
transferred by the Company or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment), (A) no Default or Event of Default shall
have occurred and be continuing, (B) immediately prior to and after giving
effect to such Restricted Payment, the Company would be able to incur $1.00 of
additional Indebtedness pursuant to the first paragraph of the covenant
described under "-- Limitation on Indebtedness" above (assuming a market rate
of interest with respect to such additional Indebtedness) and (C) the aggregate
amount of all Restricted Payments declared or made from and after the Issue
Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net
Income of the Company accrued on a cumulative basis during the period beginning
on the first day of the fiscal quarter of the Company during which the Issue
Date occurs and ending on the last day of the fiscal quarter of the Company
immediately preceding the date of such proposed Restricted Payment, which
period shall be treated as a single accounting period (or, if such aggregate
cumulative Consolidated Net Income of the Company for such period shall be a
deficit, minus 100% of such deficit) plus (2) the aggregate net proceeds (the
amount of such proceeds, if other than cash, shall be the Fair Market Value on
the date such proceeds are received by the Company of the asset(s) comprising
such proceeds) received by the Company either (x) as capital contributions to
the Company after the Issue Date from any person (other than a Subsidiary of
the Company) or (y) from the issuance or sale of Capital Stock (excluding
Redeemable Capital Stock, but including Capital Stock issued upon the
conversion of convertible Indebtedness or from the exercise of options,
warrants or rights to purchase Capital Stock (other than Redeemable Capital
Stock)) of the Company to any person (other than to a Subsidiary of the
Company) after the Issue Date plus (3) in the case of the disposition or
repayment of any Investment constituting a Restricted Payment made after the
Issue Date (excluding any Investment described in clause (v) of the following
paragraph), an amount
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equal to the lesser of the return of capital with respect to such Investment
and the initial amount of such Investment, in either case, less the cost of the
disposition of such Investment. For purposes of the preceding clause (C)(2),
the value of the aggregate net proceeds received by the Company upon the
issuance of Capital Stock upon the conversion of convertible Indebtedness or
upon the exercise of options, warrants or rights will be the net proceeds
received upon the issuance of such Indebtedness, options, warrants or rights
plus the incremental proceeds received by the Company upon the conversion or
exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) so
long as no Default or Event of Default shall have occurred and be continuing,
the redemption, repurchase or other acquisition or retirement of any shares of
any class of Capital Stock of the Company or any Restricted Subsidiary of the
Company in exchange for, or out of the net proceeds of, a substantially
concurrent (x) capital contribution to the Company from any person (other than
a Subsidiary of the Company) or (y) issue and sale of other shares of Capital
Stock (other than Redeemable Capital Stock) of the Company to any person (other
than to a Subsidiary of the Company); provided, however, that the amount of any
such net proceeds that are utilized for any such redemption, repurchase or
other acquisition or retirement shall be excluded from clause (C)(2) of the
preceding paragraph; (iii) so long as no Default or Event of Default shall have
occurred and be continuing, any redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness by exchange for, or out of the net
proceeds of, a substantially concurrent (x) capital contribution to the Company
from any person (other than a Subsidiary of the Company) or (y) issue and sale
of (1) Capital Stock (other than Redeemable Capital Stock) of the Company to
any person (other than to a Subsidiary of the Company); provided, however, that
the amount of any such net proceeds that are utilized for any such redemption,
repurchase or other acquisition or retirement shall be excluded from clause
(C)(2) of the preceding paragraph; or (2) Indebtedness of the Company issued to
any person (other than a Subsidiary of the Company), so long as such
Indebtedness is Subordinated Indebtedness which (x) has no Stated Maturity
earlier than the 91st day after the Final Maturity Date, (y) has an Average
Life to Stated Maturity equal to or greater than the remaining Average Life to
Stated Maturity of the Notes and (z) is subordinated to the Notes in the same
manner and at least to the same extent as the Subordinated Indebtedness so
purchased, exchanged, redeemed, acquired or retired; (iv) so long as no Default
or Event of Default shall have occurred and be continuing, the making of any
Restricted Payment by the Company or any Restricted Subsidiary of the Company
during any period of time when the Notes are rated Investment Grade by S&P and
Moody's (or if either S&P or Moody's does not make a rating of the Notes
publicly available, by either S&P or Moody's and an equivalent rating by
another Rating Agency); (v) Investments constituting Restricted Payments made
as a result of the receipt of non-cash consideration from any Asset Sale made
pursuant to and in compliance with the covenant described under "Disposition of
Proceeds of Asset Sales" below; (vi) so long as no Default or Event of Default
has occurred and is continuing, repurchases by the Company of Common Stock of
the Company from employees of the Company or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such employees, in an aggregate amount not exceeding $1,000,000
in any calendar year; and (vii) so long as no Default or Event of Default has
occurred and is continuing, other Restricted Payments in an aggregate amount
not exceeding $5,000,000. In computing the amount of Restricted Payments
previously made for purposes of clause (C) of the preceding paragraph,
Restricted Payments made under the preceding clauses (i), (iv), (vi) and (vii)
shall be included and clauses (ii), (iii) and (v) shall not be so included.
Limitation on Liens. The Company will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or suffer to exist any
Liens of any kind against or upon any of its property or assets, or any
proceeds therefrom, unless (x) in the case of Liens securing Subordinated
Indebtedness, the Notes are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Liens and (y) in all other cases,
the Notes are equally and ratably secured, except for (a) Liens existing
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as of the Issue Date and Liens under and as contemplated by agreements existing
as of the Issue Date, including Liens on Capital Stock of Subsidiaries of the
Company, accounts receivable, inventory and intangibles of the Company and its
Restricted Subsidiaries securing Indebtedness (including any guarantees) under
the Credit Agreement and the Note Agreement; (b) Liens securing the Notes or
any Guarantee; (c) Liens in favor of the Company; (d) Liens securing
Indebtedness which is incurred to refinance Indebtedness which has been secured
by a Lien permitted under the Indenture and which has been incurred in
accordance with the provisions of the Indenture; provided, however, that such
Liens do not extend to or cover any property or assets of the Company or any of
its Restricted Subsidiaries not securing the Indebtedness so refinanced; and
(e) Permitted Liens.
Change of Control. Upon the occurrence of a Change of Control, the
Company shall be obligated to make an offer to purchase (a "Change of Control
Offer"), and shall purchase, on a business day (the "Change of Control Purchase
Date") not more than 60 nor less than 30 days following the occurrence of the
Change of Control, all of the then outstanding Notes at a purchase price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the Change of Control Purchase Date. The Company shall be required to
purchase all Notes properly tendered into the Change of Control Offer and not
withdrawn. The Change of Control Offer is required to remain open for at least
20 business days and until the close of business on the Change of Control
Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the occurrence of the Change of Control, mail to
each holder of Notes notice of the Change of Control Offer, which notice shall
govern the terms of the Change of Control Offer and shall state, among other
things, the procedures that holders of Notes must follow to accept the Change
of Control Offer.
The occurrence of a Change of Control may result in the lenders under the
Note Agreement and the Credit Agreement having the right to require the Company
to repay all Indebtedness outstanding under the Note Agreement and the Credit
Agreement, respectively. There can be no assurance that the Company will have
adequate resources to repay or refinance all Indebtedness owing under the Note
Agreement and the Credit Agreement or to fund the purchase of the Notes upon a
Change of Control.
The Company shall 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
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase Notes as described above.
Disposition of Proceeds of Asset Sales. The Company will not, and will
not permit any of its Restricted Subsidiaries to, make any Asset Sale during
any period when the Notes are not rated Investment Grade by S&P and Moody's (or
if either S&P or Moody's does not make a rating of the Notes publicly
available, by either S&P or Moody's and an equivalent rating by another Rating
Agency (such period, the "Non-Investment Grade Period")) unless (a) the Company
or such Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
shares or assets sold or otherwise disposed of and (b) at least 75% of such
consideration consists of cash or Cash Equivalents. To the extent the Net Cash
Proceeds of any Asset Sale consummated during the Non-Investment Grade Period
are not required (a) to repay any Indebtedness secured by the assets subject to
such Asset Sale pursuant to Liens permitted under the Indenture, (b) to repay
Indebtedness incurred pursuant to clause (j) under "-- Limitation on
Indebtedness" or (c) to be applied to repay, and permanently reduce the
commitments under, the Credit Agreement (as required by
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the terms thereof), or, in each case, are not so applied, the Company or such
Restricted Subsidiary, as the case may be, may, within 365 days of such Asset
Sale, apply such Net Cash Proceeds to an investment in properties and assets
that replace the properties and assets that were the subject of such Asset Sale
or in properties and assets that will be used in the businesses of the Company
and its Restricted Subsidiaries existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"). Any Net Cash Proceeds from
any Asset Sale consummated during the Non-Investment Grade Period that are
neither used to repay Indebtedness, as specified in the immediately preceding
sentence, nor invested in Replacement Assets within the 365-day period
described above constitute "Excess Proceeds," subject to disposition as
provided below.
When the aggregate amount of Excess Proceeds equals or exceeds
$10,000,000, the Company shall make an offer to purchase (an "Asset Sale
Offer"), from all holders of the Notes, not more than 40 business days
thereafter, an aggregate principal amount of Notes equal to such Excess
Proceeds, at a price in cash equal to 100% of the outstanding principal amount
thereof plus accrued and unpaid interest, if any, to the purchase date. To the
extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use such
deficiency for general corporate purposes. If the aggregate principal amount
of Notes validly tendered and not withdrawn by holders thereof exceeds the
Excess Proceeds, Notes to be purchased will be selected on a pro rata basis.
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall
be reset to zero.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Notes as described above.
Limitation on Issuances and Sale of Preferred Stock by Restricted
Subsidiaries. The Company (a) will not permit any of its Restricted
Subsidiaries to issue any Preferred Stock (other than to the Company or a
Wholly-Owned Restricted Subsidiary) and (b) will not permit any person (other
than the Company or a Wholly-Owned Restricted Subsidiary) to own any Preferred
Stock of any Restricted Subsidiary of the Company; provided, however, that this
covenant shall not prohibit the issuance and sale of (x) all, but not less than
all, of the issued and outstanding Capital Stock of any Restricted Subsidiary
of the Company owned by the Company or any of its Restricted Subsidiaries in
compliance with the other provisions of the Indenture or (y) the issuance or
sale of any Preferred Stock of a Restricted Subsidiary during any period of
time when the Notes are rated Investment Grade by S&P and Moody's (or if either
S&P or Moody's does not make a rating of the Notes publicly available, by
either S&P or Moody's and an equivalent rating by another Rating Agency), so
long as no Default or Event of Default shall have occurred and be continuing.
Limitation on Transactions with Interested Persons. The Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, transfer, disposition,
purchase, exchange or lease of assets, property or services) with, or for the
benefit of, any Affiliate of the Company, unless (a) such transaction or series
of related transactions is on terms that are no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those which could have
been obtained in a comparable transaction at such time from persons who are not
Affiliates of the Company, (b) with respect to a transaction or series of
transactions involving aggregate payments or value equal to or greater than
$5,000,000, the Company has obtained a written opinion from an Independent
Financial Advisor stating that the terms of such transaction or series of
transactions are fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view and (c) with respect to a transaction or
series of transactions involving aggregate payments or value equal to or
greater than $2,500,000, the Company shall have delivered an officers'
certificate to the Trustee certifying that such transaction or series of
transactions complies with the preceding clause (a) and, if applicable,
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certifying that the opinion referred to in the preceding clause (b) has been
delivered and that such transaction or series of transactions has been approved
by a majority of the Board of Directors of the Company; provided, however, that
this covenant will not restrict the Company from (i) paying dividends in
respect of its Capital Stock permitted under the covenant described under "--
Limitation on Restricted Payments" above, (ii) paying reasonable and customary
fees to directors of the Company who are not employees of the Company or (iii)
making loans or advances to officers, employees or consultants of the Company
and its Restricted Subsidiaries (including travel and moving expenses) in the
ordinary course of business for bona fide business purposes of the Company or
such Restricted Subsidiary not in excess of $5,000,000 in the aggregate at any
one time outstanding.
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary of the Company, (c) make loans or advances to, or any investment in,
the Company or any other Restricted Subsidiary of the Company, (d) transfer any
of its properties or assets to the Company or any other Restricted Subsidiary
of the Company or (e) guarantee any Indebtedness of the Company or any other
Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of the Company or any Restricted Subsidiary of the Company, (iii)
customary restrictions on transfers of property subject to a Lien permitted
under the Indenture which could not materially adversely affect the Company's
ability to satisfy its obligations under the Indenture and the Notes, (iv) any
agreement or other instrument of a person acquired by the Company or any
Restricted Subsidiary of the Company (or a Restricted Subsidiary of such
person) in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any person, or the properties or assets of any person, other than the person,
or the properties or assets of the person, so acquired, (v) provisions
contained in agreements or instruments relating to Indebtedness which prohibit
the transfer of all or substantially all of the assets of the obligor
thereunder unless the transferee shall assume the obligations of the obligor
under such agreement or instrument and (vi) encumbrances and restrictions under
and as contemplated by agreements governing Indebtedness in effect on the Issue
Date and encumbrances and restrictions in permitted refinancings or
replacements thereof which are no less favorable to the holders of the Notes
than those contained in the Indebtedness so refinanced or replaced.
Limitation on Sale-Leaseback Transactions. The Company will not, and
will not permit any of its Restricted Subsidiaries to, enter into any
Sale-Leaseback Transaction with respect to any property of the Company or any
of its Restricted Subsidiaries. Notwithstanding the foregoing, the Company and
its Restricted Subsidiaries may enter into Sale-Leaseback Transactions with
respect to property acquired or constructed after the Issue Date; provided that
(a) the Attributable Value of such Sale-Leaseback Transaction shall be deemed
to be Indebtedness of the Company or such Restricted Subsidiary, as the case
may be, and (b) after giving pro forma effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), the Company would be able to incur
$1.00 of additional Indebtedness pursuant to the first paragraph of the
covenant described under "-- Limitation on Indebtedness" above (assuming a
market rate of interest with respect to such additional Indebtedness).
Reporting Requirements. The Company will file with the Commission the
annual reports, quarterly reports and other documents required to be filed with
the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or
not the Company has a class of securities registered under the Exchange Act.
The Company will be required to file with the Trustee and provide to each
holder of
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Notes within 15 days after it files them with the Commission (or if any such
filing is not permitted under the Exchange Act, 15 days after the Company would
have been required to make such filing) copies of such reports and documents.
MERGER, SALE OF ASSETS, ETC.
Neither the Company nor any Guarantor will, in any transaction or series
of transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any person or persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, to any other person or persons, unless at the
time of and after giving effect thereto (a) either (i) if the transaction or
series of transactions is a merger or consolidation, the Company, the
applicable Guarantor or applicable Restricted Subsidiary shall be the surviving
person of such merger or consolidation, or (ii) the person formed by such
consolidation or into which the Company, such Guarantor or such Restricted
Subsidiary is merged or to which the properties and assets of the Company, such
Guarantor or such Restricted Subsidiary, as the case may be, are transferred
(any such surviving person or transferee person being the "Surviving Entity")
shall be a corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all the obligations of
the Company or such Guarantor, as the case may be, under the Notes or such
Guarantor's Guarantee, as the case may be, and the Indenture, and in each case,
the Indenture shall remain in full force and effect; (b) immediately before and
immediately after giving effect to such transaction or series of transactions
on a pro forma basis (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), no Default or Event of Default shall
have occurred and be continuing and the Company or the Surviving Entity, as the
case may be, after giving effect to such transaction or series of transactions
on a pro forma basis (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur $1.00 of additional
Indebtedness pursuant to the first paragraph of the covenant described under
"-- Certain Covenants -- Limitation on Indebtedness" above (assuming a market
rate of interest with respect to such additional Indebtedness); and (c)
immediately after giving effect to such transaction or series of transactions
on a pro forma basis (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), the Consolidated Net Worth of the
Company or the Surviving Entity, as the case may be, is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
series of transactions. The foregoing provisions shall not apply to a
transaction involving the consolidation or merger of a Guarantor with or into
another person, or the sale, lease, conveyance or disposition of all or
substantially all of the assets of such Guarantor that results in such
Guarantor being released from its Guarantee as provided in "-- The
Guarantees").
In connection with any consolidation, merger, transfer, lease, assignment
or other disposition contemplated hereby, the Company shall deliver, or cause
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an officers' certificate and an opinion of counsel, each
stating that such consolidation, merger, transfer, lease, assignment or other
disposition and the supplemental indenture in respect thereof comply with the
requirements under the Indenture.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, in which the
Company is not the continuing corporation, the successor corporation formed by
such a consolidation or into which the Company is merged or to which
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such transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named as the Company
therein; provided that solely for purposes of computing amounts described in
subclause (C) of the covenant described under "-- Limitation on Restricted
Payments" above, any such successor person shall only be deemed to have
succeeded to and be substituted for the Company with respect to periods
subsequent to the effective time of such merger, consolidation or transfer of
assets.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any,
on any Senior Note when the same becomes due and payable (upon Stated
Maturity, acceleration, optional redemption, required purchase, scheduled
principal payment or otherwise); or
(ii) default in the payment of an installment of interest on any of
the Notes, when the same becomes due and payable, which default continues
for a period of 30 days; or
(iii) failure to perform or observe any other term, covenant or
agreement contained in the Notes or the Indenture or any Guarantee (other
than a default specified in clause (i) or (ii) above) and such default
continues for a period of 30 days after written notice of such default
requiring the Company to remedy the same shall have been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by holders
of 25% in aggregate principal amount of the Notes then outstanding; or
(iv) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under
which the Company or any Restricted Subsidiary of the Company then has
outstanding Indebtedness in excess of $5,000,000, individually or in the
aggregate, and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults have resulted in the acceleration of
the maturity of such Indebtedness; or
(v) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5,000,000, either individually or in the
aggregate, shall be entered against the Company or any Restricted
Subsidiary of the Company or any of their respective properties and shall
not be discharged or fully bonded and there shall have been a period of
60 days after the date on which any period for appeal has expired and
during which a stay of enforcement of such judgment, order or decree
shall not be in effect; or
(vi) either (i) the collateral agent under the Credit Agreement or
(ii) any holder of at least $5,000,000 in aggregate principal amount of
Indebtedness of the Company or any of its Restricted Subsidiaries shall
commence judicial proceedings to foreclose upon assets of the Company or
any of its Restricted Subsidiaries having an aggregate Fair Market Value,
individually or in the aggregate, in excess of $5,000,000 or shall have
exercised any right under applicable law or applicable security documents
to take ownership of any such assets in lieu of foreclosure; or
(vii) any Guarantee ceases to be in full force and effect or is
declared null and void, or any Guarantor denies that it has any further
liability under any Guarantee or gives notice to such effect (other than
by reason of the termination of the Indenture or the release of any such
Guarantee in accordance with the Indenture) and such condition shall have
continued for a period
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of 60 days after written notice of such failure (which notice shall
specify the Default, demand that it be remedied and state that it is a
"Notice of Default") requiring the Guarantor and the Company to remedy
the same shall have been given (x) to the Company by the Trustee or (y)
to the Company and the Trustee by holders of at least 25% in aggregate
principal amount of the Notes then outstanding; or
(viii) certain events of bankruptcy, insolvency or reorganization
with respect to the Company or any Significant Subsidiary of the Company
shall have occurred.
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing, the Trustee, by notice to the Company, or the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee and the Company, may declare the
principal of, premium, if any, and accrued and unpaid interest, if any, on all
of the outstanding Notes due and payable immediately, upon which declaration,
all amounts payable in respect of the Notes shall be immediately due and
payable. If an Event of Default specified in clause (viii) above occurs and is
continuing, then the principal of, premium, if any, and accrued and unpaid
interest, if any, on all of the outstanding Notes shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of the Notes.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration if (a) the Company has paid or deposited with the
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Notes, (iii) the principal of and premium, if any, on any Notes which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, and (iv) to the extent that payment of
such interest is lawful, interest upon overdue interest and overdue principal
at the rate borne by the Notes which has become due otherwise than by such
declaration of acceleration; (b) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction; and (c) all Events of
Default, other than the non-payment of principal of, premium, if any, and
interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the holders of all the Notes waive any
past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or the Notes or the Guarantees or any remedy
thereunder, unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee under the
Notes and the Indenture, the Trustee has failed to institute such proceeding
within 30 days after receipt of such notice and the Trustee, within such 30-day
period, has not received directions inconsistent with such written request by
holders of a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a holder of a
Note for the enforcement of the payment of the principal of, premium, if any,
or interest on such Note on or after the respective due dates expressed in such
Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof
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as a prudent person would exercise under the circumstances in the conduct of
such person's own affairs. Subject to the provisions of the Indenture relating
to the duties of the Trustee, whether or not an Event of Default shall occur
and be continuing, the Trustee under the Indenture is not under any obligation
to exercise any of its rights or powers under the Indenture at the request or
direction of any of the holders unless such holders shall have offered to the
Trustee reasonable security or indemnity. Subject to certain provisions
concerning the rights of the Trustee, the holders of not less than a majority
in aggregate principal amount of the outstanding Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the Notes notice of
the Default or Event of Default within 30 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, premium, if any, or interest on any Notes, the Trustee may
withhold the notice to the holders of such Notes if a committee of its trust
officers in good faith determines that withholding the notice is in the
interest of the holders of the Notes.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within ten days of any event which is, or after
notice or lapse of time or both would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and the Guarantors with respect to the outstanding Notes and
Guarantees ("defeasance"). Such defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of holders of outstanding Notes to
receive payment in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (ii) the Company's obligations to
issue temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and the Guarantors with respect to certain
covenants that are set forth in the Indenture, some of which are described
under "-- Certain Covenants" above (including the covenant described under "--
Certain Covenants -- Change of Control" above) and any subsequent failure to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes ("covenant defeasance").
In order to exercise either 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 United States dollars, U.S. government
obligations, 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 of, premium, if any, and interest on the
outstanding Notes to redemption or maturity (except lost, stolen or destroyed
Notes which have been replaced or paid); (ii) the Company shall have delivered
to the Trustee an opinion of counsel to the effect that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance or 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 defeasance or covenant
defeasance had not occurred (in the case of defeasance, such opinion must refer
to and be based upon a ruling of the Internal Revenue Service or a change in
applicable federal income tax laws); (iii) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit; (iv) such
defeasance or covenant defeasance shall not cause
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the Trustee to have a conflicting interest with respect to any securities of
the Company; (v) 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 Company or any of its Subsidiaries is a party or by
which it is bound; (vi) the Company shall 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; and (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or repaid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed Notes which have been replaced
or paid) have been called for redemption pursuant to the terms of the Notes or
have otherwise become due and payable and the Company has irrevocably deposited
or caused to be deposited with the Trustee funds in an amount sufficient to pay
and discharge the entire Indebtedness on the Notes not theretofore delivered to
the Trustee for cancellation, for principal of, premium, if any, and interest
on the Notes to the date of deposit together with irrevocable instructions from
the Company directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be; (ii) the Company has paid all other
sums payable under the Indenture by the Company; (iii) there exists no Default
or Event of Default under the Indenture; and (iv) the Company has delivered to
the Trustee an officers' certificate and an opinion of counsel stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, the Company and the Guarantors, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may,
without the consent of the holders of any outstanding Notes, amend, waive or
supplement the Indenture or the Notes or the Guarantees for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act of 1939, as amended, or making any other change
that does not adversely affect the rights of any holder of Notes; provided,
however, that the Company has delivered to the Trustee an opinion of counsel
stating that such change does not adversely affect the rights of any holder of
Notes. Other amendments and modifications of the Indenture or the Notes or the
Guarantees may be made by the Company and the Trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding Notes; provided, however, that no such modification or amendment
may, without the consent of the holder of each outstanding Note affected
thereby, (i) reduce the principal amount of, extend the fixed maturity of or
alter the redemption provisions of, the Notes, (ii) change the currency in
which any Notes or any premium or the interest thereon is payable or make the
principal of, premium, if any, or interest on any Note payable in money other
than that stated in the Note, (iii) reduce the percentage in principal amount
of outstanding Notes that must consent to an amendment, supplement or waiver or
consent to take any action under the Indenture, any Guarantee or the Notes,
(iv) impair the right to institute suit for the enforcement of any payment on
or with respect to the Notes, (v) waive a default in payment with respect to
the Notes, (v) amend, change or modify the obligations of the Company to make
and consummate a
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Change of Control Offer in the event of a Change of Control or make and
consummate the Asset Sale Offer with respect to any Asset Sale or modify any of
the provisions or definitions with respect thereto, (vii) reduce or change the
rate or time for payment of interest on the Notes, (viii) modify or change any
provision of the Indenture affecting the ranking of the Notes or any Guarantee
in a manner adverse to the holders of the Notes, or (ix) release any Guarantor
from any of its obligations under its Guarantee or the Indenture other than in
compliance with the Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in the Trust Indenture Act of
1939, as amended) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and the Guarantees will be governed by the laws
of the State of New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified person.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other person pursuant to which such
person shall become a Restricted Subsidiary of the Company, or shall be merged
with or into the Company or any Restricted Subsidiary of the Company, (b) the
acquisition by the Company or any Restricted Subsidiary of the Company of the
assets of any person (other than a Restricted Subsidiary of the Company) which
constitute all or substantially all of the assets of such person or (c) the
acquisition by the Company or any Restricted Subsidiary of the Company of any
division or line of business of any person (other than a Restricted Subsidiary
of the Company).
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease or other disposition to any person other than the Company or a
Wholly-Owned Restricted Subsidiary, in one or a series of related transactions,
of (a) any Capital Stock of any Restricted Subsidiary of the Company (other
than in respect of director's qualifying shares or investments by foreign
nationals mandated by applicable law); (b) all or substantially all of the
properties and assets of any division or line of business of the Company or any
Restricted Subsidiary of the Company; or (c) any other properties or assets of
the Company or any Restricted Subsidiary of the Company other than in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include (i) any sale, transfer or other disposition of
equipment, tools or other assets (excluding Capital Stock of any Restricted
Subsidiary of
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the Company) by the Company or any of its Restricted Subsidiaries in one or a
series of related transactions in respect of which the Company or such
Restricted Subsidiary receives cash or property with an aggregate Fair Market
Value of $5,000,000 or less; (ii) any sale, issuance, conveyance, transfer,
lease or other disposition of properties or assets that is governed by the
provisions described under "-- Merger, Sale of Assets, Etc." above; and (iii)
any sale, transfer or exchange of Capital Stock of any Person other than a
Restricted Subsidiary to the extent proceeds from which are Capital Stock of
such Person or its Affiliates.
"Attributable Value" means, as to any particular lease under which any
person is at the time liable other than a Capitalized Lease Obligation, and at
any date as of which the amount thereof is to be determined, the total net
amount of rent required to be paid by such person under such lease during the
initial term thereof as determined in accordance with GAAP, discounted from the
last date of such initial term to the date of determination at a rate per annum
equal to the discount rate which would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated. "Attributable Value" means,
as to a Capitalized Lease Obligation under which any person is at the time
liable and at any date as of which the amount thereof is to be determined, the
capitalized amount thereof that would appear on the face of a balance sheet of
such person in accordance with GAAP.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years (or any
fraction thereof) from such date to the date or dates of each successive
scheduled principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness multiplied by (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof
at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) certificates
of deposit with a maturity of 180 days or less of any financial institution
that is organized under the laws of the United States, any state thereof or the
District of Columbia that are rated at least A-1 by S&P or at least P-1 by
Moody's or at least an equivalent rating category of another Rating Agency;
(iv) repurchase agreements and reverse repurchase agreements relating to
marketable direct obligations issued or unconditionally
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guaranteed by the government of the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within 180 days from the date of acquisition;
provided that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October
31, 1985.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) other than a Permitted Holder or a group controlled by or
comprised of Permitted Holders is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of more than 50% of the total Voting Stock of the
Company; (b) the Company consolidates with, or merges with or into, another
person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any person, or any person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than any such transaction where (i) the outstanding Voting Stock of the Company
is converted into or exchanged for (1) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could then be paid by the
Company as a Restricted Payment under the Indenture, or a combination thereof,
and (ii) immediately after such transaction no "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a
Permitted Holder or a group controlled by or comprised of Permitted Holders is
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening
of an event or otherwise), directly or indirectly, of more than 50% of the
total Voting Stock of the surviving or transferee corporation; (c) at any time
during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (d) the Company is
liquidated or dissolved or adopts a plan of liquidation.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated Cash Flow Available for Fixed Charges" means, with respect
to any person for any period, the sum of, without duplication, the amounts for
such period, taken as a single accounting period, of (a) Consolidated Net
Income, (b) Consolidated Non-cash Charges, (c) Consolidated Interest Expense
and (d) Consolidated Income Tax Expense less (B) any non-cash items increasing
Consolidated Net Income for such period.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
person, the ratio of the aggregate amount of Consolidated Cash Flow Available
for Fixed Charges of such person for the four full fiscal quarters immediately
preceding the date of the transaction (the "Transaction Date") giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio (such four
full fiscal quarter
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period being referred to herein as the "Four Quarter Period") to the aggregate
amount of Consolidated Fixed Charges of such person for the Four Quarter
Period. In addition to and without limitation of the foregoing, for purposes
of this definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to, without duplication, (a) the
incurrence of any Indebtedness (other than revolving credit Indebtedness) of
such person or any of its Restricted Subsidiaries (and the application of the
net proceeds thereof) during the period commencing on the first day of the Four
Quarter Period to and including the Transaction Date (the "Reference Period"),
including, without limitation, the incurrence of the Indebtedness giving rise
to the need to make such calculation (and the application of the net proceeds
thereof), as if such incurrence (and application) occurred on the first day of
the Reference Period, and (b) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such person or one of its Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the Reference Period, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period.
Furthermore, 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 outstanding Indebtedness determined on
a fluctuating basis as of the Transaction 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 Indebtedness in effect on the Transaction
Date; and (ii) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on the Transaction Date will be
deemed to have been in effect during the Reference Period. If such person or
any of its Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third person, the above clause shall give effect to the
incurrence of such guaranteed Indebtedness as if such person or such Restricted
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the aggregate amount of dividends and
other distributions paid or accrued during such period in respect of Preferred
Stock and Redeemable Capital Stock of such person and its Restricted
Subsidiaries on a consolidated basis, multiplied by a fraction, the numerator
of which is one and the denominator of which is one minus the then current
federal statutory income tax rate of such person.
"Consolidated Income Tax Expense" means, with respect to any person for
any period, the provision for federal, state, local and foreign income taxes of
such person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of (i) the interest expense (net of
interest income) of such person and its Restricted Subsidiaries for such period
as determined on a consolidated basis in accordance with GAAP, including,
without limitation, (a) any amortization of debt discount, (b) the net cost
under Interest Rate Protection Obligations, (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and (e) all accrued interest and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any
period, the consolidated net income (or loss) of such person and its Restricted
Subsidiaries for such period as determined in
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accordance with GAAP, adjusted, to the extent included in calculating such net
income, by excluding, without duplication, (i) all extraordinary gains or
losses, (ii) the portion of net income (but not losses) of such person and its
Restricted Subsidiaries allocable to minority interests in unconsolidated
persons to the extent that cash dividends or distributions have not actually
been received by such person or one of its Restricted Subsidiaries, (iii) net
income (or loss) of any person combined with such person or one of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) any gain or loss realized upon
the termination of any employee pension benefit plan, on an after-tax basis,
(v) gains in respect of any Asset Sales by such person or one of its Restricted
Subsidiaries and (vi) the net income of any Restricted Subsidiary of such
person to the extent that the declaration of dividends or similar distributions
by that Restricted Subsidiary of that income is not at the time permitted,
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 stockholders.
"Consolidated Net Worth" means, with respect to any person at any date,
the consolidated stockholders' equity of such person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock of such person
and its Restricted Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such person and its Restricted Subsidiaries reducing Consolidated Net Income of
such person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which required an
accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among the Company, certain of its Subsidiaries, Comerica Bank, in its
individual capacity and as agent, and the other banks which are or become
parties from time to time thereto, and as it may be amended, restated,
supplemented or otherwise modified from time to time, including all exhibits
and schedules thereto, and any successor or replacement facility.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect any
person or any of its Restricted Subsidiaries against fluctuations in currency
values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Event of Default" has the meaning set forth under "-- Events of Default"
herein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any assets, the price, as
determined by the Board of Directors of the Company, acting in good faith,
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
pressure or compulsion to complete the transaction; provided, however, that,
with respect to any transaction which involves an asset or assets in excess of
$250,000, such determination shall be evidenced by a resolution of the Board of
Directors of the Company delivered to the Trustee.
"Final Maturity Date" means July 15, 2005.
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"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 may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means (i) each of Walbro Automotive Corporation, a Delaware
corporation, Walbro Engine Management Corporation, a Delaware corporation,
Sharon Manufacturing Co., a Michigan corporation and Whitehead Engineered
Products, Inc., a Delaware corporation, (ii) each Wholly-Owned Restricted
Subsidiary of the Company which is incorporated under the laws of the United
States or any state therein or the District of Columbia which incurs
Indebtedness (other than to the Company or a Wholly-Owned Restricted
Subsidiary) in an aggregate principal amount in excess of $5,000,000 for so
long as such Wholly-Owned Restricted Subsidiary has Indebtedness outstanding in
excess of $5,000,000 and (iii) any other Subsidiary that guarantees the Notes.
"Indebtedness" means, with respect to any person, without duplication,
(a) all liabilities of such person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business and
which are not overdue by more than 180 days, but including, without limitation,
all obligations, contingent or otherwise, of such person in connection with any
letters of credit, banker's acceptance or other similar credit transaction, (b)
all obligations of such person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), but excluding trade accounts payable arising in the
ordinary course of business, (d) all Capitalized Lease Obligations of such
person, (e) all Indebtedness referred to in the preceding clauses of other
persons and all dividends of other persons, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon property (including, without
limitation, accounts and contract rights) owned by such person, even though
such person has not assumed or become liable for the payment of such
Indebtedness (the amount of such obligation being deemed to be the lesser of
the value of such property or asset or the amount of the obligation so
secured), (f) all guarantees of Indebtedness referred to in this definition by
such person, (g) all Redeemable Capital Stock of such person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all obligations under or in respect of Currency
Agreements and Interest Rate Protection Obligations of such person, and (i) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of the types referred to in clauses (a) through (h) above.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value.
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"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company or any of its Subsidiaries and (ii)
which, in the judgment of the Board of Directors of the Company, is otherwise
independent and qualified to perform the task for which it is to be engaged.
"Interest Rate Protection Agreement" means any arrangement with any other
person whereby, directly or indirectly, such person is entitled to receive from
time to time periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or a floating rate
of interest on the same notional amount and shall include without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
"Interest Rate Protection Obligations" means the obligations of any
person pursuant to an Interest Rate Protection Agreement.
"Investment" means, with respect to any person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. In addition, the
Fair Market Value of the assets of any Subsidiary of the Company at the time
that such Subsidiary is designated as an Unrestricted Subsidiary shall be
deemed to be an Investment made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries in the ordinary course of business in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be.
"Investment Grade" means, with respect to the Notes, (i) in the case of
S&P, a rating of at least BBB-, (ii) in the case of Moody's, a rating of at
least Baa3, and (iii) in the case of a Rating Agency other than S&P or Moody's,
the equivalent rating, or in each case, any successor, replacement or
equivalent definition as promulgated by S&P, Moody's or other Rating Agency, as
the case may be; provided that a rating of BBB-, with respect to S&P, Baa3,
with respect to Moody's, or the equivalent rating of another Rating Agency
other than S&P or Moody's (or any such successor, replacement or equivalent
definition) shall not be Investment Grade if any such Rating Agency shall have
then placed the Notes on credit watch with negative implications.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary of the Company) net
of (i) brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) amounts required to be paid to any person (other than the
Company or any Restricted Subsidiary of the Company) owning a beneficial
interest in the assets subject to the Asset Sale
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and (iv) appropriate amounts to be provided by the Company or any Restricted
Subsidiary of the Company, as the case may be, as a reserve required in
accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary of the Company, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an officers' certificate delivered to the
Trustee.
"Net Worth" means, with respect to any person at any date, the
stockholders' equity of such person less the amount of such stockholders'
equity attributable to Redeemable Capital Stock of such person, as determined
in accordance with GAAP.
"Note Agreement" means the Note Agreement dated as of October 1, 1994 by
and among the Company and the Purchasers named on Schedule I thereto, relating
to the $45,000,000 aggregate principal amount of 7.68% Senior Notes due October
1, 2004 of the Company.
"Permitted Holder" means (i) each of Lambert E. Althaver, Robert H.
Walpole, Gary L. Vollmar, Richard H. Whitehead, Michael A. Shope and Daniel L.
Hittler; (ii) each spouse, lineal descendant and spouse of a lineal descendant
of a person named in clause (i); and (iii) the estate or legal representative
of a person named in clause (i) or (ii).
"Permitted Investments" means any of the following: (i) Investments in
any Wholly-Owned Restricted Subsidiary (including any person that pursuant to
such Investment becomes a Wholly-Owned Restricted Subsidiary) and any person
that is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or any Wholly-Owned Restricted
Subsidiary at the time such Investment is made; (ii) Investments in Cash
Equivalents; (iii) Investments in deposits with respect to leases or utilities
provided to third parties in the ordinary course of business; (iv) Investments
in the Notes; (v) Investments in Currency Agreements on commercially reasonable
terms entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business in connection with the operations of the business
of the Company or its Restricted Subsidiaries to hedge against fluctuations in
foreign exchange rates; (vi) loans or advances to officers, employees or
consultants of the Company and its Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes of the Company and its
Restricted Subsidiaries (including travel and moving expenses) not in excess of
$1,000,000 in the aggregate at any one time outstanding; (vii) Investments in
evidences of Indebtedness, securities or other property received from another
person by the Company or any of its Restricted Subsidiaries in connection with
any bankruptcy proceeding or by reason of a composition or readjustment of debt
or a reorganization of such person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Indebtedness, securities
or other property of such person held by the Company or any of its Restricted
Subsidiaries, or for other liabilities or obligations of such other person to
the Company or any of its Restricted Subsidiaries that were created in
accordance with the terms of the Indenture; (viii) Investments in Interest Rate
Protection Agreements on commercially reasonably terms entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business in connection with the operations of the business of the Company or
its Restricted Subsidiaries to hedge against fluctuations in interest rates;
and (ix) other Investments made after the Issue Date not to exceed $10,000,000
in the aggregate plus an amount equal to the lesser of the return of capital
with respect to such Investment and the initial amount of such Investment, in
either case, less the cost of the disposition of such Investment.
"Permitted Liens" means the following types of Liens:
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(a) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
governmental contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(d) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease;
(g) purchase money Liens to finance the acquisition or construction
of property or assets of the Company or any Restricted Subsidiary of the
Company acquired in the ordinary course of business; provided, however,
that (i) the related purchase money Indebtedness shall not be secured by
any property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired or construction,
(ii) the amount of Indebtedness secured by any such Lien shall not exceed
the purchase price of the property or assets acquired or constructed and
(iii) the Lien securing such Indebtedness either (x) exists at the time
of such acquisition or construction or (y) shall be created within 90
days of such acquisition or construction;
(h) other purchase money Liens to finance the acquisition or
construction of property or assets of the Company or any Restricted
Subsidiary of the Company acquired in the ordinary course of business
securing Indebtedness of the Company and its Restricted Subsidiaries
under industrial revenue bonds or other Indebtedness of the Company and
its Restricted Subsidiaries for which a governmental entity or agency
provides direct or indirect credit support not to exceed $20,000,000 in
the aggregate at any one time outstanding; provided, however, that (i)
the amount of Indebtedness secured by any such Lien shall not exceed 125%
of the purchase price of the property or assets acquired or constructed
and (ii) the Lien securing such Indebtedness either (x) exists at the
time of such acquisition or construction or (y) shall be created within
90 days of such acquisition or construction;
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(i) other Liens; provided that at the time any such Lien is to be
incurred, all such Liens incurred pursuant to this clause (i) secure
obligations of the Company and its Restricted Subsidiaries not to exceed
10% of the Consolidated Net Worth of the Company after giving pro forma
effect to the Lien that is to be incurred; and
(j) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods.
"person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, charitable
foundation, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of preferred or preference Capital Stock of such person.
"Rating Agency" means a nationally recognized securities rating agency,
selected by the Company and satisfactory to the Trustee.
"Redeemable Capital Stock" means any shares of any class or series of
Capital Stock that, either by the terms thereof, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise, is or
upon the happening of an event or passage of time would be, required to be
redeemed prior to the Stated Maturity with respect to the principal of any Note
or is redeemable at the option of the holder thereof at any time prior to any
such Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity.
"Restricted Subsidiary" means a Subsidiary of any person which is not an
Unrestricted Subsidiary.
"Sale-Leaseback Transaction" of any person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such person of any property or asset of such person which has
been or is being sold or transferred by such person after the acquisition
thereof or the completion of construction or commencement of operation thereof
to such lender or investor or to any person to whom funds have been or are to
be advanced by such lender or investor on the security of such property or
asset. The stated maturity of such arrangement shall be the date of the last
payment of rent or any other amount due under such arrangement prior to the
first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" shall have the same meaning as in Rule 1.02(v)
of Regulation S-X under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
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"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor which is expressly subordinated in right of payment to the Notes or
the Guarantee of such Guarantor, as the case may be.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such person, by one or more Subsidiaries of such person or by such person and
one or more Subsidiaries thereof and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person, one or more Subsidiaries thereof or such person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other person performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"Unrestricted Subsidiary" means a Subsidiary of the Company (i) none of
whose properties or assets were owned by the Company or any of its Subsidiaries
on or prior to the Issue Date, other than any such assets as are transferred to
such Unrestricted Subsidiary in accordance with the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments", (ii) whose
properties and assets, to the extent that they secure Indebtedness, secure only
Non-Recourse Indebtedness and (iii) which has no Indebtedness other than
Non-Recourse Indebtedness. As used above, "Non-Recourse Indebtedness" means
Indebtedness as to which (i) neither the Company nor any of its Restricted
Subsidiaries (1) provides credit support (including any undertaking, agreement
or instrument which would constitute Indebtedness), (2) guarantees or is
otherwise directly or indirectly liable or (3) constitutes the lender (in each
case, other than pursuant to and in compliance with the covenant described
under "-- Certain Covenants -- Limitation on Restricted Payments") and (ii) no
default with respect to such Indebtedness (including any rights which the
holders thereof may have to take enforcement action against the relevant
Unrestricted Subsidiary or its assets) would permit (upon notice, lapse of time
or both) any holder of any other Indebtedness of the Company or its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity. The
Company shall not be permitted to designate any Unrestricted Subsidiary as a
Restricted Subsidiary unless, after giving pro forma effect to such
designation, (i) the Company would be permitted to incur $1.00 of additional
Indebtedness pursuant to the first paragraph of the covenant described under
"-- Certain Covenants -- Limitation on Indebtedness" above (assuming a market
rate of interest with respect to such Indebtedness) and (ii) all Indebtedness
and Liens of such Unrestricted Subsidiary would be permitted to be incurred by
a Restricted Subsidiary of the Company under the Indenture. An Unrestricted
Subsidiary shall not be designated as a Restricted Subsidiary unless the
Company shall have provided written notice to the Trustee as to compliance with
the Indenture. A designation of an Unrestricted Subsidiary as a Restricted
Subsidiary may not thereafter be rescinded.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, Capital
Stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary of
the Company of which 100% of the outstanding Capital Stock is owned by the
Company or one or more Wholly-Owned Restricted Subsidiaries or by the Company
and one or more Wholly-Owned Restricted Subsidiaries. For purposes of this
definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material anticipated federal income tax
consequences of the issuance of New Notes and the Exchange Offer is based upon
the provisions of the Internal Revenue Code of 1986, as amended, the final,
temporary and proposed regulations promulgated thereunder, and administrative
rulings and judicial decisions now in effect, all of which are subject to
change (possibly with retroactive effect) or different interpretations. The
following summary is not binding on the Internal Revenue Service ("IRS") and
there can be no assurance that the IRS will take a similar view with respect to
the tax consequences described below. No ruling has been or will be requested
by the Company from the IRS on any tax matters relating to the New Notes or the
Exchange Offer. This discussion is for general information only and does not
purport to address all of the possible federal income tax consequences or any
state, local or foreign tax consequences of the acquisition, ownership and
disposition of the Old Notes, the New Notes or the Exchange Offer. It is
limited to investors who will hold the Old Notes and the New Notes as capital
assets and does not address the federal income tax consequences that may be
relevant to particular investors in light of their unique circumstances or to
certain types of investors (such as dealers in securities; insurance companies;
financial institutions; foreign corporations; partnerships; trusts; nonresident
individuals; and tax-exempt entities) who may be subject to special treatment
under federal income tax laws.
INDEBTEDNESS
The Old Notes and the New Notes should be treated as indebtedness of the
Company. In the unlikely event the Old Notes or the New Notes were treated as
equity, the amount treated as a distribution on any such Old Note or New Note
would first be taxable to the holder as dividend income to the extent of the
Company's current and accumulated earnings and profits, and would next be
treated as a return of capital to the extent of the holder's tax basis in the
Old Notes or New Notes, with any remaining amount treated as a gain from the
sale of an Old Note or a New Note. In addition, in the event of equity
treatment, amounts received in retirement of an Old Note or a New Note might in
certain circumstances be treated as a dividend, and the Company could not
deduct amounts paid as interest on such Old Notes or New Notes. The remainder
of this discussion assumes that the Old Notes and the New Notes will constitute
indebtedness.
EXCHANGE OFFER
The exchange of the Old Notes for New Notes pursuant to the Exchange
Offer should not be treated as an "exchange" because the New Notes should not
be considered to differ materially in kind or extent from the Old Notes.
Rather, the New Notes received by a holder of the Old Notes should be treated
as a continuation of the Old Notes in the hands of such holder. As a result,
there should be no federal income tax consequences to holders exchanging the
Old Notes for the New Notes pursuant to the Exchange Offer.
INTEREST
A holder of an Old Note or a New Note will be required to report stated
interest on the Old Note and the New Note as interest income in accordance with
the holder's method of accounting for tax purposes. Because the Old Notes were
issued at 99.65% of par there is no original issue discount pursuant to the de
minimis exception to the "original issue discount" rules.
TAX BASIS IN OLD NOTES AND NEW NOTES
A holder's tax basis in an Old Note will be the holder's purchase price
for the Old Note. If a holder of an Old Note exchanges the Old Note for a New
Note pursuant to the Exchange Offer, the tax basis of the New Note immediately
after such exchange should equal the holder's tax basis in the Old Note
immediately prior to the exchange.
95
<PAGE> 98
DISPOSITION OF OLD NOTES OR NEW NOTES
The sale, exchange, redemption or other disposition of an Old Note or a
New Note, except in the case of an exchange pursuant to the Exchange Offer (see
the above discussion), generally will be a taxable event. A holder generally
will recognize gain or loss equal to the difference between (i) the amount of
cash plus the fair market value of any property received upon such sale,
exchange, redemption or other taxable disposition of the Old Note or the New
Note (except to the extent attributable to accrued interest) and (ii) the
holder's adjusted tax basis in such debt instrument. Such gain or loss will be
capital gain or loss, and will be long term if the Old Notes have been held for
more than one year at the time of the sale or other disposition.
PURCHASERS OF OLD NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE
The foregoing does not discuss special rules which may affect the
treatment of purchasers that acquired Old Notes other than at par, including
those provisions of the Internal Revenue Code relating to the treatment of
"market discount," and "amortizable bond premium." Any such purchaser should
consult its tax advisor as to the consequences to him of the acquisition,
ownership, and disposition of Old Notes.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Old Notes and the
New Notes, and (2) proceeds of sale of the Old Notes and the New Notes, must be
withheld and remitted to the United States Treasury. Therefore, each holder
should complete and sign the Substitute Form W-9 included so as to provide the
information and certification necessary to avoid backup withholding. However,
certain holders (including, among others, certain foreign individuals) are not
subject to these backup withholding and reporting requirements. For a foreign
individual to qualify as an exempt foreign recipient, that exchanging holder
must submit a statement, signed under penalties of perjury, attesting to that
individual's exempt foreign status. Such statements can be obtained from the
Company. For further information concerning backup withholding and
instructions for completing the Substitute Form W-9 (including how to obtain a
taxpayer identification number if you do not have one and how to complete the
Substitute Form W-9 if the Old Notes are held in more than one name), contact
the Company's secretary, 6242 Garfield Street, Cass City, Michigan 48726-1325
or telephone number (517) 872-2131.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
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<PAGE> 99
OLD NOTES REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company has agreed to
file with the Commission a registration statement under the Securities Act with
respect to an offer to exchange the Old Notes for the New Notes. Upon the
effectiveness of the Exchange Offer registration statement, the Company will
offer to the holders of Old Notes who are able to make certain representations
the opportunity to exchange their Old Notes for New Notes. If (i) the Company
is not permitted to file the Exchange Offer registration statement or to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any holder of Old Notes notifies
the Company within the specified time period that (A) due to a change in law or
policy it is not entitled to participate in the Exchange Offer, (B) due to a
change in law or policy it may not resell the New Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer registration statement is not appropriate or
available for such resales by such holder or (C) it is a broker-dealer and owns
Old Notes acquired directly from the Company or an affiliate of the Company,
the Company will file with the Commission the Shelf Registration Statement to
cover resales of the "Transfer Restricted Notes" (as defined) by the holders
thereof. The Company will use reasonable efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission. For purposes of the foregoing, "Transfer Restricted Notes" means
each Old Note until (i) the date on which such Old Note has been exchanged by a
person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer, of an Old Note
for a New Note, the date on which such New Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
this Prospectus, (iii) the date on which such Old Note has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Old Note is
distributed to the public pursuant to Rule 144 under the Securities Act.
Under existing Commission interpretations, the Transfer Restricted Notes
would, in general, be freely transferable after the Exchange Offer without
further registration under the Securities Act; provided that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act will be delivered upon resale by such
broker-dealer in connection with resales of the New Notes. The Company has
agreed, for a period of 180 days after consummation of the Exchange Offer, to
make available a prospectus meeting the requirements of the Securities Act to
any such broker-dealer for use in connection with any resale of any New Notes
acquired in the Exchange Offer. A broker-dealer which delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
Each holder of the Old Notes who wishes to exchange such Old Notes for
New Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any New Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
New Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or, if it is an affiliate, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
If the holder if not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution
of the New Notes. If the holder is a broker-dealer that will receive New Notes
for its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
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<PAGE> 100
The Registration Rights Agreement provides that: (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the
Company will file an Exchange Offer registration statement with the Commission
on or prior to 60 days after the date of original issuance of the Old Notes
(the "Closing Date"), (ii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Company will use its best efforts to
have the Exchange Offer registration statement declared effective by the
Commission on or prior to 120 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use reasonable efforts to
issue, on or prior to 20 business days after the date on which the Exchange
Offer registration statement was declared effective by the Commission, New
Notes in exchange for all Old Notes tendered prior thereto in the Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, the
Company will file prior to the later of (x) 60 days after the Closing Date or
(y) 30 days after such filing obligation arises and use its best efforts to
cause the Shelf Registration Statement to be declared effective by the
Commission on or prior to 90 days after such obligation arises; provided that
if the Company has not consummated the Exchange Offer within 180 days of the
Closing Date, then the Company will file the Shelf Registration Statement with
the Commission on or prior to the 181st day after the Closing Date. The
Company shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended until the third anniversary of
the Closing Date or such shorter period that will terminate when all the
Transfer Restricted Notes covered by the Shelf Registration Statement have been
sold pursuant thereto. If (a) the Company fails to file any of the
registration statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such registration
statements are not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 20 business days of the
Effectiveness Target Date with respect to the Exchange Offer registration
statement, or (d) the Shelf Registration Statement or the Exchange Offer
registration statement is declared effective but thereafter, subject to certain
exceptions, ceases to be effective or usable in connection with the Exchange
Offer or resales of Transfer Restricted Notes, as the case may be, during the
periods specified in the Registration Rights Agreement (each such event
referred to in clauses (a) through (d) above, a "Registration Default"), then
the interest rate on Transfer Restricted Notes will increase ("Additional
Interest"), with respect to the first 90-day period immediately following the
occurrence of such Registration Default by 0.50% per annum and will increase by
an additional 0.50% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of 2%
per annum. Following the cure of all Registration Defaults, the accrual of
Additional Interest will cease and the Interest rate will revert to the
original rate.
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 reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
BOOK ENTRY; DELIVERY AND FORM
The New Notes initially will be represented by a single, permanent global
certificate in definitive, fully registered form (the "Global Note"). The
Global Note will be deposited on the Closing Date with, or on behalf of, The
Depository Trust Company ("DTC") and registered in the name of a nominee of
DTC.
THE GLOBAL NOTE
The Company expects that pursuant to procedures established by DTC (i)
upon the issuance of the Global Note, DTC or its custodian will credit, on its
internal system, the principal amount of Notes
98
<PAGE> 101
of the individual beneficial interest represented by such Global Note to the
respective accounts for persons who have accounts with DTC and (ii) ownership
of beneficial interest in the Global Note will be shown on, and the transfer of
such ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Note will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interest through participants.
So long as DTC or its nominee is the registered owner or holder of the
New Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the New Notes represented by such Global Note for all
purposes under the Indenture. No beneficial owner of an interest in any Global
Note will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture.
Payments of the principal of, premium, if any, and interest (including
Additional Interest) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any paying agent of the Trustee 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 DTC or its nominee, upon receipt of any payment
of principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Note, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Note as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interest in the Global Note 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 in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in clearinghouse funds.
If a holder requires physical delivery of a Certificated Security for any
reason, including to sell Notes to persons in states which require physical
delivery of the Certificated Securities, or to pledge such securities, such
holder must transfer its interest in the Global Note in accordance with the
normal procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of Notes as to which
such participant or participants has or have given such direction. However, if
there is an Event of Default under the Indenture, DTC will exchange the Global
Note for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book entry changes in
accounts of its participants, thereby eliminating the need for physical
movement
99
<PAGE> 102
of certificates. Participants include securities brokers and dealers banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may
be discontinued at any time. None of the Company, the Initial Purchasers or
the Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Company
within 90 days, Certificated Securities will be issued in exchange for the
Global Note.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff 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 the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder
which is (i) an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act, (ii) a broker-dealer who acquired Notes directly from the
Company or (iii) broker-dealers who acquired Notes as a result of market-making
or other trading activities) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business, and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such New Notes; provided that broker-dealers ("Participating
Broker-Dealers") receiving New Notes in the Exchange Offer will be subject to a
prospectus delivery requirement with respect to resales of such New Notes. To
date, the Staff has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to transactions
involving an exchange of securities such as the exchange pursuant to the
Exchange Offer (other than a resale of an unsold allotment from the sale of the
Old Notes to the Initial Purchasers) with the Prospectus contained in the
Exchange Offer Registration Statement. Pursuant to the Registration Rights
Agreement, the Company has agreed to permit Participating Broker-Dealers and
other persons, if any, subject to similar prospectus delivery requirements to
use this Prospectus in connection with the resale of such New Notes. The
Company and the Guarantors have agreed that, for a period of 180 days after the
Expiration Date, they will make this Prospectus, and any amendment or
supplement to this Prospectus, available to any broker-dealer that requests
such documents in the Letter of Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer -- Terms and Conditions of the
Letter of Transmittal." In addition, each holder who is a broker-dealer and
who receives New Notes for its own account in exchange for Old Notes that were
acquired by it as a result of market-making activities or other trading
activities, will be required to acknowledge that it will deliver a prospectus
in connection with any resale by it of such New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
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<PAGE> 103
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 at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange offer 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 broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange
Offer other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, the Company has agreed to use its best efforts to cause the
New Notes to be listed on the New York Stock Exchange.
LEGAL MATTERS
Certain legal matters regarding the validity of the New Notes offered
hereby will be passed upon for the Company by Katten Muchin & Zavis, a
partnership including professional corporations, Chicago, Illinois.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited consolidated financial statements of the Company (excluding
Dyno) at December 31, 1994, 1993 and 1992, and for each of the three years in
the period ended December 31, 1994, included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
its report appearing herein. The audited combined financial statements of Dyno
at December 31, 1994 and for the period then ended included in this Prospectus
have been audited by Arthur Andersen & Co. GmbH, independent public
accountants, as stated in its report appearing herein. In addition, the
combined financial statements of Dyno at December 31, 1993, for the period
ended December 31, 1993, and the combined statement of revenues and direct
costs and expenses for the period ended December 31, 1992, included in this
Prospectus have been audited by Deloitte & Touche, independent public
accountants, as stated in their reports appearing herein.
101
<PAGE> 104
INDEX TO FINANCIAL STATEMENTS
WALBRO CORPORATION
As of December 31, 1994, 1993 and 1992 and for the years ended December 31,
1994, 1993 and 1992
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Balance Sheets.......................................................... F-3
Consolidated Statements of Income.................................................... F-4
Consolidated Statements of Stockholders' Equity...................................... F-5
Consolidated Statements of Cash Flows................................................ F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
As of June 30, 1995 and for the six months ended June 30, 1995 and 1994
<TABLE>
<S> <C>
Unaudited Consolidated Balance Sheet as of June 30, 1995 and
Audited Consolidated Balance Sheet as of December 31, 1994......................... F-37
Consolidated Statements of Income (Unaudited)........................................ F-38
Consolidated Statements of Cash Flows (Unaudited).................................... F-39
Notes to Consolidated Financial Statements (Unaudited)............................... F-40
</TABLE>
THE FUEL SYSTEMS BUSINESS OF DYNO INDUSTRIER A.S
As of December 31, 1994 and 1993 and for the years ended December 31, 1994
and 1993
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................. F-47
Combined Balance Sheets.............................................................. F-49
Combined Income Statements........................................................... F-50
Combined Statements of Cash Flows.................................................... F-51
Notes to the Combined Financial Statements........................................... F-52
</TABLE>
For the year ended December 31, 1992
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................. F-62
Combined Statement of Revenues and Direct Costs and Expenses......................... F-63
Notes to the Financial Statements.................................................... F-64
</TABLE>
As of June 30, 1995 and for the six months ended June 30, 1995 and 1994
<TABLE>
<S> <C>
Unaudited Combined Balance Sheets as of June 30, 1995 and 1994....................... F-66
Combined Income Statements (Unaudited)............................................... F-67
Combined Statements of Cash Flows (Unaudited)........................................ F-68
Notes to the Combined Financial Statements (Unaudited)............................... F-69
</TABLE>
F-1
<PAGE> 105
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and
Stockholders of Walbro Corporation:
We have audited the accompanying consolidated balance sheets of Walbro
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1994,
1993 and 1992, and the related consolidated statements of income, stockholders'
equity and cash flows for the years then ended. 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 financial position of Walbro Corporation and
subsidiaries as of December 31, 1994, 1993 and 1992, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for investments in
debt and equity securities. In addition, as discussed in Note 10 to the
consolidated financial statements, effective January 1, 1993, the Company
changed its method of accounting for postretirement benefits other than
pensions.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 14, 1995
(Except with respect to the matters
discussed in Notes 20 and 21, as to
which the date is June 30, 1995).
F-2
<PAGE> 106
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash............................................................ $ 4,540 $ 4,605 $ 8,248
Accounts receivable, net........................................ 66,333 44,676 40,369
Inventories..................................................... 31,439 26,898 23,938
Prepaid expenses and other...................................... 4,001 7,266 4,544
Deferred and refundable income taxes............................ 3,663 4,871 3,115
-------- -------- --------
Total Current Assets.......................................... 109,976 88,316 80,214
-------- -------- --------
Plant and Equipment, at cost:
Land............................................................ 1,234 426 678
Buildings and improvements...................................... 44,668 43,689 34,385
Machinery and equipment......................................... 93,127 71,727 65,128
-------- -------- --------
139,029 115,842 100,191
Less -- Accumulated depreciation................................ 50,737 41,666 34,635
-------- -------- --------
Net Plant and Equipment....................................... 88,292 74,176 65,556
-------- -------- --------
Other Assets:
Funds held for construction..................................... 1,061 2,710 --
Joint ventures.................................................. 16,518 11,278 10,095
Investments..................................................... 10,797 8,057 5,988
Goodwill, net................................................... 16,905 16,937 16,620
Plant and equipment held for resale............................. 80 80 248
Notes receivable................................................ 4,366 3,616 1,974
Deferred income taxes........................................... 871 41 --
Other........................................................... 8,500 10,084 12,325
-------- -------- --------
Total Other Assets............................................ 59,098 52,803 47,250
-------- -------- --------
Total Assets.................................................. $257,366 $215,295 $193,020
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............................... $ 8,442 $ 408 $ 7,069
Bank and other borrowings....................................... 6,970 5,375 2,642
Accounts payable................................................ 23,252 19,991 17,070
Accrued liabilities............................................. 12,077 11,500 8,881
Dividends payable............................................... 857 855 810
-------- -------- --------
Total Current Liabilities..................................... 51,598 38,129 36,472
-------- -------- --------
Long-Term Liabilities:
Long-term debt, less current portion............................ 66,136 52,392 49,638
Pension obligations and other................................... 8,153 8,071 3,157
Deferred income taxes........................................... 2,439 2,557 3,843
Minority interest............................................... 1,125 -- --
-------- -------- --------
Total Long-Term Liabilities................................... 77,853 63,020 56,638
-------- -------- --------
Stockholders' Equity
Common stock, $.50 par value; authorized 15,000,000; outstanding
8,564,576 in 1994, 8,551,782 in 1993, and 8,098,242 in 1992... 4,282 4,276 4,049
Paid-in capital................................................. 64,221 63,997 57,139
Retained earnings............................................... 55,855 44,686 38,422
Deferred compensation........................................... (1,225) (1,634) (2,042)
Minimum pension liability adjustment............................ -- (520) (371)
Unrealized gain on securities available for sale................ 1,428 -- --
Cumulative translation adjustments.............................. 3,354 3,341 2,713
-------- -------- --------
Total Stockholders' Equity.................................... 127,915 114,146 99,910
-------- -------- --------
Total Liabilities and Stockholders' Equity.................... $257,366 $215,295 $193,020
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 107
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net Sales................................................... $325,205 $273,463 $241,416
Costs and Expenses:
Cost of sales............................................. 261,501 216,804 185,712
Selling and administrative expenses....................... 39,318 33,043 33,614
Reorganization and restructuring charges.................. -- 1,760 --
-------- -------- --------
Operating Income............................................ 24,386 21,856 22,090
Other Expense (Income):
Unrealized loss on marketable equity security............. -- -- 1,050
Interest expense.......................................... 3,862 2,594 3,704
Interest income........................................... (91) (35) (591)
Foreign currency exchange loss............................ 2,602 1,495 566
Other..................................................... 111 572 350
-------- -------- --------
Income before provision for income taxes, minority
interest, equity in (income) loss of joint ventures and
cumulative effect of accounting change................. 17,902 17,230 17,011
Provision for income taxes.................................. 5,824 4,574 4,664
Minority interest........................................... 92 -- --
Equity in (income) loss of joint ventures................... (2,609) 89 (179)
-------- -------- --------
Income before cumulative effect of accounting change........ 14,595 12,567 12,526
Cumulative effect of accounting change, net of tax benefit
of $1,494 in 1993......................................... -- 2,900 --
-------- -------- --------
Net income............................................. $ 14,595 $ 9,667 $ 12,526
======== ======== ========
Primary Income Per Share:
Income before cumulative effect of accounting change...... $ 1.70 $ 1.47 $ 1.63
Cumulative effect of accounting change, net of tax
benefit................................................ -- (.34) --
-------- -------- --------
Net income............................................. $ 1.70 $ 1.13 $ 1.63
======== ======== ========
Fully Diluted Income Per Share:
Income before cumulative effect of accounting change...... $ 1.70 $ 1.47 $ 1.58
Cumulative effect of accounting change, net of tax
benefit................................................ -- (.34) --
-------- -------- --------
Net income............................................. $ 1.70 $ 1.13 $ 1.58
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 108
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
MINIMUM SECURITIES CUMULATIVE
COMMON PAID-IN RETAINED DEFERRED PENSION AVAILABLE TRANSLATION
STOCK CAPITAL EARNINGS COMPENSATION LIABILITY FOR SALE ADJUSTMENTS
------ ------- -------- ------------ --------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance --
December 31, 1991............. $3,049 $17,355 $29,088 $ (2,450) $ -- $ -- $ 3,297
Net proceeds from public
offering of 1,112,135 shares
of common stock............. 556 25,720 -- -- -- -- --
Conversion of convertible
subordinated notes into
827,086 shares of common
stock....................... 414 12,794 -- -- -- -- --
Conversion of Series C
redeemable preferred
stock....................... 15 930 -- -- -- -- --
Exercise of stock options..... 15 340 -- -- -- -- --
ESOP debt payments............ -- -- -- 408 -- -- --
Net income.................... -- -- 12,526 -- -- -- --
Additional minimum pension
liability................... -- -- -- -- (371) -- --
Cash dividends
($.40 per share)............ -- -- (3,192) -- -- -- --
Translation adjustments....... -- -- -- -- -- -- (584)
------ ------- ------- -------- ------- ------- -------
Balance --
December 31, 1992............. 4,049 57,139 38,422 (2,042) (371) -- 2,713
Conversion of convertible
subordinated notes into
404,429 shares of common
stock....................... 202 6,273 -- -- -- -- --
Exercise of stock options..... 25 585 -- -- -- -- --
ESOP debt payments............ -- -- -- 408 -- -- --
Net income.................... -- -- 9,667 -- -- -- --
Additional minimum pension
liability................... -- -- -- -- (149) -- --
Cash dividends
($.40 per share)............ -- -- (3,403) -- -- -- --
Translation adjustments....... -- -- -- -- -- -- 628
------ ------- ------- -------- ------- ------- -------
Balance --
December 31, 1993............. 4,276 63,997 44,686 (1,634) (520) -- 3,341
Change in accounting for
securities available for
sale -- January 1, 1994..... -- -- -- -- -- 2,096 --
Exercise of stock options..... 6 224 -- -- -- -- --
ESOP debt payments............ -- -- -- 409 -- -- --
Net income.................... -- -- 14,595 -- -- -- --
Additional minimum pension
liability................... -- -- -- -- 520 -- --
Cash dividends
($.40 per share)............ -- -- (3,426) -- -- -- --
Change in market value of
securities available for
sale........................ -- -- -- -- -- (668) --
Translation adjustments....... -- -- -- -- -- -- 13
------ ------- ------- -------- ------- ------ -------
Balance --
December 31, 1994............. $4,282 $64,221 $55,855 $ (1,225) $ -- $1,428 $3,354
====== ======= ======= ======== ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 109
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income.................................................. $ 14,595 $ 9,667 $ 12,526
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization.......................... 14,672 11,339 10,339
Cumulative effect of accounting change................. -- 2,900 --
Loss on disposition of assets.......................... 449 372 870
Minority interest...................................... 92 -- --
(Income) loss of joint ventures........................ (2,609) 89 (179)
Reorganization and restructuring charges............... -- 754 --
Unrealized loss on marketable equity security.......... -- -- 1,050
Change in assets and liabilities, net of effects of
acquisitions:
Deferred income taxes............................... (681) (1,324) (1,117)
Deferred pension obligations and other.............. 519 544 659
Accounts payable and accrued liabilities............ 704 4,220 (1,436)
Accounts receivable, net............................ (18,463) (3,449) (8,078)
Inventories......................................... (3,752) (2,752) (3,297)
Prepaid expenses and other.......................... 4,951 (6,979) (3,767)
-------- -------- --------
Total adjustments................................. (4,118) 5,714 (4,956)
-------- -------- --------
Net cash provided by operating activities.............. 10,477 15,381 7,570
-------- -------- --------
Cash Flows From Investing Activities:
Purchase of plant and equipment............................. (18,844) (20,260) (14,681)
Acquisitions, net of cash acquired.......................... (1,480) 1,312 --
Purchase of other assets.................................... (2,615) (2,047) (3,455)
Investment in joint ventures and other...................... (1,508) (1,333) (4,206)
Proceeds from disposal of assets............................ 1,463 3,149 276
-------- -------- --------
Net cash used in investing activities.................. (22,984) (19,179) (22,066)
-------- -------- --------
Cash Flows From Financing Activities:
Net borrowings (repayments) under revolving line-of-credit
agreements............................................... (27,739) (3,691) 8,834
Debt repayments............................................. (824) (2,617) (13,247)
Proceeds from issuance of long-term debt.................... 45,000 9,000 6,300
Proceeds from issuance of common stock and options.......... 230 610 26,629
Retirement of redeemable preferred stock.................... -- -- (6,500)
Cash dividends paid......................................... (3,424) (3,359) (2,992)
-------- -------- --------
Net cash provided by (used in) financing activities.... 13,243 (57) 19,024
-------- -------- --------
Effect of exchange rate changes on cash..................... (801) 212 (513)
-------- -------- --------
Net increase (decrease) in cash............................. (65) (3,643) 4,015
Cash at beginning of year................................... 4,605 8,248 4,233
-------- -------- --------
Cash at end of year......................................... $ 4,540 $ 4,605 $ 8,248
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 110
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation:
The consolidated financial statements include the accounts of Walbro
Corporation and its wholly-owned and majority owned subsidiaries (the Company).
Investments in joint ventures are generally accounted for under the equity
method (Note 2). Significant transactions and balances among the Company and its
subsidiaries have been eliminated in the consolidated financial statements.
Foreign Currency Translation:
The assets and liabilities of the Company's foreign operations are
generally translated into U.S. dollars at current exchange rates, and revenues
and expenses are translated at average exchange rates for the year. Resulting
translation adjustments are reflected as a separate component of stockholders'
equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency,
except those transactions which operate as a hedge of an identifiable foreign
currency commitment or as a hedge of a foreign currency investment position, are
included in the results of operations as incurred.
Accounts Receivable:
Accounts receivable are net of allowances for doubtful accounts of
$732,000, $413,000 and $340,000 as of December 31, 1994, 1993 and 1992,
respectively.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories include raw materials and component parts, work-in-process
and finished products. Work-in-process and finished products inventories include
material, labor and manufacturing overhead costs.
Inventory at December 31, 1994 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994
-------
<S> <C>
Raw materials and components.................................... $19,310
Work-in-process................................................. 6,915
Finished products............................................... 5,214
-------
$31,439
=======
</TABLE>
Amounts included in work-in-process and finished products in 1993 and 1992
were not material.
Plant and Equipment:
The Company provides for depreciation of plant and equipment based upon the
acquisition costs and the estimated service lives of depreciable assets. The
straight-line method is the principal method used to compute depreciation for
financial reporting purposes. However, the units-of-production method is used to
compute depreciation of certain equipment. Estimated service lives of
depreciable assets are as follows: buildings and improvements -- 30 years,
machinery and equipment -- 5 to 10 years.
Marketable Equity Securities:
Effective January 1, 1994, the carrying value of marketable equity
securities is market value (Note 3). During 1993 and 1992, the carrying value of
marketable equity securities was based on the lower of cost or
F-7
<PAGE> 111
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
quoted market value. Net unrealized losses on non-current marketable equity
securities that were deemed to be other than temporary were reflected in income.
Realized gains and losses on the sale of marketable equity securities are
recognized in income on the specific identification basis.
Goodwill:
Goodwill consists of purchase price and related acquisition costs in excess
of the fair value of the identifiable net assets acquired. Goodwill is amortized
on a straight-line basis over 15 to 40 years. The Company evaluates the carrying
value of goodwill for potential impairment on an ongoing basis. Such evaluations
compare operating income before amortization of goodwill of the operations to
which goodwill relates to the amortization recorded. The Company also considers
future anticipated operating results, trends and other circumstances in making
such evaluations.
Goodwill consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Goodwill...................................... $19,367 $18,943 $18,137
Less: Accumulated amortization................ (2,462) (2,006) (1,517)
------- ------- -------
$16,905 $16,937 $16,620
======= ======= =======
</TABLE>
Income Taxes:
The consolidated financial statements for 1994 and 1993 have been prepared
in accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." The adoption of SFAS No. 109 as
of January 1, 1993 did not have a material impact on the consolidated financial
statements of the Company. The consolidated financial statements for 1992 have
been prepared in accordance with the provisions of SFAS No. 96, which was
superseded by SFAS No. 109. The 1992 consolidated financial statements have not
been restated to conform to the 1994 and 1993 presentation.
Deferred income taxes represent the effect of cumulative temporary
differences between income and expense items reported for financial statement
and tax purposes, and between the bases of various assets and liabilities for
financial statement and tax purposes. Deferred tax assets are reduced by a
valuation allowance if, based on the weight of evidence, it is deemed more
likely than not that the asset will not be realized.
Research and Development Costs:
Research and development costs are charged to operations as incurred and
amounted to $12,199,000, $9,484,000 and $9,040,000 for 1994, 1993 and 1992,
respectively.
Financial Instruments:
The Company enters into interest rate swap agreements. The differential to
be paid or received is accrued as interest rates change and is recognized over
the life of the agreements. In order to manage exposure to fluctuations in
foreign currency exchange rates, the Company regularly enters into forward
currency exchange contracts. Gains and losses on contracts that hedge specific
foreign currency commitments are deferred and recognized in net income in the
period in which the related transaction is consummated. Gains and losses on
contracts that hedge net investments in foreign joint ventures or subsidiaries
are recognized as cumulative translation adjustments in stockholders' equity.
Gains and losses on forward currency exchange contracts that do not qualify as
hedges are recognized as other income or expense.
F-8
<PAGE> 112
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Per Share Information:
Primary income per share is based on the weighted average number of shares
outstanding during each period. Shares used in the per share calculations were
8,602,077 in 1994, 8,537,375 in 1993 and 7,675,974 in 1992.
Fully diluted income per share is calculated by dividing income, after
deducting interest on the subordinated debt, by the weighted average common
shares outstanding during the period under the treasury stock method. Shares
used in the per share calculations were 8,602,077 in 1994, 8,537,375 in 1993 and
8,160,472 in 1992.
Reclassifications:
Certain amounts in prior years' consolidated financial statements have been
reclassified to conform with the presentation used in 1994.
NOTE 2. JOINT VENTURES.
The investments in joint ventures as of December 31 are as follows:
<TABLE>
<CAPTION>
PERCENT BENEFICIAL OWNERSHIP
----------------------------
1994 1993 1992
-------- -------- ----
<S> <C> <C> <C>
Marwal Systems, S.A. ......................... 49% 49% 49%
Walbro Korea Ltd. ............................ (Note 4) (Note 4) 50%
Mitsuba-Walbro, Inc. ......................... 50% 50% 50%
Marwal do Brasil, Ltda. ...................... 49% 49% --
Korea Automotive Fuel Systems, Ltd. .......... 49% -- --
</TABLE>
The above joint ventures are generally involved in the design and
manufacture of precision fuel systems products for the global automotive market.
All of the above investments in joint ventures are accounted for using the
equity method, except Walbro Korea Ltd. in 1994 and 1993 (Note 4). Certain
adjustments are made to the joint ventures' income so that recorded income is
stated in accordance with United States generally accepted accounting
principles. At December 31, 1994, the cumulative effect of these adjustments was
to increase the Company's equity in its joint ventures by approximately
$1,300,000. At December 31, 1994, the amount included in retained earnings as
undistributed earnings of foreign joint ventures was approximately $918,000.
In December 1994, the Company entered into a joint venture (Korea
Automotive Fuel Systems, Ltd.) with Daewoo Precision Industries in Korea. Korea
Automotive Fuel Systems, Ltd. manufactures fuel sending units for the Korean
automotive market.
In February 1993, the Company entered into a joint venture (Marwal do
Brasil, Ltda.) with Magneti Marelli, S.p.A. in Brazil. Marwal do Brasil, Ltda.
manufactures and markets fuel system components to customers in South America.
During 1992, the Company exercised an exchange option and liquidated its
50% investment in a former joint venture, Orbital-Walbro Corporation. As a
result of this exchange transaction, the Company received $5.5 million in cash
and approximately 3,746,600 shares of Orbital Engine Company Pty. Ltd., the
parent company of the joint venture partner and a public company listed on the
Australian stock exchange. The shares of stock received by the Company have been
recorded at an amount equal to the Company's investment in the joint venture at
the time the option was exercised.
F-9
<PAGE> 113
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized combined financial information for joint ventures accounted for
under the equity method is as follows (unaudited, in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Balance sheet data:
Current assets............................. $53,160 $35,773 $32,851
Non-current assets......................... 26,069 20,140 16,248
Current liabilities........................ 48,160 36,672 28,959
Non-current liabilities.................... 786 882 1,885
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Income statement data:
Net sales.................................. $137,873 $80,722 $72,431
Gross profit............................... 29,283 15,063 14,671
Income before provision for income taxes... 8,136 962 291
Net income (loss).......................... 5,164 466 (362)
</TABLE>
Dividends from joint ventures of approximately $38,000, $45,000 and $40,000
were received by the Company during 1994, 1993 and 1992, respectively. The
Company has sales to joint ventures of approximately $20,407,000, $20,456,000
and $15,942,000 for 1994, 1993 and 1992, respectively. Included in accounts
receivable are trade receivables from joint ventures of approximately
$7,349,000, $1,882,000 and $5,064,000 for 1994, 1993 and 1992, respectively. The
Company had purchases from joint ventures of approximately $15,329,000,
$11,820,000 and $9,791,000 for 1994, 1993 and 1992, respectively. Included in
accounts payable are trade payables to joint ventures of approximately $782,000
and $1,120,000 for 1994 and 1993, respectively. Trade payables to joint ventures
were not material for 1992.
NOTE 3. INVESTMENTS.
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." This Statement requires
that certain investments be classified into three separate categories:
"held-to-maturity", "available-for-sale", and "trading", each with different
accounting treatment. The Company has classified its investments in common stock
securities as "available-for-sale" which requires the Company to record these
investments at fair market value and record the gross unrealized holding gains
and losses, after-tax, as a separate component of stockholders' equity. The
impact of adoption at January 1, 1994 was to increase investments by
approximately $3,225,000 and to increase stockholders' equity by $2,096,000, net
of income taxes.
As of December 31, 1994, the fair market value of the Company's investments
was approximately $10,797,000, including gross unrealized holding gains of
approximately $2,167,000 ($1,428,000 after-tax). During the year ended December
31, 1994, the gross unrealized holding gains decreased by approximately
$1,058,000 ($668,000 after-tax), which was reflected as a change in
stockholders' equity.
At December 31, 1993 and 1992, the portfolio of noncurrent marketable
equity securities includes gross unrealized gains of approximately $3,240,000
and $5,458,000, respectively.
In 1990, the Company acquired 207,000 shares of common stock of Mitsuba
Electric Company, its joint venture partner in Mitsuba-Walbro, Inc. The
investment is treated as a noncurrent marketable equity security for financial
statement presentation. Prior to 1992, any decrease in the market value of the
Mitsuba Electric stock was determined to be temporary in nature. With the
deterioration of the Japanese economy, the losses suffered by the Japanese
automakers and their component suppliers along with the strengthening of the Yen
in
F-10
<PAGE> 114
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1992, it was determined that the decline in value was deemed to be other than
temporary in nature and a charge to earnings of $1,050,000 was recorded in the
fourth quarter of 1992.
NOTE 4. ACQUISITIONS.
In January 1994, the Company acquired a 60% interest in Fujian Hualong
Carburetor Co., Ltd. (Fujian), which manufactures and markets carburetors for
two-wheeled vehicles in China. In connection with the acquisition, the Company
exchanged approximately $1,500,000 for a 60% ownership interest in Fujian. This
acquisition was accounted for as a purchase. The purchase price approximated the
fair value of the net assets acquired. As a result, Fujian's balance sheet as of
December 31, 1994 and its results of operations for the period then ended have
been included in the Company's consolidated financial statements.
In May 1994, the Company acquired a 100% ownership interest in an
engineering firm in Canada (Walbro Canada) for an aggregate purchase price of
$352,000. This acquisition was accounted for as a purchase. The excess of the
purchase price over the fair value of the net assets acquired was approximately
$424,000 and will be amortized over 15 years. As a result, Walbro Canada's
balance sheet as of December 31, 1994 and its results of operations for the
period since the date of acquisition have been included in the Company's
consolidated financial statements.
In April 1993, the Company purchased the interests of its joint venture
partners in Walbro Korea Ltd. for a purchase price of approximately $640,000,
including related expenses. As a result, the Company now has 100% ownership.
Prior to this purchase, the Company owned 50% of Walbro Korea Ltd.'s common
stock and accounted for its investment under the equity method of accounting.
This acquisition was accounted for as a purchase. The excess of the purchase
price over the fair value of net assets acquired was approximately $800,000.
Walbro Korea Ltd. has been included in the Company's consolidated financial
statements from the date of purchase.
Pro forma results of these acquisitions, assuming they had taken place at
the beginning of each year presented, would not be materially different from the
results reported.
NOTE 5. REORGANIZATION AND RESTRUCTURING CHARGES.
During 1993, the Company recorded a pretax charge of $1,760,000 for
employee separation costs in connection with a management reorganization, of
which $1,006,000 was paid during the year. The remaining amount of $754,000 was
paid during 1994.
F-11
<PAGE> 115
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. LONG-TERM DEBT AND LINES OF CREDIT.
Long-term debt consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
2004 Notes, unsecured, interest at 7.68%, payable in annual
amounts from 1998 to 2004...................................... $45,000 $ -- $ --
Revolving credit loan, interest rate from LIBOR plus 5/8% to
prime, unsecured............................................... -- 28,750 35,050
Industrial revenue bond, issued by Town of Ossian, Indiana,
interest at a variable municipal bond rate, due in 2023........ 9,000 9,000 --
Industrial revenue bond, issued by City of Ligonier, Indiana,
interest at a variable municipal bond rate plus 1%, payable in
annual amounts from 2003 to 2007............................... 6,300 6,300 6,300
Convertible subordinated promissory notes, 8%, callable in April
1993, convertible into shares of common stock at a rate of one
share for each $16.24 of principal............................. -- -- 6,568
Foreign bank note, payable in Japanese yen, interest at Japanese
prime, due in May 1995......................................... 7,519 6,708 6,014
Foreign bank note, payable in Chinese Renminbi, interest at 9.8%,
due in 1997.................................................... 348 -- --
ESOP credit agreement, secured, interest rate which approximates
86% of prime, payable in annual installments of $408,000....... 1,634 2,042 2,451
Capital lease obligations, interest at 7.5%, payable in monthly
installments through February 2002............................. 4,710 -- --
Other............................................................ 67 -- 324
------- ------- -------
74,578 52,800 56,707
Less -- current portion.......................................... 8,442 408 7,069
------- ------- -------
$66,136 $52,392 $49,638
======= ======= =======
</TABLE>
In October 1994, the Company sold $45,000,000 of 7.68% senior notes (2004
Notes). The 2004 Notes require quarterly interest payments due January 1, April
1, July 1 and October 1. The agreement requires the Company to maintain
consolidated adjusted net worth of $85 million plus 25% of cumulative net income
for each year beginning in 1995 and a funded debt to total capital ratio not
greater than .65 to 1.
In January 1993, the Company amended its revolving credit agreement
increasing the Company's borrowing capacity under the agreement up to $80
million. The amended revolving credit agreement is subject to a commitment fee
of 1/8% to 3/8% on the unused portion, bears interest at rates varying from
LIBOR plus 5/8% to prime and expires in January 1996. The agreement requires
the Company to maintain working capital of $20 million, a fixed charge coverage
ratio of 2 to 1, a current ratio of not less than 1.5 to 1, consolidated
tangible net worth of $65 million plus 50% of cumulative net income for each
year beginning in 1993 and a leverage ratio of not more than 2 to 1.
During 1994, the Company entered into an agreement to lease certain
machinery under terms which qualified as a capital lease. As of December 31,
1994, assets recorded under this capital lease were approximately $5,109,000,
net of accumulated amortization of approximately $18,000.
Aggregate minimum principal payment requirements on long-term debt,
including capital lease obligations, in each of the five years subsequent to
December 31, 1994 are as follows: 1995 -- $8,442,000; 1996 -- $963,000; 1997 --
$1,421,000; 1998 -- $7,503,000; 1999 -- $7,144,000, and thereafter --
$49,105,000.
F-12
<PAGE> 116
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to long-term debt, the Company and its subsidiaries have line
of credit arrangements with foreign banks for short-term borrowings of
approximately $11,919,000, $7,200,000 and $2,500,000 at December 31, 1994, 1993
and 1992, respectively. The weighted average interest rate on short-term bank
borrowings outstanding under these arrangements was 6.7%, 5.6% and 3.9% as of
December 31, 1994, 1993 and 1992, respectively. Certain of these borrowings are
secured by certain plant and equipment.
NOTE 7. COMMITMENTS AND CONTINGENCIES.
The manufacture of automotive components entails the risk that a customer
or governmental authority may require the recall of one of the Company's
products or a product in which one of the Company's products has been installed.
The Company has taken and will continue to take all reasonable precautions to
avoid the risk of exposure to a recall or warranty claim that would have a
material effect on the financial position of the Company. The Company does not
believe that any insurance is available to protect against potential product
recall/warranty liability. The Company provides for warranty claims on its
products on an ongoing basis.
Management believes that any liability resulting from these matters will
not have a material impact on the financial position or future results of
operations of the Company.
NOTE 8. INCOME TAXES.
The provisions of SFAS No. 109, "Accounting for Income Taxes" have been
applied in the consolidated financial statements for the years ended December
31, 1994 and 1993. The provisions of SFAS No. 96, "Accounting for Income Taxes"
have been applied in the consolidated financial statements for the year ended
December 31, 1992. A summary of income before provision for income taxes,
minority interest, equity in (income) loss of joint ventures, and cumulative
effect of accounting change, and components of the provision are as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Income before provision for income taxes,
minority interest, equity in (income) loss
of joint ventures and cumulative effect of
accounting change:
Domestic................................. $12,873 $12,765 $13,749
Foreign.................................. 5,029 4,465 3,262
------- ------- -------
$17,902 $17,230 $17,011
======= ======= =======
Provision for income taxes:
Currently payable --
Domestic................................. $ 3,313 $ 4,923 $ 4,042
Foreign.................................. 1,674 1,931 1,397
Utilization of tax credits............... (605) (1,075) --
------- ------- -------
4,382 5,779 5,439
------- ------- -------
Deferred --
Domestic................................. 1,067 (1,161) (699)
Foreign.................................. (14) (309) (76)
Effect of change in U.S. statutory
rate................................... -- (90) --
Change in beginning of year valuation
allowance.............................. 389 355 --
------- ------- -------
1,442 (1,205) (775)
------- ------- -------
$ 5,824 $ 4,574 $ 4,664
======= ======= =======
</TABLE>
F-13
<PAGE> 117
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reconciliations of the U.S. Federal statutory income tax rates to the
Company's consolidated effective income tax rates applicable to continuing
operations are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory income tax rate.............. 35.0% 35.0% 34.0%
Increase (decrease) in effective income tax rate
resulting from --
Differences between U.S. and foreign income
tax rates................................. (1.2) .3 .4
Utilization of tax credits................... (3.4) (6.3) (8.7)
Increase in valuation allowance.............. 2.2 -- --
Goodwill amortization........................ .9 .9 .9
Other, net................................... (1.0) (3.4) .8
---- ---- ----
Effective income tax rates.......................... 32.5% 26.5% 27.4%
==== ==== ====
</TABLE>
The components of the net deferred income tax (asset) liability at December
31, 1994 and 1993 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Deferred income tax liabilities:
Depreciation and basis difference.................... $ 5,342 $ 4,958
Employee benefits.................................... 1,470 1,535
Income on joint ventures............................. -- 556
Basis difference on foreign currency contracts....... 910 999
Unrealized gain on securities available for sale..... 739 --
Other................................................ 483 660
------- -------
8,944 8,708
------- -------
Deferred income tax assets:
Estimated net operating loss carryforwards........... (585) (585)
Employee benefits.................................... (3,552) (3,135)
Accruals............................................. (238) (1,276)
Minimum pension liability adjustment................. -- (274)
Inventory............................................ (613) (611)
Accounts and notes receivable reserve................ (159) (179)
Write-down of investment............................. (368) (368)
Loss on joint ventures............................... (2,072) (2,646)
Other................................................ (207) (150)
------- -------
(7,794) (9,224)
------- -------
Valuation allowance.................................. 744 355
------- -------
(7,050) (8,869)
------- -------
Net deferred income tax (asset) liability.............. $ 1,894 $ (161)
======= =======
</TABLE>
The net change in the valuation allowance during 1994 and 1993 was an
increase of $389,000 and $355,000, respectively.
F-14
<PAGE> 118
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The sources of the timing differences and the related income tax effects
which compose the deferred income tax provision for 1992 are as follows (in
thousands):
<TABLE>
<CAPTION>
1992
----
<S> <C>
Depreciation............................................... $ 143
Inventory cost capitalization for tax purposes............. (103)
Reserve for restructuring costs............................ 68
ESOP contribution.......................................... (9)
Gain on machinery and equipment............................ 5
Inventory reserve.......................................... (179)
Employee benefits and bonuses.............................. (135)
Account and note reserves.................................. (128)
Plant closing reserve...................................... 388
Other...................................................... (825)
------
$ (775)
======
</TABLE>
At December 31, 1994, the cumulative amount of undistributed earnings of
foreign subsidiaries was approximately $16,500,000. No deferred U.S. income
taxes have been provided on these earnings as such amounts are deemed to be
permanently reinvested. If such earnings were remitted, the impact of foreign
withholding taxes would not be significant. The Company has net operating loss
carryforwards available from one of its subsidiaries of approximately
$1,670,000. These carryforwards expire in the year 2003.
Provisions for state income taxes are included in selling and
administrative expenses and amounted to $1,203,000 in 1994, $722,000 in 1993 and
$1,035,000 in 1992.
NOTE 9. STOCK OPTION PLANS AND LONG-TERM INCENTIVE PLANS.
The Company has a stock option plan, the Walbro Corporation 1983 Incentive
Stock Option Plan (1983 Plan), under which 155,850 shares of common stock are
reserved for issuance to officers and key employees. Options may be granted for
periods of up to ten years at prices greater than or equal to the market value
at the date of grant.
In addition, during 1991, the Board of Directors authorized the Walbro
Corporation Equity Based Long Term Incentive Plan, under which 428,900 shares of
common stock are reserved for issuance to officers and key employees. During
1992, the stockholders of the Company approved approximately an additional
330,400 shares of common stock reserved for issuance to officers and key
employees, bringing the total shares of common stock reserved for issuance to
approximately 759,300. Options are granted yearly based on certain financial
performance criteria as compared to the annual business plan. In addition,
grants are awarded yearly which, when exercised, result in a cash bonus equal to
the price of the common stock. If the Company's common stock price appreciates
at a 17% compounded rate over a five year term, the number of grants awarded,
valued at the common stock price, will equal the dollar amount necessary to
exercise the stock options. Participants will receive a greater or lesser number
of grants based on the actual market performance of the stock over the term of
the plan. The number of grants outstanding was 30,915, 31,912 and 43,012 as of
December 31, 1994, 1993 and 1992, respectively.
F-15
<PAGE> 119
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the stock option transactions of the 1983 Plan and the Equity
Based Long Term Incentive Plan for the years ended December 31, 1992, 1993 and
1994 is as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES (PER SHARE)
--------- --------------
<S> <C> <C>
Outstanding and exercisable, December 31, 1991.................... 169,232 $ 9.25 -- 26.00
Granted......................................................... 49,599 26.00
Exercised....................................................... (29,972) 9.25 -- 15.25
Canceled........................................................ (1,000) 10.88
-------
Outstanding and exercisable, December 31, 1992.................... 187,859 9.25 -- 26.00
Granted......................................................... 73,380 27.13 -- 33.25
Exercised....................................................... (49,111) 9.25 -- 26.00
Canceled........................................................ (9,116) 26.00
-------
Outstanding and exercisable, December 31, 1993.................... 203,012 9.25 -- 33.25
Granted......................................................... 88,701 17.00
Exercised....................................................... (12,794) 10.88 -- 26.00
Canceled........................................................ (5,808) 10.88 -- 33.25
-------
Outstanding and exercisable, December 31, 1994.................... 273,111 $ 9.25 -- 33.25
=======
</TABLE>
In 1991, the Company approved the Walbro Engine Management Corporation
(EMC) Incentive Compensation Plan which covers selected officers and key
employees of EMC. The purpose of the plan is to increase the proportion of
officer and key employee compensation tied to the profitability and cash flow of
EMC, a wholly-owned subsidiary of the Company. The plan requires EMC management
to amortize over a seven-year period, in annual installments of interest and
principal, an amount approximating the fair market value (FMV) of EMC at July 1,
1991. If all required payments have been made at the end of the fifth plan year,
the participants will receive an amount equal to 15% of the FMV of EMC. At that
time, if the payments made are less than 100% but greater than 70% of the
required amortization amount, the participants are eligible to receive a
pro-rata share of the 15% of FMV of EMC based on the actual repayment percentage
achieved. The Company has accrued approximately $3,100,000, $1,480,000 and
$180,000 as of December 31, 1994, 1993 and 1992, respectively, under this plan.
NOTE 10. POSTRETIREMENT HEALTH BENEFITS.
The Company provides postretirement health care, dental benefit and
prescription drug coverage to a limited number of current retirees. The cost of
these benefits was recognized as expense as premiums were paid and such amounts
were not significant for the year ended December 31, 1992. Postretirement
benefits are not available for active employees.
Effective January 1, 1993, the Company changed its method of accounting for
the cost of these benefits from a pay-as-you-go (cash) method to an accrual
method as required by SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," and recognized the unfunded transition obligation
of $4,394,000 ($2,900,000 after-tax) as a one-time cumulative effect of change
in accounting.
F-16
<PAGE> 120
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the status of the accrued postretirement
benefits obligation at December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------ -------
<S> <C> <C>
Retirees................................................ $4,687 $ 5,572
Fully eligible active plan participants................. -- --
Other active plan participants.......................... -- --
------ -------
4,687 5,572
Plan assets at fair value............................... -- --
------ -------
Accumulated postretirement benefit obligation in excess
of plan assets........................................ 4,687 5,572
Unrecognized net loss................................... (190) (1,120)
------ -------
Accrued postretirement benefits obligation.............. $4,497 $ 4,452
====== =======
</TABLE>
Net periodic postretirement benefit cost consisted of the following for the
years ended December 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Interest cost............................................ $ 378 $ 321
Amortization of unrecognized net loss.................... 35 --
----- -----
$ 413 $ 321
===== =====
</TABLE>
The unrecognized net loss in 1993 results from a change in the discount
rate from 7.5% to 7.0%. The discount rate used in 1994 was 8.5%.
For measurement purposes, an 11.3% annual rate of increase was assumed in
per capita cost of covered health and dental care benefits for 1994. The rate
was assumed to gradually decrease to 5% by the year 2003 and remain at that
level thereafter. The health care cost trend rate assumption has a significant
impact on the accumulated postretirement benefit obligation and on future
amounts accrued. A one percentage point increase each year in the assumed health
care cost would increase the accumulated postretirement benefit obligation at
December 31, 1994 by $417,000 and the interest cost component of net periodic
postretirement benefit cost for the year ended December 31, 1995 by $37,000.
Effective January 1, 1994, the Company adopted the provisions of SFAS No.
112, "Employers' Accounting for Postemployment Benefits." This Statement
requires that employers accrue the cost of postemployment benefits during the
employees' active service. The adoption of this Statement did not have a
material effect on the Company's financial position or results of operations.
NOTE 11. PENSION PLANS.
The Company sponsors pension plans covering substantially all domestic
collectively bargained and certain foreign employees. The plan covering domestic
collectively bargained employees provides benefits of stated amounts for each
year of service. Plans covering certain foreign employees provide payments at
termination which are based upon length of service, compensation rate and
whether termination was voluntary or involuntary. The Company annually
contributes to the plan covering domestic employees amounts which are
actuarially determined to provide the plan with sufficient assets to meet future
benefit payment requirements. The plans covering foreign employees are generally
not funded.
Total pension expense amounted to $239,000 in 1994, $280,000 in 1993 and
$526,000 in 1992. The Company recognizes currently the amount which would be
payable if all employees covered by its foreign plan
F-17
<PAGE> 121
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
terminated voluntarily. Pension expense for the plan covering domestic employees
is comprised of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Service cost...................................... $ 165 $ 157 $ 318
Interest on projected benefit obligation.......... 219 197 263
Actual return on assets........................... (182) (297) (219)
Net amortization and deferral..................... 16 171 11
----- ----- -----
$ 218 $ 228 $ 373
===== ===== =====
</TABLE>
The following table summarizes the funded status of the Company's domestic
defined benefit pension plan and the related amounts recognized in the Company's
consolidated balance sheets as of December 31, 1994, 1993 and 1992 (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Actuarial present value of benefit obligation --
Vested......................................................... $(2,319) $(3,134) $(3,182)
Nonvested...................................................... (314) (282) (252)
------- ------- -------
Accumulated benefit obligation................................. (2,633) (3,416) (3,434)
Effects of salary progression.................................. -- -- --
------- ------- -------
Projected benefit obligation................................... (2,633) (3,416) (3,434)
------- ------- -------
Plan assets --
Cash equivalents............................................... 321 344 444
Equity securities.............................................. 2,438 2,350 --
Fixed income securities........................................ -- -- 2,475
------- ------- -------
2,759 2,694 2,919
------- ------- -------
Projected benefit obligation under (over) plan assets............ 126 (722) (515)
Unamortized net asset at transition............................ (75) (97) (152)
Unamortized net (gain) loss.................................... (74) 891 736
Adjustment to recognize minimum liability...................... -- (1,108) (892)
Unrecognized prior service cost................................ 498 314 259
------- ------- -------
Pension asset (liability) recorded in the consolidated balance
sheets......................................................... $ 475 $ (722) $ (564)
======= ======= =======
</TABLE>
SFAS No. 87, "Employers' Accounting for Pensions," required the Company to
record a minimum liability as of December 31, 1993 and 1992. The assumption used
in determining the funded status information shown above were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate........................................ 8.5% 6.5% 6.5%
Long-term rate of return on assets................... 8.5% 6.5% 6.5%
</TABLE>
The Company also sponsors a defined contribution plan under which the
Company will make matching contributions of 50% of each participant's before-tax
contribution (up to 6% of the participant's annual income) and retirement
contribution of up to 3% (subject to change on an annual basis) of a
participant's annual income. The cost of defined contributions charged to
earnings during 1994, 1993 and 1992 was approximately $1,431,000, $1,416,000 and
$1,361,000, respectively.
F-18
<PAGE> 122
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain non-union employees, excluding officers, are eligible to
participate in the Walbro Corporation Employee Stock Ownership Plan (ESOP). The
Company will make annual contributions to a trust in the form of either cash or
common stock of the Company. The amount of the annual contribution is
discretionary, except that it must be sufficient to enable the trust to meet its
current obligations. The Company has guaranteed the ESOP's loan and is obligated
to contribute sufficient cash to the trust to repay the loan. Contribution
expense related to the ESOP amounted to $365,000, $302,000 and $321,000 in 1994,
1993 and 1992, respectively. Contribution expense is net of dividends of
$210,000, $106,000 and $106,000 in 1994, 1993 and 1992, respectively. As of
December 31, 1994, 1993 and 1992, the following are held by the ESOP: 170,000,
152,000 and 127,000 allocated shares, respectively and 82,000, 109,000 and
136,000 suspense (unallocated) shares, respectively, which are all
committed-to-be-released.
NOTE 12. DISCLOSURES ABOUT DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF
FINANCIAL INSTRUMENTS.
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to help meet financing needs and to reduce
exposure to fluctuating foreign currency exchange rates. The Company is exposed
to credit loss in the event of nonperformance by the other parties to the
financial instruments described below. However, the Company does not anticipate
nonperformance by the other parties. The Company does not engage in trading
activities with these financial instruments and does not generally require
collateral or other security to support these financial instruments. The
notional amounts of derivatives summarized below do not represent the amounts
exchanged by the parties and, thus, are not a measure of the exposure of the
Company through its use of derivatives. The amounts exchanged are calculated on
the basis of the notional amounts and the other terms of the derivatives.
Financial Instruments with Off-Balance Sheet Risk
The Company enters into various types of contracts to manage its foreign
currency exchange risk and interest rate risk. A summary of these contracts
(notional amounts) as of December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Forward currency exchange contracts........... $14,000 $30,000 $31,000
Interest rate swaps........................... -- -- $15,000
</TABLE>
The Company enters into forward currency exchange contracts to manage its
exposure against foreign currency fluctuations related to firm commitments. As
of December 31, 1994, the Company has one forward currency exchange contract
maturing in 1995 which exchanges 86,332,000 French Francs. Total losses on this
contract of approximately $1,800,000 were recorded as a deferred asset. This
asset is being recognized based on actual purchases of the related foreign
currency transaction. The amounts included in the equity in (income) loss of
joint ventures in the accompanying consolidated statements of income related to
this contract for the year ending December 31, 1994 was approximately $600,000.
The Company enters into forward currency exchange contracts to hedge its
equity investments in certain foreign joint ventures. During 1994, the Company
had one forward currency exchange contract, which matured during 1994, which
exchanged 44,100,000 French Francs. At December 31, 1994, losses of $1,020,000
on a hedge of a net investment in a foreign joint venture are included in
stockholders' equity.
The Company enters into forward currency exchange contracts to reduce its
exposure against fluctuations in foreign currency exchange rates. During 1994,
the Company had twenty-one forward currency exchange contracts which matured
during 1994, which exchanged 1,133,000,000 Japanese Yen, 20,100,000 Deutsche
Marks, and 15,100,000 Singapore Dollars. The amounts included in foreign
currency exchange loss in the accompanying consolidated statements of income
related to these contracts for the year ending December 31, 1994 were
approximately $1,200,000.
F-19
<PAGE> 123
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company enters into interest rate swaps to manage its interest rate
risk. As of December 31, 1992, these agreements effectively converted an
aggregate principal amount of $15,000,000 of variable rate borrowings into fixed
rate borrowings with interest rates ranging from 9.50% to 9.75%. These
agreements matured during 1993.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and short-term financial instruments
The fair values are estimated to be equal to carrying values because of
the short-term, highly liquid nature of these instruments.
Notes receivable
The fair value is estimated using the expected future cash flows
discounted at current interest rates.
Marketable equity securities
The fair value of marketable equity securities is estimated by quoted
market prices when the investment is traded on a public stock exchange.
For investments not publicly traded, a combination of book value and
fair market value of assets is used (Note 3).
Long-term debt
The fair value of the Company's long-term debt is estimated using the
expected future cash flows discounted at the current interest rates
offered to the Company for debt of the same remaining maturities.
Forward currency exchange contracts
The fair value of forward currency exchange contracts is estimated by
obtaining quotes from brokers.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------------------- ------------------- -------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Notes receivable...................... $ 4,366 $ 4,860 $ 3,616 $ 4,049 $ 1,974 $ 1,974
Long-term debt........................ 74,578 73,513 52,800 52,542 56,707 56,422
Forward currency exchange contracts... (1,800) (1,800) -- (73) -- (150)
</TABLE>
NOTE 13. LEASES.
The Company has leased certain of its buildings, equipment and vehicles
under operating leases. The leases involving buildings contain options enabling
the Company to renew the leases at the end of the respective lease terms.
Rent expense was approximately $3,324,000, $2,655,000 and $2,808,000 in
1994, 1993 and 1992, respectively.
F-20
<PAGE> 124
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate minimum future rentals under noncancellable leases are as follows
(in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1995................................................... $ 850 $ 2,823
1996................................................... 850 2,046
1997................................................... 850 1,425
1998................................................... 850 833
1999................................................... 850 782
Thereafter............................................. 1,851 53
------- --------
Total minimum lease payments........................... 6,101 $ 7,962
=======
Amount representing interest........................... 1,391
-------
Present value of net future minimum lease payments..... $ 4,710
=======
</TABLE>
NOTE 14. ACCRUED LIABILITIES.
Accrued liabilities consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
<S> <C> <C> <C>
Compensation................................... $ 5,123 $ 3,941 $3,957
Income taxes................................... 2,239 1,498 --
Reorganization and restructuring............... -- 754 360
Interest....................................... 147 407 413
Other.......................................... 4,568 4,900 4,151
------- ------- ------
$12,077 $11,500 $8,881
======= ======= ======
</TABLE>
NOTE 15. STOCKHOLDERS' EQUITY.
The Company has a stock rights plan which entitles the holder of each
right, upon the occurrence of certain events, to purchase one one-hundredth of a
share of a new series of preferred stock for $75. Furthermore, if the Company is
involved in a merger or other business combination at any time after the rights
become exercisable, the rights will entitle the holder to buy the number of
shares of common stock of the acquiring company having a market value of twice
the then current exercise price of each right. Alternatively, if a 15% or more
shareholder acquires the Company by means of a reverse merger in which the
Company and its stock survives, or engages in self-dealing transactions with the
Company, or if any person acquires 50% or more of the Company's common stock,
then each right not owned by a 15% or more shareholder will become exercisable
for the number of shares of common stock of the Company having a market value of
twice the then current exercise price of each right. The rights, which do not
have voting rights, expire in December 1998 and may be redeemed by the Company
at a price of $.01 per right at any time prior to their expiration or the time
they become exercisable.
The Company has authorized 1,000,000 shares of $1.00 par value preferred
stock.
NOTE 16. REDEEMABLE PREFERRED STOCK.
In connection with the acquisition of the Whitehead Engineered Products
Group (Whitehead) in 1988, the Company reserved 75,000 shares of preferred stock
as Series C Non-Voting Participating Cumulative Preferred Stock. These shares
were released from escrow in 1991 due to the attainment of certain performance
targets by the Company's Whitehead operation. The preferred stock has a $1.00
par value and was redeemable
F-21
<PAGE> 125
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in twelve semi-annual installments commencing January 1993. This $7,500,000 of
preferred stock represents additional purchase price in connection with
Whitehead and, as a result, the Company recorded $7,500,000 of additional
goodwill in connection with the acquisition. During 1992, the Company redeemed
the preferred stock at a redemption price of $6,500,000 in cash and 30,888
shares of common stock.
NOTE 17. BUSINESS SEGMENT INFORMATION.
The Company operates through its subsidiaries in the following industry
segments:
1. Automotive, which designs, develops and manufactures fuel storage
and delivery products for a broad range of U.S. and foreign manufacturers
of passenger automobiles and light trucks (including minivans), and
2. Small engine, which designs, develops and manufactures diaphragm
carburetors for portable engines, float feed carburetors for ground
supported engines and ignition systems and other components for a variety
of small engine products. The Company includes aftermarket operations for
both the automotive and small engine markets within its small engine
business segment.
Selected financial information about the Company's business and geographic
segments are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Financial Information by Business Segment
Net sales to customers:
Automotive.................................. $204,563 $173,510 $156,172
Small engine................................ 135,505 114,116 95,285
-------- -------- --------
340,068 287,626 251,457
Eliminations.................................. (14,863) (14,163) (10,041)
-------- -------- --------
Total net sales............................... $325,205 $273,463 $241,416
======== ======== ========
Operating profit (loss):
Automotive.................................. $ 24,883 $ 20,416 $ 26,000
Small engine................................ 18,522 16,025 11,121
Corporate................................... (22,986) (19,300) (19,931)
-------- -------- --------
Income before provision for income taxes
and cumulative effect of accounting
change...................................... $ 20,419 $ 17,141 $ 17,190
======== ======== ========
Identifiable assets:
Automotive.................................. $155,006 $122,440 $106,253
Small engine................................ 64,494 58,121 52,547
Corporate................................... 37,866 34,734 34,220
-------- -------- --------
Total identifiable assets..................... $257,366 $215,295 $193,020
======== ======== ========
Depreciation and amortization:
Automotive.................................. $ 6,320 $ 5,652 $ 4,326
Small engine................................ 5,841 4,908 4,872
Corporate................................... 2,511 779 1,141
-------- -------- --------
Total depreciation and amortization........... $ 14,672 $ 11,339 $ 10,339
======== ======== ========
Capital expenditures:
Automotive.................................. $ 10,101 $ 15,439 $ 10,854
Small engine................................ 5,113 4,508 3,673
Corporate................................... 3,630 313 154
-------- -------- --------
Total capital expenditures.................... $ 18,844 $ 20,260 $ 14,681
======== ======== ========
</TABLE>
F-22
<PAGE> 126
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Financial Information by Geographic Segment
Net sales to customers:
Domestic.................................... $260,710 $215,149 $194,568
Foreign..................................... 64,495 58,314 46,848
-------- -------- --------
325,205 273,463 241,416
Net sales between geographic areas.......... 31,094 28,842 28,478
-------- -------- --------
356,299 302,305 269,894
Eliminations.................................. (31,094) (28,842) (28,478)
-------- -------- --------
Total net sales............................... $325,205 $273,463 $241,416
======== ======== ========
Operating profit (loss):
Domestic.................................... $ 37,040 $ 31,791 $ 32,545
Foreign..................................... 6,365 4,650 4,576
-------- -------- --------
43,405 36,441 37,121
Corporate, net................................ (22,986) (19,300) (19,931)
-------- -------- --------
Income before provision for income taxes
and cumulative effect of accounting
change...................................... $ 20,419 $ 17,141 $ 17,190
======== ======== ========
Identifiable assets:
Domestic.................................... $224,369 $191,999 $172,974
Foreign..................................... 32,997 23,296 20,046
-------- -------- --------
Total identifiable assets..................... $257,366 $215,295 $193,020
======== ======== ========
</TABLE>
The Company's foreign operations are located in East Asia (Japan,
Singapore, South Korea and The People's Republic of China), Canada and Mexico.
Sales between geographic areas are accounted for at cost plus a margin for
profit. Operating profit consists of total sales less operating expenses,
interest expense, research and development expense and income taxes.
Identifiable assets are those assets used in the operations in each geographic
area. Export sales from domestic locations were approximately $36,881,000,
$47,876,000 and $30,174,000 for 1994, 1993 and 1992, respectively.
The net assets of the Company's foreign operations were $24,598,000,
$17,240,000 and $12,744,000 at December 31, 1994, 1993 and 1992, respectively.
The Company's share of foreign net income was $3,369,000, $2,843,000 and
$1,941,000, in 1994, 1993 and 1992, respectively.
A majority of the Company's sales are to automobile manufacturing
companies. Sales to certain major customers which exceeded 10% of consolidated
sales are as follows. Sales to one such customer amounted to 30%, 30% and 33% of
consolidated sales in 1994, 1993 and 1992, respectively. Sales to another such
customer amounted to 23%, 21% and 20% of consolidated sales in 1994, 1993 and
1992, respectively.
The Company's operations are in one business segment, the development,
manufacture and sale of fuel systems and components.
NOTE 18. SUPPLEMENTAL CASH FLOW INFORMATION.
In 1994, 1993 and 1992, the Company paid $6,749,000, $4,458,000 and
$6,078,000 for income taxes and $4,122,000, $2,591,000 and $3,487,000 for
interest, respectively.
F-23
<PAGE> 127
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
Selected quarterly financial information for the years ended December 31,
1994 and 1993, is as follows:
<TABLE>
<CAPTION>
QUARTER
----------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1994 --
Net sales................................... $82,205 $83,976 $75,251 $83,773 $325,205
Cost of sales............................... 64,973 66,335 62,130 68,063 261,501
------- ------- ------- ------- --------
Gross profit............................. $17,232 $17,641 $13,121 $15,710 $ 63,704
======= ======= ======= ======= ========
Net income............................... $ 4,499 $ 4,461 $ 2,974 $ 2,661 $ 14,595
======= ======= ======= ======= ========
Net income per share..................... $ .52 $ .52 $ .35 $ .31 $ 1.70
======= ======= ======= ======= ========
1993 --
Net sales................................... $66,903 $71,471 $64,374 $70,715 $273,463
Cost of sales............................... 51,435 55,516 50,604 59,249 216,804
------- ------- ------- ------- --------
Gross profit............................. $15,468 $15,955 $13,770 $11,466 $ 56,659
======= ======= ======= ======= ========
Income before cumulative effect of
accounting change...................... $ 3,746 $ 3,889 $ 3,112 $ 1,820 $ 12,567
======= ======= ======= ======= ========
Net income............................... $ 846 $ 3,889 $ 3,112 $ 1,820 $ 9,667
======= ======= ======= ======= ========
Income per share before cumulative effect
of accounting change................... $ .44 $ .45 $ .36 $ .21 $ 1.47
======= ======= ======= ======= ========
Net income per share..................... $ .10 $ .45 $ .36 $ .21 $ 1.13
======= ======= ======= ======= ========
</TABLE>
F-24
<PAGE> 128
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................... $ 75 $ 2,525 $ 1,940 $ -- $ 4,540
Accounts receivable, net................. 40,316 20,311 18,495 (12,789) 66,333
Inventories.............................. 24,732 6,120 587 -- 31,439
Prepaid expenses and other............... 3,728 733 701 (1,161) 4,001
Deferred and refundable income taxes..... 5,656 (1,169) (824) -- 3,663
-------- -------- -------- --------- --------
Total current assets................... 74,507 28,520 20,899 (13,950) 109,976
-------- -------- -------- --------- --------
PLANT AND EQUIPMENT, NET................... 64,044 14,292 9,848 108 88,292
-------- -------- -------- --------- --------
OTHER ASSETS:
Funds held for construction.............. 1,061 -- -- -- 1,061
Joint ventures........................... 6,598 9,920 -- -- 16,518
Investments.............................. 4,395 239 89,092 (82,929) 10,797
Goodwill, net............................ 15,710 1,195 -- -- 16,905
Plant and equipment held for resale...... -- -- 80 -- 80
Notes receivable......................... -- -- 55,916 (51,550) 4,366
Deferred income taxes.................... -- 871 -- -- 871
Other.................................... 2,399 721 5,380 -- 8,500
-------- -------- -------- --------- --------
Total other assets..................... 30,163 12,946 150,468 (134,479) 59,098
-------- -------- -------- --------- --------
Total assets............................. $168,714 $ 55,758 $181,215 $(148,321) $257,366
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt........ $ 515 $ 7,519 $ 408 $ -- $ 8,442
Bank and other borrowings................ -- 6,970 -- -- 6,970
Accounts payable......................... 28,322 6,868 472 (12,410) 23,252
Accrued liabilities...................... 10,218 4,152 (775) (1,518) 12,077
Dividends payable........................ -- -- 857 -- 857
-------- -------- -------- --------- --------
Total current liabilities.............. 39,055 25,509 962 (13,928) 51,598
-------- -------- -------- --------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current portion..... 71,112 348 46,226 (51,550) 66,136
Pension obligations and other............ 648 949 6,556 -- 8,153
Deferred income taxes.................... 2,120 763 (444) -- 2,439
Minority interest........................ -- 1,125 -- -- 1,125
-------- -------- -------- --------- --------
Total long-term liabilities............ 73,880 3,185 52,338 (51,550) 77,853
-------- -------- -------- --------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value;
authorized 15,000,000; outstanding
8,564,576 in 1994...................... -- 1,999 4,282 (1,999) 4,282
Paid-in capital.......................... -- 3,632 64,221 (3,632) 64,221
Retained earnings........................ 55,416 18,934 55,855 (74,350) 55,855
Deferred compensation.................... -- -- (1,225) -- (1,225)
Unrealized gain on securities available
for sale............................... -- -- 1,428 -- 1,428
Cumulative translation adjustments....... 363 2,499 3,354 (2,862) 3,354
-------- -------- -------- --------- --------
Total stockholders' equity............. 55,779 27,064 127,915 (82,843) 127,915
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity............................... $168,714 $ 55,758 $181,215 $(148,321) $257,366
======== ======== ======== ========= ========
</TABLE>
F-25
<PAGE> 129
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................... $ 431 $ 1,732 $ 2,442 $ -- $ 4,605
Accounts receivable, net................. 44,729 13,826 (3,208) (10,671) 44,676
Inventories.............................. 21,887 4,621 390 -- 26,898
Prepaid expenses and other............... 2,910 985 4,991 (1,620) 7,266
Deferred and refundable income taxes..... 983 188 3,700 -- 4,871
-------- -------- -------- --------- --------
Total current assets................... 70,940 21,352 8,315 (12,291) 88,316
-------- -------- -------- --------- --------
PLANT AND EQUIPMENT, NET: 54,415 11,971 7,682 108 74,176
-------- -------- -------- --------- --------
OTHER ASSETS:
Funds held for construction.............. 2,710 -- -- -- 2,710
Joint ventures........................... 2,793 8,485 -- -- 11,278
Investments.............................. 2,479 -- 62,086 (56,508) 8,057
Goodwill, net............................ 16,166 771 -- -- 16,937
Plant and equipment held for resale...... -- -- 80 -- 80
Notes receivable......................... -- -- 63,666 (60,050) 3,616
Deferred income taxes.................... -- 41 -- -- 41
Other.................................... 2,615 1,432 6,037 -- 10,084
-------- -------- -------- --------- --------
Total other assets..................... 26,763 10,729 131,869 (116,558) 52,803
-------- -------- -------- --------- --------
Total assets............................... $152,118 $ 44,052 $147,866 $(128,741) $215,295
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt........ $ -- $ -- $ 408 $ -- $ 408
Bank and other borrowings................ -- 5,375 -- -- 5,375
Accounts payable......................... 22,567 8,931 418 (11,925) 19,991
Accrued liabilities...................... 16,630 1,754 (6,439) (445) 11,500
Dividends payable........................ -- -- 855 -- 855
-------- -------- -------- --------- --------
Total current liabilities.............. 39,197 16,060 (4,758) (12,370) 38,129
-------- -------- -------- --------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current portion..... 75,350 6,709 30,383 (60,050) 52,392
Pension obligations and other............ 45 783 7,243 -- 8,071
Deferred income taxes.................... 1,015 690 852 -- 2,557
-------- -------- -------- --------- --------
Total long-term liabilities............ 76,410 8,182 38,478 (60,050) 63,020
-------- -------- -------- --------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value; authorized
15,000,000; outstanding 8,551,782 in
1993................................... -- 1,985 4,276 (1,985) 4,276
Paid-in capital.......................... -- 1,770 63,997 (1,770) 63,997
Retained earnings........................ 36,511 14,328 44,686 (50,839) 44,686
Deferred compensation.................... -- -- (1,634) -- (1,634)
Minimum pension liability adjustment..... -- -- (520) -- (520)
Cumulative translation adjustments....... -- 1,727 3,341 (1,727) 3,341
-------- -------- -------- --------- --------
Total stockholders' equity............. 36,511 19,810 114,146 (56,321) 114,146
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity............................ $152,118 $ 44,052 $147,866 $(128,741) $215,295
======== ======== ======== ========= ========
</TABLE>
F-26
<PAGE> 130
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1992
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................... $ 3,116 $ 379 $ 4,753 $ -- $ 8,248
Accounts receivable, net................. 41,701 13,861 (2,138) (13,055) 40,369
Inventories.............................. 20,020 3,679 239 -- 23,938
Prepaid expenses and other............... 4,278 464 (198) -- 4,544
Deferred and refundable income taxes..... (3,834) 280 6,669 -- 3,115
-------- -------- -------- --------- --------
Total current assets................... 65,281 18,663 9,325 (13,055) 80,214
-------- -------- -------- --------- --------
PLANT AND EQUIPMENT, NET................... 44,514 13,051 7,991 -- 65,556
-------- -------- -------- --------- --------
OTHER ASSETS:
Joint ventures........................... 1,803 8,292 -- -- 10,095
Investments.............................. (2,917) -- 51,275 (42,370) 5,988
Goodwill, net............................ 16,620 -- -- -- 16,620
Plant and equipment held for resale...... -- -- 248 -- 248
Notes receivable......................... -- -- 65,024 (63,050) 1,974
Other.................................... 2,977 953 8,395 -- 12,325
-------- -------- -------- --------- --------
Total other assets....................... 18,483 9,245 124,942 (105,420) 47,250
-------- -------- -------- --------- --------
Total assets............................... $128,278 $ 40,959 $142,258 $(118,475) $193,020
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt........ $ -- $ -- $ 7,069 $ -- $ 7,069
Bank and other borrowings................ -- 2,642 -- -- 2,642
Accounts payable......................... 19,945 5,400 527 (8,802) 17,070
Accrued liabilities...................... 15,973 1,390 (8,443) (39) 8,881
Dividends payable........................ -- -- 810 -- 810
-------- -------- -------- --------- --------
Total current liabilities.............. 35,918 9,432 (37) (8,841) 36,472
-------- -------- -------- --------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current portion..... 69,350 6,338 37,000 (63,050) 49,638
Pension obligations and other............ 644 576 1,937 -- 3,157
Deferred income taxes.................... (217) 612 3,448 -- 3,843
-------- -------- -------- --------- --------
Total long-term liabilities............ 69,777 7,526 42,385 (63,050) 56,638
-------- -------- -------- --------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value;
authorized 15,000,000; outstanding
8,098,242 in 1992...................... -- 771 4,049 (771) 4,049
Paid-in capital.......................... -- 1,597 57,139 (1,597) 57,139
Retained earnings........................ 22,583 18,207 38,422 (40,790) 38,422
Deferred compensation.................... -- -- (2,042) -- (2,042)
Minimum pension liability adjustment..... -- -- (371) -- (371)
Cumulative translation adjustments....... -- 3,426 2,713 (3,426) 2,713
-------- -------- -------- --------- --------
Total stockholders' equity............. 22,583 24,001 99,910 (46,584) 99,910
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity............................... $128,278 $ 40,959 $142,258 $(118,475) $193,020
======== ======== ======== ========= ========
</TABLE>
F-27
<PAGE> 131
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES............................. $296,779 $ 58,903 $ 1,021 $ (31,498) $ 325,205
COSTS AND EXPENSES:
Cost of sales....................... 242,155 49,910 934 (31,498) 261,501
Selling and administrative
expenses......................... 26,765 3,576 8,977 -- 39,318
-------- -------- -------- --------- ---------
OPERATING INCOME (LOSS)............... 27,859 5,417 (8,890) -- 24,386
OTHER EXPENSE (INCOME):
Interest expense.................... 4,911 1,366 2,428 (4,843) 3,862
Interest income..................... -- (4) (4,930) 4,843 (91)
Foreign currency exchange loss
(gain)........................... 260 (42) 2,384 -- 2,602
Other............................... (2) 18 95 -- 111
-------- -------- -------- --------- ---------
Income before provision for income
taxes, minority interest, equity in
(income) loss of joint ventures and
subsidiaries........................ 22,690 4,079 (8,867) -- 17,902
Provision (credit) for income taxes... 7,741 1,213 (3,130) -- 5,824
Minority interest..................... -- 92 -- -- 92
Equity in (income) loss of joint
ventures............................ (1,509) (1,491) 391 -- (2,609)
Equity in (income) of subsidiaries.... (4,265) -- (20,723) 24,988 --
-------- -------- -------- --------- ---------
Net income............................ $ 20,723 $ 4,265 $ 14,595 $ (24,988) $ 14,595
======== ======== ======== ========= =========
</TABLE>
F-28
<PAGE> 132
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ----------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES.......................... $249,866 $ 51,647 $ 1,478 $ (29,528) $273,463
COSTS AND EXPENSES:
Cost of sales.................... 201,092 43,372 1,868 (29,528) 216,804
Selling and administrative
expenses...................... 24,445 3,587 5,011 -- 33,043
Reorganization and restructuring
charges....................... -- -- 1,760 -- 1,760
-------- -------- --------- ---------- --------
OPERATING INCOME (LOSS)............ 24,329 4,688 (7,161) -- 21,856
OTHER EXPENSE (INCOME):
Interest expense................. 5,282 482 1,833 (5,003) 2,594
Interest income.................. (8) (4) (5,026) 5,003 (35)
Foreign currency exchange loss... 567 211 717 -- 1,495
Other............................ 255 123 194 -- 572
-------- -------- --------- ---------- --------
Income before provision for income
taxes, equity in (income) loss of
joint ventures and subsidiaries
and cumulative effect of
accounting change................ 18,233 3,876 (4,879) -- 17,230
Provision (credit) for income
taxes............................ 5,411 1,412 (2,249) -- 4,574
Equity in (income) loss of joint
ventures......................... 303 (214) -- -- 89
Equity in (income) of
subsidiaries..................... (2,678) -- (15,197) 17,875 --
-------- -------- --------- ---------- --------
Income before cumulative effect of
accounting change................ 15,197 2,678 12,567 (17,875) 12,567
Cumulative effect of accounting
change, net of tax benefit of
$1,494........................... -- -- 2,900 -- 2,900
-------- -------- --------- ---------- --------
Net income......................... $ 15,197 $ 2,678 $ 9,667 $ (17,875) $ 9,667
======== ======== ========= ========= ========
</TABLE>
F-29
<PAGE> 133
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1992
------------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ----------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES......................... $223,372 $ 40,636 $ 1,043 $ (23,635) $241,416
COSTS AND EXPENSES:
Cost of sales................... 174,062 33,837 1,448 (23,635) 185,712
Selling and administrative
expenses..................... 22,247 3,554 7,813 -- 33,614
-------- -------- --------- --------- --------
OPERATING INCOME (LOSS)........... 27,063 3,245 (8,218) -- 22,090
OTHER EXPENSE (INCOME):
Interest expense................ 5,299 1,086 3,147 (5,828) 3,704
Interest income................. (529) (5) (5,885) 5,828 (591)
Foreign currency exchange
loss......................... 567 25 (26) -- 566
Other........................... -- -- 1,400 -- 1,400
-------- -------- --------- --------- --------
Income before provision for income
taxes, equity in (income) loss
of joint ventures and
subsidiaries.................... 21,726 2,139 (6,854) -- 17,011
Provision (credit) for income
taxes........................... 7,165 648 (3,149) -- 4,664
Equity in (income) loss of joint
ventures........................ (255) 76 -- -- (179)
Equity in (income) of
subsidiaries.................... (1,415) -- (16,231) 17,646 --
-------- -------- --------- --------- --------
Net income........................ $ 16,231 $ 1,415 $ 12,526 $ (17,646) $ 12,526
======== ======== ========= ========= ========
</TABLE>
F-30
<PAGE> 134
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities.............. $ 25,141 $ 2,323 $(16,987) $ -- $ 10,477
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of plant and
equipment.................... (12,428) (2,729) (3,687) -- (18,844)
Acquisitions, net of cash
acquired..................... (1,480) -- -- -- (1,480)
Purchase of other assets....... (985) -- (1,630) -- (2,615)
Investment in joint ventures
and other.................... (1,508) -- -- -- (1,508)
Proceeds/(payments) of
intercompany note
receivable................... (8,500) -- 8,500 -- --
Proceeds from disposal of
assets....................... 402 407 654 -- 1,463
-------- -------- -------- ------- --------
Net cash provided by (used in)
investing activities.............. (24,499) (2,322) 3,837 -- (22,984)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings (repayments)
under revolving
line-of-credit
agreements................... -- 1,011 (28,750) -- (27,739)
Debt repayments................ (416) -- (408) -- (824)
Proceeds from issuance of
long-term debt............... -- -- 45,000 -- 45,000
Proceeds from issuance of
common stock and options..... -- -- 230 -- 230
Cash dividends paid............ -- -- (3,424) -- (3,424)
-------- -------- -------- ------- --------
Net cash provided by (used in)
financing activities.............. (416) 1,011 12,648 -- 13,243
-------- -------- -------- ------- --------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH.............................. (582) (219) -- -- (801)
-------- -------- -------- ------- --------
NET INCREASE (DECREASE) IN CASH..... (356) 793 (502) -- (65)
CASH AT BEGINNING OF YEAR........... 431 1,732 2,442 -- 4,605
-------- -------- -------- ------- --------
CASH AT END OF YEAR................. $ 75 $ 2,525 $ 1,940 $ -- $ 4,540
======== ======== ======== ======= ========
</TABLE>
F-31
<PAGE> 135
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ----------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities......................... $ 7,836 $ 1,220 $ 6,325 $ -- $ 15,381
-------- -------- ------- ----- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and
equipment..................... (17,688) (2,259) (313) -- (20,260)
Acquisitions, net of cash
acquired...................... 1,312 -- -- -- 1,312
Purchase of other assets........ (66) -- (1,981) -- (2,047)
Investment in joint ventures and
other......................... (1,333) -- -- -- (1,333)
Proceeds/(payments) of
intercompany note
receivable.................... (3,000) -- 3,000 -- --
Proceeds from disposal of
assets........................ 1,254 1,780 115 -- 3,149
-------- -------- ------- ----- --------
Net cash provided by (used in)
investing activities............... (19,521) (479) 821 -- (19,179)
-------- -------- ------- ----- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments)
under revolving line-of-credit
agreements.................... -- 2,609 (6,300) -- (3,691)
Debt repayments................. -- (2,209) (408) -- (2,617)
Proceeds from issuance of
long-term debt................ 9,000 -- -- -- 9,000
Proceeds from issuance of common
stock and options............. -- -- 610 -- 610
Cash dividends paid............. -- -- (3,359) -- (3,359)
-------- -------- ------- ----- --------
Net cash provided by (used in)
financing activities............... 9,000 400 (9,457) -- (57)
-------- -------- ------- ----- --------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH............................... -- 212 -- -- 212
-------- -------- ------- ----- --------
NET INCREASE (DECREASE) IN CASH...... (2,685) 1,353 (2,311) -- (3,643)
CASH AT BEGINNING OF YEAR............ 3,116 379 4,753 -- 8,248
-------- -------- ------- ----- --------
CASH AT END OF YEAR.................. $ 431 $ 1,732 $ 2,442 $ -- $ 4,605
======== ======== ======= ====== ========
</TABLE>
F-32
<PAGE> 136
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1992
-----------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities............ $ 19,057 $ 786 $(12,273) $ -- $ 7,570
Cash Flows From Investing
Activities:
Purchase of plant and
equipment.................... (12,809) (1,607) (265) -- (14,681)
Acquisitions, net of cash
acquired.....................
Purchase of other assets........ (715) (23) (2,717) -- (3,455)
Investment in joint ventures and
other........................ (4,206) -- -- -- (4,206)
Proceeds/(payments) of
intercompany note
receivable................... (4,573) -- 4,573 -- --
Proceeds from disposal of
assets....................... 35 194 47 -- 276
---------- ---------- ---------- -------- ----------
Net cash provided by (used in)
investing activities............ (22,268) (1,436) 1,638 -- (22,066)
---------- ---------- ---------- -------- ----------
Cash Flows from Financing
Activities:
Net borrowings (repayments)
under revolving
line-of-credit
agreements................... -- 1,551 7,283 -- 8,834
Debt repayments................. -- (339) (12,908) -- (13,247)
Proceeds from issuance of long
term debt.................... 6,300 -- -- -- 6,300
Proceeds from issuance of common
stock and options............ -- -- 26,629 -- 26,629
Retirement of Redeemable
Preferred Stock.............. -- -- (6,500) -- (6,500)
Cash dividends paid............. -- -- (2,992) -- (2,992)
---------- ---------- ---------- -------- ----------
Net cash provided by (used in)
financing activities............ 6,300 1,212 11,512 -- 19,024
---------- ---------- ---------- -------- ----------
Effect of Exchange Rate Changes on
Cash............................ 22 (206) (329) -- (513)
---------- ---------- ---------- -------- ----------
Net Increase (Decrease) in Cash... 3,111 356 548 -- 4,015
Cash at Beginning of Year......... 5 23 4,205 -- 4,233
---------- ---------- ---------- -------- ----------
Cash at End of Year............... $ 3,116 $ 379 $ 4,753 $ -- $ 8,248
========== ========== ========== ======== ==========
</TABLE>
F-33
<PAGE> 137
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
Basis of Presentation -- In connection with the acquisition (the Dyno
Acquisition) by the Company of the fuel systems business of Dyno Industrier A.S
(Dyno) and the execution of a new $135,000,000 credit facility, the Company is
offering $110,000,000 in aggregate principal amount of Senior Notes due in 2005
(the Notes) (See Note 21). The Notes will be guaranteed on a senior unsecured
basis, jointly and severally, by each of the Company's principal wholly-owned
domestic operating subsidiaries and certain of its indirect wholly-owned
subsidiaries (the Guarantors). The Guarantors include Walbro Automotive
Corporation, Walbro Engine Management Corporation, Whitehead Engineered
Products, Inc. and Sharon Manufacturing Co. The condensed consolidating
financial statements of the Guarantors are presented on pages F-25 through F-32
and should be read in connection with the consolidated financial statements of
the Company. Separate financial statements of the Guarantors are not presented
because the Guarantors are jointly, severally and unconditionally liable under
the guarantees, and the Company believes the condensed consolidating financial
statements presented are more meaningful in understanding the financial position
of the Guarantor Subsidiaries.
Distributions -- There are no significant restrictions on the ability of
the Guarantor Subsidiaries to make distributions to Walbro Corporation.
Postretirement Health Benefits -- The Company provides postretirement
health care, dental benefit and prescription drug coverage to a limited number
of current retirees. Effective January 1, 1993, the Company changed its method
of accounting for the cost of these benefits from a pay-as-you-go (cash) method
to an accrual method as required by SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," and recognized the unfunded
transition obligation of $4,394,000 ($2,900,000 after-tax) as a one-time
cumulative effect of change in accounting in 1993. The net periodic
postretirement benefit cost amounted to $413,000 in 1994 and $321,000 in 1993.
These amounts are recorded under Parent Corporation in the accompanying
Supplemental Guarantor Condensed Consolidating Financial Statements. As these
costs relate to existing retirees, they have not been allocated to the guarantor
subsidiaries.
F-34
<PAGE> 138
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
Combined Long-Term Debt of the Parent Corporation and Guarantor
Subsidiaries -- Long-term debt of the Issuer and the Guarantor subsidiaries
consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Senior notes, unsecured, interest at 7.68%, payable in annual
amounts from 1998 to 2004...................................... $45,000 $ -- $ --
Revolving credit loan, interest rate from LIBOR plus 5/8% to
prime, unsecured............................................... -- 28,750 35,050
Industrial revenue bond, issued by Town of Ossian, Indiana,
interest at a variable municipal bond rate, due in 2023........ 9,000 9,000 --
Industrial revenue bond, issued by City of Ligonier, Indiana,
interest at a variable municipal bond rate plus 1%, payable in
annual amounts from 2003 to 2007............................... 6,300 6,300 6,300
Convertible subordinated promissory notes, 8%, callable in April
1993, convertible into shares of common stock at a rate of one
share for each $16.24 of principal............................. -- -- 6,568
ESOP credit agreement, interest rate which approximates 86% of
prime, payable in annual installments of $408,000.............. 1,634 2,042 2,451
Capital lease obligations, interest at 7.5%, payable in monthly
installments through February 2002............................. 4,710 -- --
Other............................................................ 67 -- --
------- ------- -------
66,711 46,092 50,369
Less -- Current portion.......................................... 923 408 7,069
------- ------- -------
$65,788 $45,684 $43,300
======= ======= =======
</TABLE>
For a more detailed description of the above indebtedness, see Note 6 of
Notes to Consolidated Financial Statements.
Aggregate minimum principal payment requirements on long-term debt,
including capital lease obligations, in each of the five years subsequent to
December 31, 1994 are as follows: 1995 - $923,000; 1996 - $963,000; 1997 -
$1,073,000; 1998 - $7,503,000; 1999 - $7,144,000, and thereafter - $49,105,000.
NOTE 21. SUBSEQUENT EVENTS.
On April 7, 1995, the Company signed a definitive agreement to acquire the
fuel systems business of Dyno Industrier A.S of Oslo, Norway (the Dyno
Acquisition) for $130,000,000 in cash, which includes provisions for estimated
closing adjustments and fees and expenses estimated at $6,000,000. Dyno is a
leading designer, manufacturer and marketer of plastic mono-layer fuel tank
systems and components to many European vehicle manufacturers, and has
operations in France, Norway, Germany, Great Britain, Spain and Belgium.
Consummation of the Dyno Acquisition is subject to certain conditions, including
the consent of certain governmental bodies.
In connection with the Dyno Acquisition, the Company is offering (the
Offering) $110,000,000 in aggregate principal amount of 9 7/8% Senior Notes due
2005 (the Notes) and executing a new $135,000,000 credit facility (the New
Credit Facility). Proceeds from the Offering and the New Credit Facility will be
used to (i) finance the Dyno Acquisition; (ii) retire certain existing credit
facilities and (iii) finance capital expenditures, working capital and other
needs.
F-35
<PAGE> 139
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 21. SUBSEQUENT EVENTS (CONTINUED)
The Notes will be general unsecured obligations of the Company with
interest payable semi-annually. The Notes will be guaranteed by each of the
Guarantors pursuant to the guarantees described in Note 20.
Except as noted below, the Notes are not redeemable at the Company's option
prior to July 15, 2000. Thereafter, the Notes will be redeemable, in whole or
part, at the option of the Company at various redemption prices as set forth in
the Note Indenture, plus accrued and unpaid interest thereon to the redemption
date. In addition, prior to July 15, 1998, the Company may, at its option,
redeem up to an aggregate of 30% of the principal amount of the Notes originally
issued with the net proceeds from one or more public equity offerings at the
redemption price specified in the Note Indenture plus accrued interest to the
date of redemption.
Also, in the event of a change in control, the Company will be obligated to
make an offer to purchase all of the outstanding Notes at a redemption price of
101% of the principal amount thereof plus accrued interest to the date of
repurchase. Also, in certain circumstances, the Company will be required to make
an offer to repurchase the Notes at a price equal to 100% of the principal
amount thereof, plus accrued interest to the date of repurchase, with the net
cash proceeds of certain asset sales.
The New Credit Facility consists of a $135,000,000 multi-currency revolving
loan facility for the Company and certain of its wholly-owned domestic and
foreign subsidiaries, including a $5,000,000 swing line facility and a
$17,000,000 letter of credit facility. The New Credit Facility will have an
initial term of five years, with annual one year extensions of the revolving
credit portion of the facility available in the lender's discretion.
At any time within three years after closing of the New Credit Facility,
the Company may convert up to $70,000,000 of revolving credit loans under the
New Credit Facility to term loans in minimum amounts of $15,000,000 with
maturities not exceeding seven years from the closing of the New Credit
Facility.
Borrowings under the New Credit Facility will bear interest at a per annum
rate equal to the agent's base rate or the prevailing interbank offered rate in
the applicable offshore currency market, plus an additional margin ranging from
0.5% to 1.75% based on certain financial ratios of the Company. The annual
letter of credit fee will range from 0.5% to 1.5% based on the same financial
ratios. The Company will also be required to pay a quarterly unused facility
fee.
Borrowings under the New Credit Facility will be secured by first liens on
the inventory, accounts receivable and certain intangibles of the Company and
its wholly-owned domestic subsidiaries and by a pledge of 100% of the stock of
wholly-owned domestic subsidiaries, and up to 65% of the stock of wholly-owned
foreign subsidiaries. Collateral for the New Credit Facility will secure the
2004 Notes on an equal and ratable basis. The Company and its wholly-owned
domestic subsidiaries will guarantee payment of domestic and foreign borrowings
under the New Credit Facility. The Company's wholly-owned foreign subsidiaries
will guarantee payment of foreign borrowings under the New Credit Facility.
The Note Indenture and the New Credit Facility will contain numerous
restrictive covenants including, but not limited to, the following matters: (i)
maintenance of certain financial ratios and compliance with certain financial
tests and limitations; (ii) limitations on payment of dividends, incurrence of
additional indebtedness and granting of certain liens; (iii) restrictions on
mergers, acquisitions, asset sales, sales of subsidiary stock, capital
expenditures and investments; (iv) issuance of preferred stock by subsidiaries
and (v) sale and leaseback transactions.
See "Business -- Dyno Acquisition" and "Description of Other Indebtedness"
elsewhere in this Offering Memorandum for further discussion.
F-36
<PAGE> 140
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
6/30/95 12/31/94
----------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash................................................................. $ 3,419 $ 4,540
Accounts receivable (net)............................................ 69,928 66,333
Inventories.......................................................... 33,939 31,439
Other current assets................................................. 8,688 7,664
--------- --------
Total Current Assets.............................................. 115,974 109,976
---------- --------
Property, Plant & Equipment:
Land, buildings & improvements....................................... 47,010 45,902
Machinery & equipment................................................ 116,682 93,127
---------- --------
Subtotal.......................................................... 163,692 139,029
Less: Accumulated depreciation....................................... (57,209) (50,737)
---------- --------
Net Property, Plant & Equipment................................... 106,483 88,292
---------- --------
Other Assets:
Goodwill (net)....................................................... 19,025 16,905
Joint ventures, investments & other.................................. 46,007 42,193
---------- --------
Total Other Assets................................................ 65,032 59,098
---------- --------
Total Assets...................................................... $ 287,489 $257,366
========= ========
LIABILITIES
Current Liabilities:
Current portion long-term debt....................................... $ 923 $ 8,442
Notes payable -- Banks............................................... 7,109 6,970
Accounts payable..................................................... 25,861 23,252
Accrued liabilities.................................................. 17,411 12,934
---------- --------
Total Current Liabilities......................................... 51,304 51,598
---------- --------
Long-term debt, net of current......................................... 86,322 66,136
Other long-term liabilities.......................................... 13,633 11,717
---------- --------
Total Long-Term Liabilities....................................... 99,955 77,853
---------- --------
Stockholders' Equity:
Common stock, $.50 par value; authorized 25,000,000; outstanding
8,564,576 in 1995 and 1994........................................ 4,282 4,282
Paid-in capital...................................................... 64,221 64,221
Retained earnings.................................................... 63,050 55,855
Other Stockholders' Equity........................................... 4,677 3,557
---------- --------
Total Stockholders' Equity........................................ 136,230 127,915
---------- --------
Total Liabilities & Stockholders' Equity.......................... $ 287,489 $257,366
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-37
<PAGE> 141
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
6/30/95 6/30/94
--------- ---------
(UNAUDITED)
<S> <C> <C>
Net Sales.............................................................. $ 188,291 $ 166,181
Cost of Sales & Expenses:
Cost of sales........................................................ 150,585 131,308
Selling and administrative expenses.................................. 24,152 19,353
Interest expense, net................................................ 2,538 1,537
Other expense........................................................ 416 662
--------- ---------
Total............................................................. 177,691 152,860
--------- ---------
Income before income taxes and joint ventures.......................... 10,600 13,321
Provision for income taxes............................................. 3,751 4,953
Equity in (income) of joint ventures................................... (2,074) (592)
--------- ---------
Net income........................................................ $ 8,923 $ 8,960
========= =========
Net income per share.............................................. $ 1.04 $ 1.04
========= =========
Average shares outstanding............................................. 8,599,490 8,608,474
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-38
<PAGE> 142
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
6/30/95 6/30/94
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income............................................................ $ 8,923 $ 8,960
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities:
Depreciation and amortization.................................... 7,838 6,935
(Gain) loss on disposition of assets............................. 144 55
(Income) of joint ventures....................................... (2,074) (592)
Changes in assets and liabilities:
Deferred income taxes......................................... (1,800) 0
Deferred pension and other.................................... 2,442 1,368
Accounts payable and accrued liabilities...................... 6,108 1,294
Accounts receivable, net...................................... (197) (15,815)
Inventories................................................... (1,634) (1,395)
Prepaid expenses and other.................................... (1,729) (545)
-------- --------
Total adjustments........................................... 9,098 (8,695)
-------- --------
Net cash provided by operating activities........................ 18,021 265
-------- --------
Cash Flows From Investing Activities:
Purchase of fixed assets.............................................. (20,730) (7,280)
Acquisitions, net of cash acquired.................................... 105 0
Increase of other assets.............................................. (3,767) (1,332)
Investment in joint ventures and other................................ (2,232) (1,611)
Proceeds from disposal of assets...................................... 309 115
-------- --------
Net cash used in investing activities............................ (26,315) (10,108)
-------- --------
Cash Flows From Financing Activities:
Net borrowings under line-of-credit agreements........................ 10,787 7,611
Debt repayments....................................................... (634) 0
Proceeds from issuance of debt........................................ 0 153
Proceeds from issuance of common stock................................ 0 219
Cash dividends paid................................................... (1,713) (1,711)
-------- --------
Net cash provided by (used in) financing activities.............. 8,440 6,272
-------- --------
Effect of exchange rate changes on cash............................... (1,267) (1,013)
-------- --------
Net decrease in cash.................................................. (1,121) (4,584)
Cash beginning balance................................................ 4,540 4,605
-------- --------
Cash ending balance................................................... $ 3,419 $ 21
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-39
<PAGE> 143
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUBSEQUENT EVENT
On July 27, 1995, the Company, through certain of its wholly-owned
subsidiaries, acquired the plastic fuel tank business of Dyno Industrier AS,
(Dyno) Oslo, Norway. The plastic fuel tank division of Dyno supplies plastic
fuel tank systems to most European vehicle manufacturers through its operations
in France, Spain, Norway, Great Britain, Germany, and Belgium. Dyno Fuel Systems
Business sales approximated $147 million in 1994. The net purchase price for the
acquisition of Dyno's Fuel Systems Business was approximately $124 million
(approximately $138 million less approximately $14 million in cash acquired by
the Company), exclusive of expenses of the transaction. The purchase price is
subject to certain post-closing adjustments. The Company financed the
acquisition through a combination of a private placement of $110 million of
9 7/8% Senior Notes due 2005 (the Notes) and a new $135 million credit facility
(the New Credit Facility) with a group of Commercial Banks.
The Notes are general unsecured obligations of the Company with interest
payable semi-annually. The Notes are guaranteed by each of the significant
domestic wholly-owned subsidiaries.
Except as noted below, the Notes are not redeemable at the Company's option
prior to July 15, 2000. Thereafter, the Notes will be redeemable, in whole or in
part, at the option of the Company at various redemption prices as set forth in
the Note Indenture, plus accrued and unpaid interest thereon to the redemption
date. In addition, prior to July 15, 1998, the Company may, at its option,
redeem up to an aggregate of 30% of the principal amount of the Notes originally
issued with the net proceeds from one or more public equity offerings at the
redemption price specified in the Note Indenture plus accrued interest to the
date of redemption.
Also, in the event of a change in control, the Company will be obligated to
make an offer to purchase all of the outstanding Notes at a redemption price of
101% of the principal amount thereof plus accrued interest to the date of
repurchase. Also, in certain circumstances, the Company will be required to make
an offer to repurchase the Notes at a price equal to 100% of the principal
amount thereof, plus accrued interest to the date of repurchase, with the net
cash proceeds of certain asset sales.
The New Credit Facility consists of a $135,000,000 multi-currency revolving
loan facility for the Company and certain of its wholly-owned domestic and
foreign subsidiaries, including a $5,000,000 swing line facility and a
$17,000,000 letter of credit facility. The New Credit Facility has an initial
term of five years, with annual one year extensions of the revolving credit
portion of the facility available in the lender's discretion.
At any time within three years after closing of the New Credit Facility,
the Company may convert up to $70,000,000 of revolving credit loans under the
New Credit Facility to term loans in minimum amounts of $15,000,000 with
maturities not exceeding seven years from the closing of the New Credit
Facility.
Borrowings under the New Credit Facility bear interest at a per annum rate
equal to the agent's base rate or the prevailing interbank offered rate in the
applicable offshore currency market, plus an additional margin ranging from 0.5%
to 1.75% based on certain financial ratios of the Company. The annual letter of
credit fee will range from 0.5% to 1.5% based on the same financial ratios. The
Company will also be required to pay a quarterly unused facility fee.
Borrowings under the New Credit Facility are secured by first liens on the
inventory, accounts receivable and certain intangibles of the Company and its
wholly-owned domestic subsidiaries and by a pledge of 100% of the stock of
wholly-owned domestic subsidiaries, and 65% of the stock of whollyowned foreign
subsidiaries. Collateral for the New Credit Facility secures the 2004 Notes on
an equal and ratable basis. The Company and its wholly-owned domestic
subsidiaries guarantee payment of domestic and foreign borrowings under the New
Credit Facility. The Company's wholly-owned foreign subsidiaries guarantee
payment of foreign borrowings under the New Credit Facility.
F-40
<PAGE> 144
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUBSEQUENT EVENT (CONTINUED)
The Note Indenture and the New Credit Facility contain numerous restrictive
covenants including, but not limited to, the following matters: (i) maintenance
of certain financial ratios and compliance with certain financial tests and
limitations; (ii) limitations on payment of dividends, incurrence of additional
indebtedness and granting of certain liens; (iii) restrictions on mergers,
acquisitions, asset sales, sales of subsidiary stock, capital expenditures and
investments; (iv) issuance of preferred stock by subsidiaries and (v) sale and
leaseback transactions.
F-41
<PAGE> 145
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
JUNE 30, 1995
----------------------------------------------------------------------------
WALBRO
CORPORATION CONSOLIDATION
GUARANTOR NONGUARANTOR (PARENT AND ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ---------------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash................................ $ 134 $ 2,667 $ 618 $ -- $ 3,419
Accounts receivable -- net:......... 28,651 18,709 36,800 (14,232) 69,928
Inventories......................... 24,851 7,162 1,926 -- 33,939
Prepaid expenses and other.......... 3,076 1,874 734 (674) 5,010
Deferred and refundable income
taxes............................ 5,935 (1,153) (1,104) -- 3,678
-------- -------- -------- ---------- --------
Total Current Assets........... 62,647 29,259 38,974 (14,906) 115,974
-------- -------- -------- ---------- --------
Plant and Equipment -- Net:........... 77,358 15,828 13,297 -- 106,483
-------- -------- -------- ---------- --------
Other Assets:
Funds held for construction......... 1,061 -- -- -- 1,061
Joint ventures...................... 10,765 12,543 -- -- 23,308
Investments......................... 6,275 271 98,953 (97,011) 8,488
Goodwill, net....................... 15,482 1,205 2,338 -- 19,025
Plant and equipment held for
resale........................... -- -- 80 -- 80
Notes receivable.................... -- -- 52,117 (51,550) 567
Deferred income taxes............... -- -- -- -- --
Other............................... 5,885 854 5,764 -- 12,503
-------- -------- -------- ---------- --------
Total other assets............. 39,468 14,873 159,252 (148,561) 65,032
-------- -------- -------- ---------- --------
Total assets................... $179,473 $ 59,960 $211,523 $ (163,467) $287,489
======== ======== ======== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt... $ 515 $ -- $ 408 $ -- $ 923
Bank and other borrowings........... -- 7,109 -- -- 7,109
Accounts payable.................... 25,843 8,148 5,293 (13,423) 25,861
Accrued liabilities................. 9,031 5,731 2,626 (834) 16,554
Dividends payable................... -- -- 857 -- 857
-------- -------- -------- ---------- --------
Total Current Liabilities...... 35,389 20,988 9,184 (14,257) 51,304
-------- -------- -------- ---------- --------
Long Term Liabilities:
Long Term Debt -- Less current
portion.......................... 70,825 8,920 58,127 (51,550) 86,322
Pension obligations and other....... 932 1,097 8,098 -- 10,127
Deferred income taxes............... 1,944 318 (225) -- 2,037
Minority interest................... -- 1,469 -- -- 1,469
-------- -------- -------- ---------- --------
Total Long Term Liabilities.... 73,701 11,804 66,000 (51,550) 99,955
-------- -------- -------- ---------- --------
Stockholders' Equity:
Common stock, $.50 par value;
authorized 15,000,000;
outstanding 8,564,576............ -- 1,999 4,282 (1,999) 4,282
Paid-in capital..................... -- 3,632 64,221 (3,632) 64,221
Retained earnings................... 68,465 18,125 63,155 (86,695) 63,050
Deferred compensation............... -- -- (975) -- (975)
Unrealized gain on securities
available for sale............... -- -- 625 -- 625
Cumulative translation
adjustments...................... 1,918 3,412 5,031 (5,334) 5,027
-------- -------- -------- ---------- --------
Total Stockholders' Equity..... 70,383 27,168 136,339 (97,660) 136,230
-------- -------- -------- ---------- --------
Total Liabilities and
Stockholders' Equity........ $179,473 $ 59,960 $211,523 $ (163,467) $287,489
======== ======== ======== ========== ========
</TABLE>
F-42
<PAGE> 146
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1995
-----------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales......................... $168,563 $ 37,888 $ 1,814 $ (19,974) $188,291
Costs and Expenses:
Cost of sales................... 137,805 31,562 1,192 (19,974) 150,585
Selling and administrative
expenses..................... 9,962 1,703 5,825 -- 17,490
Research and development
expenses..................... 4,948 763 951 -- 6,662
-------- ------- -------- -------- --------
Operating Income.................. 15,848 3,860 (6,154) -- 13,554
-------- ------- -------- -------- --------
Other Expense (Income):
Interest expense................ 2,697 242 1,884 (2,165) 2,658
Interest income................. (556) 524 (2,253) 2,165 (120)
Other, net...................... (84) 5 495 -- 416
-------- ------- -------- -------- --------
Income before provision for income
taxes, minority interest, equity
in (income) loss of joint
ventures and subsidiaries....... 13,791 3,089 (6,280) -- 10,600
Provision for income taxes........ 4,754 1,143 (2,146) -- 3,751
Equity in (income) loss of joint
ventures........................ (497) (1,577) -- -- (2,074)
Equity in income of
subsidiaries.................... (3,523) -- (13,057) 16,580 --
-------- ------- -------- -------- --------
Net income........................ $ 13,057 $ 3,523 $ 8,923 $ (16,580) $ 8,923
======== ======= ======== ======== ========
</TABLE>
F-43
<PAGE> 147
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1994
-----------------------------------------------------------------------------
WALBRO CONSOLIDATION
CORPORATION AND
GUARANTOR NONGUARANTOR (PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION) ENTRIES TOTAL
------------ ------------ ------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales......................... $153,155 $ 28,909 $ 243 $ (16,126) $166,181
Costs and Expenses:
Cost of sales................... 123,126 24,130 178 (16,126) 131,308
Selling and administrative
expenses..................... 8,554 1,642 3,342 -- 13,538
Research and development
expenses..................... 4,782 233 800 -- 5,815
-------- ------- -------- -------- --------
Operating Income.................. 16,693 2,904 (4,077) -- 15,520
Other Expense (Income):
Interest expense................ 2,891 232 902 (2,484) 1,541
Interest income................. -- (2) (2,486) 2,484 (4)
Other, net...................... 53 10 599 -- 662
-------- ------- -------- -------- --------
Income before provision for income
taxes, minority interest, equity
in (income) loss of joint
ventures and subsidiaries....... 13,749 2,664 (3,092) -- 13,321
Provision for income taxes........ 4,935 1,069 (1,051) -- 4,953
Equity in (income) loss of joint
ventures........................ 274 (866) -- -- (592)
Equity in income of
subsidiaries.................... (2,461) -- (11,001) 13,462 --
-------- ------- -------- -------- --------
Net income........................ $ 11,001 $ 2,461 $ 8,960 $ (13,462) $ 8,960
======== ======= ======== ======== ========
</TABLE>
F-44
<PAGE> 148
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1995
--------------------------------------------------------------
WALBRO
CORPORATION COMBINED
GUARANTOR (PARENT ELIMINATION ISSUER AND
SUBSIDIARIES CORPORATION) ENTRIES GUARANTOR TOTAL
------------ ------------ ----------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities................................. $ 28,755 $(10,656) $ -- $ 18,099
-------- -------- ---- ---------
Cash Flows from Investing Activities:
Purchase of plant and equipment............ (18,315) (960) -- (19,275)
Acquisitions, net of cash acquired......... -- 105 -- 105
Purchase of other assets................... (3,362) (368) -- (3,730)
Investment in joint ventures and other..... (6,862) 1,108 -- (5,754)
Proceeds from disposal of assets........... 89 198 -- 287
-------- -------- ---- ---------
Net cash provided by (used in) investing
activities................................. (28,450) 83 -- (28,367)
-------- -------- ---- ---------
Cash Flows from Financing Activities:
Net borrowings (repayments) under revolving
line-of-credit agreements............... -- 11,000 -- 11,000
Debt repayments............................ (253) (36) -- (289)
Cash dividends paid........................ -- (1,713) -- (1,713)
-------- -------- ---- ---------
Net cash provided by (used in) financing
activities................................. (253) 9,251 -- 8,998
-------- -------- ---- ---------
Effect of Exchange Rate Changes on Cash...... 7 -- -- 7
-------- -------- ---- ---------
Net Increase (Decrease) in Cash.............. 59 (1,322) -- (1,263)
Cash at Beginning of Year.................... 75 1,940 -- 2,015
-------- -------- ---- ---------
Cash at End of Period........................ $ 134 $ 618 $ -- $ 752
======== ======== ==== =========
</TABLE>
F-45
<PAGE> 149
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1994
--------------------------------------------------------------
WALBRO
CORPORATION COMBINED
GUARANTOR (PARENT ELIMINATION ISSUER AND
SUBSIDIARIES CORPORATION) ENTRIES GUARANTOR TOTAL
------------ ------------ ----------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities................................. $ 15,116 $(15,315) $-- $ (199)
-------- -------- --- ---------
Cash Flows from Investing Activities:
Purchase of plant and equipment............ (6,458) (108) -- (6,566)
Purchase of other assets................... (579) (761) -- (1,340)
Investment in joint ventures and other..... (3,289) -- -- (3,289)
Proceeds from disposal of assets........... 117 6 -- 123
-------- -------- --- ---------
Net cash provided by (used in) investing
activities................................. (10,209) (863) -- (11,072)
-------- -------- --- ---------
Cash Flows from Financing Activities:
Net borrowings (repayments) under revolving
line-of-credit agreements............... -- 7,180 -- 7,180
Debt repayments............................ (5,500) 5,500 -- --
Proceeds from issuance of long term debt... 153 -- -- 153
Proceeds from issuance of common stock and
options................................. -- 219 -- 219
Cash dividends paid........................ -- (1,711) -- (1,711)
-------- -------- --- ---------
Net cash provided by (used in) financing
activities................................. (5,347) 11,188 -- 5,841
-------- -------- --- ---------
Effect of Exchange Rate Changes on Cash...... -- -- -- --
-------- -------- --- ---------
Net Increase (Decrease) in Cash.............. (440) (4,990) -- (5,430)
Cash at Beginning of Year.................... 431 2,442 -- 2,873
-------- -------- --- ---------
Cash at End of Period........................ $ (9) $ (2,548) $-- $ (2,557)
======== ======== === =========
</TABLE>
F-46
<PAGE> 150
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Dyno Industrier A.S
Oslo, Norway:
We have audited the accompanying combined balance sheet of the Fuel Tank
System Division (the "Division") of Dyno Industrier A.S ("Dyno") as of December
31, 1994, and the related combined statements of income, stockholders' and
divisional equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Division and Dyno's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. 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 audit provides a reasonable basis
for our opinion.
In our opinion, such 1994 financial statements present fairly, in all
material respects, the combined financial position of the Division as of
December 31, 1994, and the combined results of operations and its combined cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN & CO. GmbH
Stuttgart, Germany
May 12, 1995
F-47
<PAGE> 151
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of Dyno Industrier A.S:
We have audited the accompanying combined balance sheet of the Fuel Tank
System Division of Dyno Industrier A.S (the "Division") as of December 31, 1993,
and the related combined statements of income, and cash flow for the year then
ended. These combined financial statements are the responsibility of the
Division's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. 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 audit provides a reasonable basis
for our opinion.
In our opinion, such 1993 combined financial statements present fairly, in
all material respects, the combined financial position of the Division as of
December 31, 1993, and the combined results of operations and its combined cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States.
DELOITTE & TOUCHE
Oslo, Norway
May 12, 1995
F-48
<PAGE> 152
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------- -------
(AMOUNTS IN NOK
1,000)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents -- (Note 1)................................ 24,136 25,285
Notes receivable -- (Note 4)......................................... 32,622 34,384
Accounts receivable (less allowance for doubtful accounts of 1,612
and 3,591 in 1994 and 1993 respectively) -- (Note 4).............. 181,792 116,863
Amounts receivable from related entities -- (Note 11)................ 28,980 2,591
Inventories: -- (Note 1)
Raw materials........................................................ 37,036 31,337
Work in progress..................................................... 22,005 36,374
Finished goods....................................................... 26,569 19,494
------- -------
Total Inventories............................................ 85,610 87,205
------- -------
Prepaid expenses and other current assets............................ 43,532 43,838
------- -------
Total Current Assets......................................... 396,672 310,166
======= =======
Property, Plant and Equipment -- Net -- (Note 1 and 5)................. 396,665 420,601
Other Assets:
Long term receivables................................................ 16,602 33,278
Intangible assets -- Net -- (Note 6)................................. 14,801 13,338
Deferred taxes -- (Notes 1 and 3).................................... 11,130 12,793
Other................................................................ 3,605 3,738
------- -------
Total Other Assets........................................... 46,138 63,147
------- -------
Total Assets................................................. 839,475 793,914
======= =======
LIABILITIES AND SHAREHOLDERS' AND DIVISIONAL EQUITY:
Current Liabilities:
Bank overdraft....................................................... -- 3,826
Accounts payable..................................................... 147,465 108,826
Accrued liabilities -- (Note 12)..................................... 79,919 124,043
Current portion of long term debt -- (Note 7)........................ 102,388 32,679
Amounts payable to related entities -- (Note 11)..................... 36,788 108,570
Notes payable........................................................ 30,792 26,390
Income Taxes payable................................................. 1,596 246
------- -------
Total Current Liabilities.................................... 398,948 404,580
======= =======
Deferred Revenue....................................................... 9,876 4,842
Accrued Pension Liabilities -- (Notes 1 and 9)......................... 10,655 9,488
Deferred Taxes -- (Notes 1 and 3)...................................... 22,777 16,469
Long Term Debt -- Less current portion -- (Note 7)..................... 100,050 156,258
Subordinated Loan -- (Note 7).......................................... 9,511 124,890
Commitments and Contingencies -- (Note 12)
Shareholders' and Divisional Equity -- (Note 10)....................... 287,658 77,387
------- -------
Total Liabilities and Shareholders' and Divisional Equity.... 839,475 793,914
======= =======
</TABLE>
F-49
<PAGE> 153
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
COMBINED INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
--------- -------
(AMOUNTS IN NOK
1,000)
<S> <C> <C>
Revenues -- (Note 2)................................................... 1,037,571 617,955
Cost of Goods Sold..................................................... 793,364 485,030
--------- -------
Gross Profit........................................................... 244,207 132,925
--------- -------
Selling, General, and Administrative Expenses -- (Notes 1, 8, 9, and
11).................................................................. 208,303 170,590
--------- -------
Operating Income (Loss)................................................ 35,904 (37,665)
--------- -------
Other Income (Expense):
Interest expense..................................................... (25,446) (19,052)
Interest income...................................................... 5,757 1,213
Other expense -- net................................................. (6,940) 1,106
--------- -------
Total other income (expense)................................. (26,629) (16,733)
--------- -------
Income (Loss) Before Taxes and Extraordinary Item...................... 9,275 (54,398)
--------- -------
Income Taxes -- (Note 3)............................................... 16,421 349
--------- -------
Loss Before Extraordinary Item......................................... (7,146) (54,747)
--------- -------
Extraordinary Item -- Gain on forgiveness on debt -- (Note 7).......... 33,078 --
--------- -------
Net income (loss)............................................ 25,932 (54,747)
======== =======
</TABLE>
F-50
<PAGE> 154
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
-------- --------
(AMOUNTS IN NOK
1,000)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss).................................................... 25,932 (54,747)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................... 62,956 45,110
Change in deferred income taxes................................. 7,971 (1,424)
Gain on sale of property, plant and equipment................... (1,899) (2,039)
Gain on forgiveness of debt..................................... (33,078) --
Changes in operating assets and liabilities
(Increase) decrease:
Accounts and notes receivable................................ (63,167) (31,791)
Inventories.................................................. 1,595 (8,437)
Prepaid expenses and other current assets.................... 306 (17,987)
Long-term receivables and other assets....................... 15,346 (29,323)
Increase (decrease):
Accounts payable............................................. 38,639 17,729
Accrued and other liabilities................................ (45,433) 71,355
Deferred revenue............................................. 5,034 4,492
-------- --------
Net cash provided by operating activities....................... 14,202 (7,062)
======== ========
Cash Flows From Investing Activities:
Purchases of property, plant and equipment........................... (61,376) (182,061)
Proceeds from sale of property, plant and equipment.................. 25,523 28,932
(Advances to) repayments from related entities -- net................ (98,171) 54,157
-------- --------
Net cash used in investing activities................................ (134,024) (98,972)
-------- --------
Cash Flows From Financing Activities:
Borrowings of long-term debt......................................... 43,145 37,220
Repayments of long-term debt......................................... (5,434) (1,097)
Net repayment of related party long-term debt........................ (19,808) (18,334)
Borrowings of subordinated loans..................................... -- 42,612
Repayments of subordinated loans..................................... (82,301) --
Contributed equity................................................... 185,656 65,560
-------- --------
Net cash provided by financing activities.............................. 121,258 125,961
-------- --------
Foreign currency effects on cash flows................................. (2,585) 2,640
Net increase (decrease) in cash and cash equivalents................... (1,149) 22,567
-------- --------
Cash and cash equivalents at beginning of year......................... 25,285 2,718
-------- --------
Cash and cash equivalents at end of year............................... 24,136 25,285
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest............................................... 24,150 27,722
Income taxes deemed to be paid....................................... 7,100 1,527
</TABLE>
F-51
<PAGE> 155
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED 31 DECEMBER 1994 AND 1993
1 ACCOUNTING POLICIES
Principles of Combination
The combined historical financial statements include the accounts of the
Fuel Tank System Division (the Division) of Dyno Industrier A.S (Dyno), a
Norwegian company. This division comprises production units in Norway, Great
Britain, Germany, France, Belgium, and Spain which are involved in the
development and manufacture of plastic automotive fuel tank systems. All
significant accounts and transactions between the division's units have been
eliminated in combination.
The financial statements of the Division's operating units have been
combined and prepared as a result of the Purchase and Sale Agreement between
Dyno and Walbro Corporation dated April 7, 1995. Walbro Corporation is
purchasing certain divisional assets of the entities in Norway, Great Britain,
Germany and Belgium, and the shares of the entities in France and Spain. The
combined financial statements have been prepared in accordance with accounting
principles generally accepted in the United States.
During the periods covered by the combined income statement the Division's
business was conducted as an integral part of Dyno's overall operations. The
financial statements include sales to and purchases of materials to and from
other Dyno business units at established prices. These amounts are not
necessarily indicative of the costs that will prevail for the Division
subsequent to the closing of the transaction described in the purchase
agreement. The financial statements also include various allocated costs and
expenses (see Note 8) which are not necessarily indicative of the costs and
expenses which would have resulted had the Division been operated as a separate
company. All of the allocations and estimates reflected in the financial
statements are based on assumptions that the production units' and Dyno's
management believes are reasonable.
In preparing the combined accounts, the results are translated into
Norwegian kroner (NOK) at annual average rates of exchange. The combined balance
sheet is translated at year-end rates of exchange. The effects of exchange rate
changes during the year on net assets are included in Divisional equity.
Cash and cash equivalents
Cash and cash equivalents include cash, bank deposits and all other
monetary instruments with a maturity of less than three months at the date of
purchase.
Financial instruments
The Division's activities in derivative financial instruments are not
significant and generally consist of agreements with Dyno and its affiliates to
manage foreign currency and interest rate exposure. The estimated fair values of
Dyno's financial instruments approximate the carrying values.
Discounts/premiums on foreign exchange contracts and cost/income on other
hedging contracts (interest rate swaps, interest rate caps, etc.) have been
recognized as other income or expense over the life of the contracts.
Inventories
Inventories are valued at the lower of cost using the 'first-in-first-out'
method or at net realizable value. Cost for goods purchased is the purchase
price. Cost for goods in production and internally produced goods is the direct
manufacturing cost plus the appropriate portion of production overhead costs.
F-52
<PAGE> 156
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment are carried on the balance sheet at original
cost, less straight-line depreciation. The rates for calculating straight-line
depreciation have been determined based on an evaluation of the individual fixed
asset's economic lifetime as follows:
<TABLE>
<S> <C>
machinery and equipment................................ 3 - 20 years
buildings.............................................. 20 - 33 years
</TABLE>
Intangible Assets
Intangible assets include organization costs and goodwill, and are
amortized on a straight-line basis over five to twenty years.
Research and Development
Research and development costs are expensed as they are incurred.
Pensions and Pension Liabilities
Pension costs are calculated in accordance with the Statement of Financial
Accounting Standards No. 87. Pension liabilities (directly financed and funded
plans) have been valued at the present value of future pension payments as of
December 31, 1994. Future pension payments are calculated on the basis of the
expected salary at the time of retirement. Pension plan assets are valued at
market value on December 31, 1994. Net pension liabilities (pension liabilities
less pension plan assets) are accounted for as long term obligations after
correction for net actuarial differences.
Income Taxes
The Division has been included in Dyno's consolidated income tax returns in
the various countries. The recorded provision for income taxes approximates the
tax effect which would have been recorded had the Division operated on a
stand-alone basis.
Deferred income tax expense has been calculated using the liability method
in accordance with Statement of Financial Accounting Standards No. 109. Under
this method, deferred tax assets and liabilities are measured based upon
"temporary differences" which are differences between the carrying values of
assets and liabilities for financial reporting and their tax basis. Deferred
income tax expense is the change during the year in the deferred tax assets and
liabilities.
Deferred Revenues
Deferred revenues consist of investment grants from governments and certain
subsidies received from customers. Grants are recognized as income when
conditions for receipt are met, and subsidies are recognized as an offset to
cost of goods sold over the term of the agreement.
F-53
<PAGE> 157
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2 REVENUES BY COUNTRY OF CUSTOMER
<TABLE>
<CAPTION>
1994 1993
--------- -------
NOK 1,000
<S> <C> <C>
Europe:
United Kingdom....................................... 88,466 68,208
Netherlands.......................................... 5,575 4,679
Germany.............................................. 343,161 167,691
France............................................... 211,873 213,136
Belgium.............................................. 151,066 23,204
Spain................................................ 51,551 7
Finland.............................................. 301 3,889
Sweden............................................... 144,727 111,100
Other EU countries................................... -- 766
--------- -------
Total EU..................................... 996,720 592,680
Norway................................................. 8,083 6,109
Rest of Europe......................................... 18,730 16,460
--------- -------
Total Europe................................. 1,023,533 615,249
Outside Europe:
North America........................................ 115 1
Africa............................................... -- 310
Asia................................................. 13,923 2,395
--------- -------
TOTAL........................................ 1,037,571 617,955
========= =======
</TABLE>
3 TAXES
The provision for income taxes included in the combined statements of
income consist of the following (in NOK 1,000):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Current taxes............................................. 8,450 1,773
Deferred taxes............................................ 7,971 (1,424)
------ ------
Provision for income tax.................................. 16,421 349
====== ======
</TABLE>
A reconciliation between income taxes at the statutory rates in Norway (28%
for 1994 and 1993) and the provision for income taxes for the years ended 1994
and 1993 is as follows (in NOK 1,000):
<TABLE>
<CAPTION>
1994 1993
------ -------
<S> <C> <C>
Income tax provison (benefit) at Norwegian statutory
rate.................................................... 2,597 (15,231)
International rate differences............................ 2,870 --
Losses for which no tax benefit was provided.............. 8,282 15,478
Utilization of loss carry forwards........................ (3,004) --
Other..................................................... 5,676 102
------ -------
Provision for income tax.................................. 16,421 349
====== =======
</TABLE>
F-54
<PAGE> 158
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred tax balances as of December 31 are as
follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
NOK 1,000
<S> <C> <C>
Deferred tax assets:
Accrued costs of pension plans......................... 1,493 1,243
Net operating loss carry forwards...................... 33,448 44,706
Other.................................................. 1,498 408
------- -------
Total deferred tax assets................................ 36,439 46,357
Valuation allowance...................................... (25,309) (33,564)
------- -------
Net deferred tax assets.................................. 11,130 12,793
------- -------
Deferred tax liabilities
Property, plant and equipment.......................... 22,548 16,303
Other.................................................. 229 166
------- -------
Total Deferred tax liabilities........................... 22,777 16,469
======= =======
</TABLE>
The valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. The Division has
established a valuation allowance for certain net operating loss carryforwards.
At the end of 1994, total deductible losses carried forward in Dynoplast
S.A France and Dynoplast S.A Spain (the entities where stock is being acquired)
amounted to NOK 90.4 million. Losses carried forward expire as follows (in NOK
1,000):
<TABLE>
<S> <C>
1997................................................................ 18,185
1998................................................................ 28,948
1999................................................................ 11,986
Without expiration.................................................. 31,271
-------
TOTAL..................................................... 90,390
======
</TABLE>
4 GEOGRAPHIC AND CREDIT RISK
Accounts receivable by geographical area as of December 31, are:
<TABLE>
<CAPTION>
1994 1993
-------- --------
NOK 1,000
<S> <C> <C>
Norway................................................. 3,026 --
The EU................................................. 178,887 119,718
Rest of Europe......................................... 284 58
------- -------
Total Europe...................................... 182,197 119,776
North America.......................................... 96 3
Asia................................................... 1,111 675
------- -------
TOTAL GROSS ACCOUNTS RECEIVABLE........................ 183,404 120,454
Less allowance for doubtful accounts................... 1,612 3,591
------- -------
TOTAL NET ACCOUNTS RECEIVABLE..................... 181,792 116,863
======= =======
</TABLE>
In addition the French and Spanish entities had notes receivables of (NOK
1,000) 32,449 and 173 in 1994 and 34,377 and 7 in 1993, respectively. These
notes are created in the normal course of business in these countries and are
generally collected under similar terms to accounts receivable.
F-55
<PAGE> 159
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
------- -------
NOK 1,000
<S> <C> <C>
Land.................................................... 12,012 14,067
Assets under construction............................... 23,337 35,354
Buildings............................................... 62,257 41,045
Machinery and equipment................................. 534,229 531,103
------- -------
Total.............................................. 631,835 621,569
Less accumulated depreciation...................... 235,170 200,968
------- -------
Property, plant and equipment -- net............... 396,665 420,601
======= =======
</TABLE>
6 INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
------ ------
NOK 1,000
<S> <C> <C>
Organizational costs (less accumulated amortization of
2,102 and 1,401 in 1994 and 1993, respectively)........ 4,961 2,945
Goodwill (less accumulated amortization of 1,168 and 810
in 1994 and 1993, respectively)........................ 9,840 10,393
------- -------
Intangible assets -- net................................. 14,801 13,338
======= =======
</TABLE>
7 NOTES PAYABLE AND LONG-TERM DEBT
Notes payable include a short term facility with a bank in Spain. This
facility was renewed in 1994. It bears interest at 9.6% and matures in December
1995.
Long-term debt agreements are generally entered into by the legal entities
in the various locations. To present the financial position of the division,
these amounts have been allocated between divisions operating within the legal
entities. Depending on the type of loan, various allocation bases have been
utilized including relative investment, level of operations, and working
capital.
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
-------- -------
NOK 1,000
<S> <C> <C>
Mortgage loans.......................................... 6,661 4,389
Bank loans and other long-term debt..................... 45,300 14,263
Loans from Dyno and affiliated companies................ 150,477 170,285
-------- -------
Total.............................................. 202,438 188,937
Less Current portion.................................... (102,388) (32,679)
-------- -------
Total long-term debt............................... 100,050 156,258
======== =======
</TABLE>
F-56
<PAGE> 160
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt at December 31, 1994, matures as follows (in NOK 1,000):
<TABLE>
<S> <C>
1995............................................................... 102,388
1996............................................................... 5,973
1997............................................................... 26,380
1998............................................................... 3,464
1999............................................................... 3,464
Thereafter......................................................... 60,769
-------
TOTAL.................................................... 202,438
=======
</TABLE>
Long-term debt including first year's installments are payable in the
following currencies:
<TABLE>
<CAPTION>
CURRENCY VALUE NOK 1,000 CURRENCY VALUE NOK 1,000
CURRENCY DEC 31 1994 DEC 31 1994 DEC 31 1993 DEC 31 1993
------------------------ -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
NOK..................... 43,460 43,460 16,693 16,693
GBP..................... 2,077 21,950 2,597 28,850
DEM..................... 21,542 94,039 27,139 117,597
ESB..................... 47,383 2,432 89,131 4,704
FRF..................... -- -- 13,000 16,579
BEF..................... 190,955 40,557 21,683 4,514
------- -------
TOTAL......... 202,438 188,937
======= =======
</TABLE>
The mortgage loans relate to the building in Belgium, and are secured by
property, plant and equipment with a total net book value of approximately 97
NOK million at December 31, 1994. The loans bear interest at fixed rates ranging
from 8.09 to 10.45% and require monthly principal and interest payments. The
loans mature between 1995 and 1997.
Bank loans and other long-term debt at December 31, 1994 includes loans
from banks and other financial institutions in Belgium, Great Britain and Spain.
These loans are unsecured, generally require monthly principal payments and bear
interest at rates ranging from 6.92 to 10.8%. These loans mature in 2005, 1997,
and 1995, respectively.
Loans from Dyno and affiliated companies consists of agreements in Norway,
Germany, France and Great Britain to finance the operations and investing
strategies of the entities. These agreements are with the legal entities and
balances included in the combined financial statements are allocations of the
total outstanding balance. The agreements include both short term facilities and
long term notes depending on the cash and capital requirements of the various
entities. The agreements generally bear interest at the libor rate plus 0.5 to
0.6875%, and mature at dates ranging from 1995 to 1999.
Generally the related party loans are unsecured but contain negative pledge
clauses. The loan agreements do not contain clauses restrictive to the freedom
of action of the entities.
Subordinated Loans
The subordinated loans are all agreements with related parties that the
Division is normally consolidated with. These agreements do not bear interest
and no interest has been imputed.
The legal entity in Great Britain has a non-interest bearing GBP 2,700,000
(NOK 28,500,000) subordinated loan facility with a related party company in
Great Britain. Outstanding borrowings allocated to the Division were NOK
9,511,000 and NOK 9,998,000 at December 31, 1994 and 1993, respectively. The
facility matures August 27, 1996.
F-57
<PAGE> 161
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The legal entity in France had a non-interest bearing FFR 60,000,000 (NOK
76,519,000) subordinated loan from Dyno as of December 31, 1993, of which FFR
34,000,000 was repaid in 1994 and FFR 26,000,000 was forgiven in accordance with
an agreement between Dyno and Dynoplast S.A. in France.
The legal entity in Germany had a non-interest bearing DEM 10,800,000 (NOK
46,797,000) subordinated loan from Dyno of which NOK 38,373,000 was allocated to
the Division as of December 31, 1993, and repaid during 1994.
8 GENERAL, ADMINISTRATIVE AND OTHER ALLOCATED EXPENSES
General, administrative and other expenses are allocated to the Division
using procedures deemed appropriate for the nature of the expenses involved. The
procedures utilize various allocation bases such as relative investment, working
capital, number of employees and related payroll costs, and direct effort
expended. Management of Dyno believes the allocations are reasonable, but they
are not necessarily indicative of the costs that would have been incurred had
the Division been a stand-alone company. Additionally certain management and
overhead costs incurred by Dyno related to the Division have been included in
the combined financial statements. Such amounts totalled 10.7 NOK million in
1994 and 2.9 NOK million in 1993. These amounts have not been charged to the
production units, but have been included for presentation purposes.
Total research and development expense was (NOK 1,000) 11,414 and 13,030 in
1994 and 1993, respectively.
9 PENSION PLANS
In Norway, employees' retirement arrangements are provided by funded
defined benefit plans. The pension entitlements normally are based on years of
service and final salary. Entities in other countries have pension plans in
line with local rules and practice. Pension plans are either defined benefit
plans or defined contribution plans, where the employer pays a defined
contribution which is independently administered.
The pension assets in Norway are managed by an affiliated company and are
primarily invested in fixed interest securities, property and listed shares.
Net periodic pension cost
<TABLE>
<CAPTION>
1994 1993
----- -----
NOK 1,000
<S> <C> <C>
Defined benefit plans
Benefits earned during the year.......................... 870 628
Interest cost on accrued benefit......................... 1,672 1,081
Expected return on pension assets........................ (684) (567)
----- -----
Net pension cost benefit plans........................... 1,858 1,142
----- -----
Early retirement and other............................... 35 --
----- -----
Total net periodic pension cost.................. 1,893 1,142
===== =====
</TABLE>
This expense represents an allocation of Dyno's total pension expense based
on the ratio of the number of eligible Division employees to the total number of
eligible employees.
F-58
<PAGE> 162
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Status of pension plans reconciled to the combined balance sheet:
<TABLE>
<CAPTION>
1994 1993
-------------------- -------------------
FUNDED UNFUNDED FUNDED UNFUNDED
PLANS PLANS PLANS PLANS
------- -------- ------ --------
NOK 1,000
<S> <C> <C> <C> <C>
Projected benefit obligation
(PBO)........................... (10,469) (9,783) (8,979) (9,216)
Plan assets at fair value......... 8,765 -- 8,707 --
PBO in excess of plan assets...... (1,704) (9,783) (272) (9,216)
Unrecognized net actuarial loss... 812 55
Early retirement plans and
other........................... (35)
------- ------ ------ ------
Total accrued pension
liability............. (892) (9,763) (272) (9,216)
======= ====== ====== ======
Economic assumptions:
Discount rate................... 7.0% 7.0% 7.0% 7.0%
Rate of return -- plan assets... 8.0% -- 8.0% --
Salary increase................. 3.3% 3-3.5% 3.3% 3-3.5%
Pension increase................ 2.5% 2.5-3.0% 2.5% 2.5-3.0%
</TABLE>
10 SHAREHOLDER'S AND DIVISIONAL EQUITY
Combined shareholder's and divisional equity consists of the following (in
NOK 1,000) at December 31:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
<S> <C> <C>
COMMON STOCK:
Dynoplast S.A., France:
980,000 in 1993 and 1,189,996 in 1994 shares issued
at par FRF 100.................................. 150,523 29,750
Dynoplast S.A., Spain:
749,990,225 shares issued at par ESP 1............. 38,490 39,584
------- -------
Total Common Stock................................... 189,013 69,334
------- -------
Other Divisional Equity.............................. 98,645 8,053
------- -------
Total Stockholder's and Divisional Equity............ 287,658 77,387
------- -------
Balance as of beginning of year...................... 77,387 66,941
Net Income(Loss)..................................... 25,932 (54,747)
Contributed Equity................................... 185,656 65,560
Currency translation................................. (1,317) (367)
------- -------
Balance as of end of year............................ 287,658 77,387
======= =======
</TABLE>
Contributed equity includes Dyno management and overhead costs that have
been included in the combined financial statements for presentation purposes
(see Note 8).
11 RELATED PARTIES
As described in Note 1, the Division is an integral part of Dyno and is
normally consolidated in the Dyno financial statements. Many of the Division's
production units share facilities with other Divisions of Dyno.
F-59
<PAGE> 163
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Dyno affiliates provide certain treasury, insurance, and pension fund management
services to the Division at varying degrees.
Amounts receivable from and payable to related entities comprises balances
between the Division and other Divisions in the same legal entity as well as
balances with Dyno and it's affiliates for various non-operating charges and
expenses.
In conjunction with certain financing arrangements (see Note 7), Dyno and
it's affiliates have issued letters of comfort on behalf of fuel tank business
units in favor of other lenders of approximately NOK 8,972,000 as of December
31, 1994.
The combined financial statements include sales and purchases of various
products and services to and from Dyno and its affiliates in the normal course
of business of approximately (NOK 1,000) 2,889 and 29,678 in 1994 and (NOK
1,000) 3,148 and 23,028 in 1993, respectively. Amounts due from and due to these
affiliated entities related to these transactions were approximately (NOK 1,000)
182 and 5,723 and (NOK 1,000) 810 and 4,615 as of December 31, 1994 and 1993,
respectively. These amounts are included in trade accounts receivable and
payable.
The production unit in France leased certain equipment from an affiliated
company during 1993 and 1994. This arrangement has been accounted for as a
capital lease. The equipment was purchased when the lease expired in 1994. The
capital lease obligation is included in bank loans and other long term debt at
December 31, 1993. Total payments under this arrangement were (NOK 1,000) 4,944
and 5,597 in 1994 and 1993, respectively.
12 CONTINGENCIES, GUARANTEES AND LEASE COMMITMENTS
Minimum commitments under non-cancelable leases having a remaining lease
term in excess of one year at December 31, 1994 will fall due for payment as
follows (in NOK 1,000):
<TABLE>
<S> <C>
1995................................................................ 14,948
1996................................................................ 15,294
1997................................................................ 11,424
1998................................................................ 10,935
1999................................................................ 10,825
Thereafter.......................................................... 6,960
------
Total..................................................... 70,386
======
</TABLE>
Total lease expense was approximately (NOK 1,000) 22,739 and 23,739 in 1994
and 1993, respectively.
The operating unit in Norway has issued a performance bond of NOK 352,000
as of December 31, 1994.
In 1994 a former agent of the division filed a 19 FFR million
(approximately 24 NOK million) claim against Dyno Industrier A.S for breach of
the agent agreement related to procurement of materials for the production unit
in France. The litigation is still pending and Dyno intends to vigorously defend
its position. Although the final outcome cannot presently be determined, Dyno
has accrued a liability of approximately 6.7 NOK million which has been included
in the combined statements in 1994 as it relates to the operations of the
Division. In accordance with the purchase agreement (see Note 1), Dyno will
retain any obligations related to this claim.
F-60
<PAGE> 164
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
13 FINANCIAL INSTRUMENTS
The financial hedging agreements as of December 31 are as follows:
1993:
1. FORWARD CONTRACTS
<TABLE>
<CAPTION>
CONTRACT SUM (THOUSANDS)
- --------------------------
BOUGHT SOLD FORWARD RATE DATE DUE CONTRACT PARTNER
- ---------- ------------ ------------ --------- ----------------
<S> <C> <C> <C> <C>
DEM 1,496 ESB 122,807 82.09 Jan 1994 Dyno Finans A.S
DEM 5,583 FRF 19,477 0.2867 Jan 1994 Dresdner Bank
</TABLE>
1994:
1. FORWARD CONTRACT
<TABLE>
<CAPTION>
CONTRACT SUM
(THOUSANDS)
- -----------------------
BOUGHT SOLD FORWARD RATE DATE DUE CONTRACT PARTNER
- -------- ----------- ------------ --------- ----------------
<S> <C> <C> <C> <C>
DEM 883 ESB 73,858 83.65 Jan 1995 Dyno Finans A.S
</TABLE>
2. INTEREST RATE CAPS
<TABLE>
<CAPTION>
CURR. AMOUNT INTEREST RATE PERIOD CONTRACT PARTNER
- ------------ ------------- ------------------- ----------------
(THOUSANDS)
<S> <C> <C> <C> <C>
ESB 500,000 11% 1995 - August 1997 Dyno Finans A.S
</TABLE>
F-61
<PAGE> 165
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors of Dyno Industrier A.S:
We have audited the accompanying combined statement of revenues and direct
costs and expenses of the Fuel Tank System Division (the "Division") of Dyno
Industrier A.S for the year ended December 31, 1992. This financial statement is
the responsibility of the Division's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosure 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement presents fairly, in all material
respects, the combined revenues and direct costs and expenses of the Division
for the year ended December 31, 1992, in conformity with accounting principles
generally accepted in the United States.
DELOITTE & TOUCHE
Oslo, Norway
May 30, 1995
F-62
<PAGE> 166
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
COMBINED STATEMENT OF REVENUES AND DIRECT COSTS AND EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
1992
----------
(AMOUNTS
IN
NOK 1,000)
<S> <C>
Revenues -- (Note 3)............................................................. 406,503
Cost of Goods Sold............................................................... 277,229
Gross Profit..................................................................... 129,274
Selling, General, and Administrative Expenses.................................... 177,524
----------
Operating Income (Loss).......................................................... (48,250)
=========
</TABLE>
F-63
<PAGE> 167
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1992
1 BASIS OF PRESENTATION
The financial statements includes the combined accounts of the Fuel Tank
System Division (the Division) of Dyno Industrier A.S (Dyno), a Norwegian
company. This division comprises production units in Norway, Great Britain,
Germany, France, Belgium and Spain which are involved in the development and
manufacture of plastic automotive fuel tank systems. All significant
transactions between the division's production units have been eliminated in
combination.
The financial statements of the Division's operating units have been
combined and prepared as a result of the Purchase and Sale Agreement between
Dyno and Walbro Corporation dated April 7, 1995. Walbro Corporation is
purchasing certain divisional assets of the entities in Norway, Great Britain,
Germany and Belgium, and the shares of the entities in France and Spain.
During the period covered by the combined financial statement the
Division's business was conducted as an integral part of Dyno's overall
operations. The financial statements include sales to and purchases of materials
to and from other Dyno business units at established prices. These amounts are
not necessarily indicative of the costs that will prevail for the Division
subsequent to the closing of the transaction described in the purchase
agreement.
The combined financial statement includes all revenues and costs and
expenses directly incurred by, or related to, the Division, including
depreciation and rental cost related to facilities used in the business. The
cost of administrative and marketing personnel and facilities in certain
locations are shared with, and allocated between, other Dyno divisions. The
financial statement does not reflect any Dyno corporate management or overhead
costs, or any provision for income taxes.
The accompanying combined statement of revenues and direct costs and
expenses has been prepared in conformity with general accepted accounting
principles in the United States.
2 ACCOUNTING POLICIES
Cost of Goods Sold
Inventories are valued at the lower of cost using the 'first-in-first-out'
method or at net realizable value. Cost for goods purchased is the purchase
price. Cost for goods in production and internally produced goods is the direct
manufacturing cost plus the appropriate portion of production overhead costs.
Depreciation
Property, plant and equipment are depreciated using the straight-line
method. The rates for calculating straight-line depreciation have been
determined based on an evaluation of the individual fixed asset's economic
lifetime as follows:
<TABLE>
<S> <C>
machinery and equipment....................................... 3 - 20 years
buildings..................................................... 20 - 33 years
</TABLE>
F-64
<PAGE> 168
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
3 REVENUES BY COUNTRY OF CUSTOMER
<TABLE>
<CAPTION>
(IN NOK 1000)
<S> <C>
United Kingdom................................................. 81,474
Germany........................................................ 73,029
France......................................................... 105,684
Belgium........................................................ 3,322
Sweden......................................................... 111,568
Other.......................................................... 31,426
-------
Total................................................ 406,503
=======
</TABLE>
4 RELATED PARTY TRANSACTIONS
As described in Note 1, the Division is an integral part of Dyno and is
normally consolidated in the Dyno financial statements. Many of the Division's
production units share facilities with other divisions of Dyno.
The combined financial statement includes sales and purchases of various
products and services to and from Dyno and its affiliates in the normal course
of business totalling approximately (NOK 1,000) 2,177 and 24,274.
The production units in France and Germany leased certain equipment from an
affiliated company during the year. Total payments for the year under these
arrangements were (NOK 1,000) 9,917.
5 COMMITMENTS
The Division has various leases for certain facilities and machinery and
equipment. Total rental expense for the year was approximately (NOK 1,000)
22,922.
F-65
<PAGE> 169
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
6/30/95 12/31/94
------- -------
(AMOUNTS IN NOK
1,000)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................ 54,923 24,136
Notes receivable..................................................... 43,029 32,622
Accounts receivable -- Net........................................... 177,595 181,792
Amounts receivable from related entities............................. 10,381 28,980
Inventories:
Raw materials........................................................ 42,444 37,036
Work in progress..................................................... 32,671 22,005
Finished goods....................................................... 22,920 26,569
------- -------
Total Inventories............................................ 98,035 85,610
------- -------
Prepaid expenses and other current assets............................ 43,252 43,532
------- -------
Total Current Assets......................................... 427,215 396,672
======= =======
Property, Plant and Equipment -- Net................................... 396,147 396,665
Other Assets:
Long term receivables................................................ 3,905 16,602
Intangible assets -- Net............................................. 14,516 14,801
Deferred taxes....................................................... 7,566 11,130
Other................................................................ 3,299 3,605
------- -------
Total Other Assets........................................... 29,286 46,138
------- -------
Total Assets................................................. 852,648 839,475
======= =======
LIABILITIES AND SHAREHOLDERS' AND DIVISIONAL EQUITY
Current Liabilities:
Accounts payable..................................................... 179,262 147,465
Accrued liabilities.................................................. 59,151 79,919
Current portion of long term debt.................................... 63,862 102,388
Amounts payable to related entities.................................. 44,364 36,788
Notes payable........................................................ 30,516 30,792
Income taxes payable................................................. 4,743 1,596
------- -------
Total Current Liabilities.................................... 381,898 398,948
======= =======
Long Term Debt -- Less current portion................................. 110,833 100,050
Subordinated Loan...................................................... 8,845 9,511
Deferred Taxes......................................................... 26,841 22,777
Other Long Term Liabilities............................................ 16,445 20,531
Shareholders' and Divisional Equity.................................... 307,786 287,658
------- -------
Total Liabilities and Shareholders' and Divisional Equity.... 852,648 839,475
======= =======
</TABLE>
F-66
<PAGE> 170
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
COMBINED INCOME STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
6/30/95 6/30/94
------- -------
(AMOUNTS IN NOK 1,000)
(UNAUDITED)
<S> <C> <C>
Revenues.............................................................. 688,013 490,334
Cost of Goods Sold.................................................... 542,747 380,989
------- -------
Gross Profit.......................................................... 145,266 109,345
------- -------
Selling, General, and Administrative Expenses -- (Note 1)............. 110,752 101,572
------- -------
Operating Income...................................................... 34,514 7,773
------- -------
Other Income (Expense):
Interest expense.................................................... (10,106) (12,645)
Interest income..................................................... 3,496 2,888
Other expense -- Net................................................ (1,819) (1,473)
------- -------
Total Other Income (Expense)................................ (8,429) (11,230)
------- -------
Income (Loss) Before Taxes............................................ 26,085 (3,458)
------- -------
Income Taxes.......................................................... 9,929 8,636
------- -------
Net Income (Loss)........................................... 16,156 (12,094)
======= =======
</TABLE>
F-67
<PAGE> 171
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
6/30/95 6/30/94
------- --------
(AMOUNTS IN NOK
1,000)
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................................... 16,156 (12,094)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 35,018 30,877
Change in deferred income taxes................................ 7,629 1,158
(Gain) loss on sale of property, plant and equipment........... (290) 1,328
Changes in operating assets and liabilities:
(Increase) decrease:
Accounts and notes receivable............................... (6,210) (58,445)
Inventories................................................. (12,425) (14,930)
Prepaid expenses and other current assets................... 280 20,334
Long-term receivables and other assets...................... 12,970 9,010
Increase (decrease):
Accounts payable............................................ 31,797 107,202
Accrued and other liabilities............................... (21,707) (31,800)
------- --------
Net cash provided by operating activities...................... 63,218 52,640
======= ========
Cash Flows From Investing Activities:
Purchases of property, plant and equipment.......................... (39,121) (36,061)
Proceeds from sale of property, plant and equipment................. 5,454 21,439
(Advances to) repayments from related entities -- net............... 26,175 (90,989)
------- --------
Net cash used in investing activities:.............................. (7,492) (105,611)
------- --------
Cash Flows From Financing Activities:
Borrowings of long-term debt........................................ 13,732 35,428
Repayments of long-term debt........................................ (6,661) (3,910)
Net change in related party long-term debt.......................... (33,585) (10,951)
Repayments of subordinated loans.................................... -- (39,676)
Contributed equity.................................................. 6,293 72,298
------- --------
Net cash provided by financing activities............................. (20,221) 53,189
------- --------
Foreign currency effects on cash flows................................ (4,718) (2,665)
Net increase (decrease) in cash and cash equivalents.................. 30,787 (2,447)
------- --------
Cash and cash equivalents at beginning of period...................... 24,136 25,285
------- --------
Cash and cash equivalents at end of period............................ 54,923 22,838
======= ========
</TABLE>
F-68
<PAGE> 172
DYNO INDUSTRIER A.S FUEL TANK SYSTEM DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES AND PRINCIPLES OF COMBINATION
The condensed combined interim financial statements and notes should be
read in conjunction with the combined financial statements and notes for the
fuel tank system division for the year ended December 31, 1994. The condensed
combined financial statements have been prepared in accordance with United
States generally accepted accounting principles. The interim combined financial
statements are unaudited and reflect all adjustments which are, in the opinion
of management, necessary to present fairly the results of operation for the
periods presented.
During the periods covered by the combined income statements the Division's
business was conducted as an integral part of Dyno Industrier A.S's overall
operations. The combined financial statements include sales to and purchases of
materials to and from other Dyno business units at established prices. They also
include various allocated costs and expenses which are not necessarily
indicative of the costs and expenses which would have resulted had the Division
been operated as a separate company. All of the allocations and estimates
reflected in the combined financial statements are based on assumptions that the
production units' and Dyno's management believes are reasonable. Additionally
certain management and overhead costs incurred by Dyno related to the Division
have been included in the combined financial statements. Such amounts totaled
4.0 and 1.9 NOK million for the three months ended June 30, 1995 and 1994,
respectively. These amounts have not been charged to the production units, but
have been included for presentation purposes. Total research and development
expense was 2.9 and 2.8 NOK million for the three months ended June 30, 1995 and
1994, respectively.
2 CONTINGENCIES
In 1994 a former agent of the Division filed a 19 FFR million
(approximately 24 NOK million) claim against Dyno Industrier A.S for breach of
the agent agreement related to procurement of materials for the production unit
in France. The litigation is still pending and Dyno intends to vigorously defend
its position. Although the final outcome cannot presently be determined, Dyno
has accrued a liability of approximately 6.7 NOK million which has been included
in the combined statements as it relates to the operations of the Division. In
accordance with the purchase and sale agreement (see Note 3), Dyno will retain
any obligations related to this claim.
3 SUBSEQUENT EVENT
In April 1995, Dyno signed a purchase and sale agreement with Walbro
Corporation. Walbro is purchasing certain divisional assets of the entities in
Norway, Great Britain, Germany and Belgium, and the shares of the entities in
France and Spain. The price of the acquisition will be approximately USD 124
million, subject to certain adjustments. The transaction is expected to close in
the summer of 1995.
F-69
<PAGE> 173
<TABLE>
<S> <C>
============================================================ ========================================================
No dealer, salesperson or other individual has been
authorized to give any information or make any
representation not contained in this Prospectus in
connection with the offering covered by this
Prospectus. If given or made, such information or
representations must not be relied upon as having been
authorized by the Company. This Prospectus does not
constitute an offer, or a solicitation in any
jurisdiction where, or to any person to whom, it is
unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus, nor any distribution
of securities made hereunder shall, under any [LOGO]
circumstances, create any implication that there has
not been any change in the facts set forth in this
Prospectus or in the affairs of the Company since the
date hereof.
WALBRO CORPORATION
Due 2005, Series B
TABLE OF CONTENTS 9 7/8% Senior Notes
PAGE
----
Prospectus Summary . . . . . . . . . . . . . . . . . . 5
The Company . . . . . . . . . . . . . . . . . . . . . . 5
Investment Considerations . . . . . . . . . . . . . . . 13
Use of Proceeds of New Notes . . . . . . . . . . . . . 18 -------------------
Capitalization . . . . . . . . . . . . . . . . . . . . 18 P R O S P E C T U S
The Exchange Offer . . . . . . . . . . . . . . . . . . 19 -------------------
The Company . . . . . . . . . . . . . . . . . . . . . . 28
Pro Forma Unaudited
Condensed Consolidated Financial Data . . . . . . . . 30
Selected Financial and Operating Data - Walbro
Corporation . . . . . . . . . . . . . . . . . . . . . 34
Management's Discussion and Analysis
of Financial Condition and Results
of Operations - Walbro Corporation . . . . . . . . . 35
Selected Financial and Operating Data - Dyno . . . . . 43
Management's Discussion and Analysis of
Results of Operations - Dyno. . . . . . . . . . . . . 44
Business . . . . . . . . . . . . . . . . . . . . . . . 46
Management . . . . . . . . . . . . . . . . . . . . . . 59
Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . . 66
Certain Transactions . . . . . . . . . . . . . . . . . 67
Description of Other Indebtedness . . . . . . . . . . . 68
Description of the New Notes . . . . . . . . . . . . . 69
Certain U.S. Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . . . . 95 , 1995
Old Notes Registration Rights . . . . . . . . . . . . . 97
Book Entry; Delivery and Form . . . . . . . . . . . . . 98
Plan of Distribution . . . . . . . . . . . . . . . . . 100
Legal Matters . . . . . . . . . . . . . . . . . . . . . 101
Independent Public Accountants . . . . . . . . . . . . 101
Index to Financial Statements . . . . . . . . . . . . . F-1
============================================================ ========================================================
</TABLE>
<PAGE> 174
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Company in connection with the issuance and distribution of the New Notes
pursuant to the Prospectus contained in this Registration Statement. The
Company will pay all of these expenses.
<TABLE>
<CAPTION>
Approximate
Amount
-----------
<S> <C>
Securities and Exchange Commission registration fee . . . . . . . . . . . $37,931
Accountants fees and expenses . . . . . . . . . . . . . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Exchange Agents fees and expenses . . . . . . . . . . . . . . . . . . . . *
Printing and engraving . . . . . . . . . . . . . . . . . . . . . . . . . *
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . *
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ *
============
</TABLE>
- ------------------------
*To be filed by Amendment
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who
are (or are threatened to be made) parties to any threatened, pending or
completed legal action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of their being directors or officers
of the corporation. The indemnity may include expenses, attorneys' fees,
judgments, fines and amounts paid in settlement, provided such sums were
actually and reasonably incurred in connection with such action, suit or
proceeding and provided the director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests and, in the case of criminal proceedings, provided he had no
reasonable cause to believe that his conduct was unlawful. The corporation may
indemnify directors and officers in a derivative action (in which suit is
brought by a stockholder on behalf of the corporation) under the same
conditions, except that no indemnification is permitted without judicial
approval if the director or officer is adjudged liable to the corporation. If
the director or officer is successful on the merits or otherwise in defense of
any actions referred to above, the corporation must indemnify him against the
expenses and attorneys' fees he actually and reasonably incurred.
Article VIII of the Company's By-Laws provides that the Company shall
indemnify its officers and directors to the fullest extent permitted by Section
145.
Under an existing policy of insurance, the Company is entitled to be
reimbursed for certain indemnity payments it is required or permitted to make
to directors and officers of the Company.
Item 15. RECENT SALES OF UNREGISTERED SECURITIES.
On July 27, 1995, the Company sold to the Initial Purchasers, in an action
exempt from the registration requirements of the Securities Act of 1933, as
amended, pursuant to Section 4(2) thereof,
II-1
<PAGE> 175
$110,000,000 in aggregate principal amount of its Notes, less Initial
Purchasers' discount of $2,750,600. In accordance with the agreement pursuant
to which the Initial Purchasers purchased the Old Notes, the Initial Purchasers
agreed to offer and sell such securities only to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act), to a limited number
of institutional "accredited investors" (as defined in Rule 501(A)(1), (2), (3)
or (7) under the Securities Act) and pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S under the
Securities Act. Except for the transactions described above there have not
been any recent sales of unregistered securities.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
3.1* Restated Certificate of Incorporation of the Company, filed as
Exhibit 3.1, to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (the "Form 10-K").
3.2* By-laws of the Company, as amended, filed as Exhibit 3.2, to the
Form 10-K.
4.1* Indenture for the Notes, dated as of July 27, 1995, among the
Company, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc., and
Bankers Trust Company, as Trustee (including form of Exchange
Note), filed as Exhibit 2.3 to the Company's Current Report on
Form 8-K, dated June 27, 1995 (the "Form 8-K").
4.2 Amended and Restated Credit Agreement dated as of September 22,
1995, among the Company, certain of its subsidiaries, Comerica
Bank, as agent, and Harris Bank, as co-agent.
4.3 Purchase Agreement dated as of July 27, 1995 among the
Company, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc., and
the Initial Purchasers.
4.4 Registration Rights Agreement, dated July 21, 1995, among the
Company, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc., and
the Initial Purchasers.
4.5* Form of Exchange Note (included in Exhibit 4.1).
4.6* Shareholder Rights Plan, dated December 8, 1988, filed as the
Exhibit to the Company's Registration Statement on Form 8-A for
Shareholder Stock Purchase Rights filed December 12, 1988.
4.7* First Amendment to Rights Agreement, dated February 6, 1991, filed
as Exhibit 4.8 to the Company's 1990 Annual Report on Form 10-K.
4.8* Loan Agreement between City of Ligonier, Indiana and Sharon
Manufacturing Company, dated as of June 1, 1992, filed as Exhibit
4.12 to the Company's 1992 Annual Report on Form 10-K.
4.9* Loan Agreement between Walbro Automotive Corporation and the Town
of Ossian, Indiana, dated as of December 1, 1993, filed as Exhibit
4.13 to the Company's 1993 Annual Report on Form 10-K.
4.10* Note Agreement among the Company and the purchasers named therein,
dated as of October 1, 1994, relating to the 7.68% Senior Notes of
the Company, filed as Exhibit 4.9 to the Company's 1994 Annual
Report on Form 10-K.
5** Form of Opinion of Katten Muchin & Zavis as to the legality of
the securities being registered (including consent).
10.1* Purchase and Sale Agreement dated as of April 7, 1995 by and
between the Company and Dyno filed as Exhibit 2.1 to the
Company's Quarterly Report on Form 10-Q, for the quarter ended
March 31, 1995.
10.2* Addendum to Purchase and Sale Agreement by and between the Company
and Dyno dated as of July 27, 1995, filed as Exhibit 2.2 to the
Form 8-K.
10.3* The Company's 1983 Incentive Stock Option Plan, filed as the
Exhibit to the Company's Registration Statement on Form S-8, filed
November 15, 1989.
10.4* Joint Venture Agreement between the Company and Mitsuba Electric
Manufacturing Company, Ltd., dated December 12, 1986, filed as
Exhibit 10.4 to the Company's 1986 Annual Report on Form 10-K.
10.5* The Company's Equity Based Long-Term Incentive Plan, filed as
Exhibit 4.5 to the Company's Registration Statement on Form S-8,
filed June 15, 1992.
10.6* Executive Disability Plan adopted July 8, 1988, filed as Exhibit
10.10 to the Company's 1988 Annual Report on Form 10-K.
10.7* Retirement Income Plan for Directors, dated February 9, 1988, filed
as Exhibit 10.11 to the Company's 1988 Annual Report on Form 10-K.
10.8* Equipment Leasing Agreement between the Company and NEMLC Leasing
Associates No. 3, without supplements, dated July 1, 1988, filed
as Exhibit 10.13 to the Company's 1988 Annual Report on Form 10-K.
10.9* The Company's Employee Stock Ownership Plan, dated August 15, 1989,
filed as Exhibit 10.14 to the Form 10-K.
10.10* Walbro Engine Management Incentive Compensation Plan, filed as
Exhibit 10.21 to the Company's 1990 Annual Report on Form 10-K.
10.11* Joint Venture Agreement, dated June 17, 1991, between the Company
and Jaeger S.A., an indirect, majority-controlled subsidiary of
Magneti Marelli S.p.A., relating to the Marwal Systems S.A. joint
venture, filed as Exhibit 10.23 to the Company's Registration
Statement on Form S-2, File No. 33-41425.
10.12* Joint Venture Agreement between the Company and Jaeger S.A., dated
as of January 1, 1993, relating to the Marwal do Brasil joint
venture, filed as Exhibit 10.10 to the Company's 1992 Annual
Report on Form 10-K.
10.13* Agreement among AB Svenska Elektromagneter, Opcon AB, Cartona
Fastighetsforvaltning K.B., Erling Edmundson, Four Seasons Venture
Capital AB, SEM-Walbro Corporation and the Company, effective as of
January 2, 1991, filed as Exhibit 10.20 to the Company's 1991
Annual Report on Form 10-K.
10.14* The Company's Advantage Plan, filed as the Exhibit to the Company's
Registration Statement on Form S-8, filed October 28, 1991.
10.15* Aircraft Lease Agreement between the Company and C.I.T. Leasing
Corporation, dated as of October 27, 1992, filed as Exhibit 10.13
to the Company's 1992 Annual Report on Form 10-K.
10.16* Joint Venture Contract among Walbro Engine Management Corporation,
Fujian Fuding Carburetor Factory and Twin Winner Trading Co., Ltd.,
dated December 30, 1993, relating to the Fujian Hualong Carburetor
Co. Ltd. joint venture, filed as Exhibit to the Company's 1993
Annual Report on Form 10-K.
10.17* Assistance Agreement among the State of Connecticut, acting by the
Department of Economic Development, and Walbro Automotive
Corporation and Whitehead Engineered Products, dated February 17,
1995, filed as Exhibit 10.24 to the Company's 1994 Annual Report
on Form 10-K.
10.18* Agreement among the Company, Walbro Automotive Corporation and
Magneti Marelli France S.A., dated February 7, 1995, filed as
Exhibit 10.25 to the Company's 1994 Annual Report on Form 10-K.
10.19* Joint Venture Agreement between the Company and Daewoo Precision
Industries, Ltd., dated November 30, 1994, filed as Exhibit 10.26
to the Company's 1994 Annual Report on Form 10-K.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen & Co. GmbH.
23.3 Consent of Deloitte & Touche.
23.4 Consent of Katten Muchin & Zavis (contained in its opinion to be
filed as Exhibit 5 hereto).
24 Power of Attorney (see signature page).
25 Statement of eligibility under the Trust Indenture Act of
1939, as amended, on Form T-1 of Bankers Trust Company, as
Trustee under the Indenture.
99.1 Form of Letter of Transmittal for New Notes.
II-2
<PAGE> 176
99.2 Form of Notice of Guaranteed Delivery for New Notes.
99.3 Letter to Brokers.
99.4 Letter to Clients.
99.5 Instruction to Registered Holder and/or Book Entry Transfer
Participant from Beneficial Owner.
99.6 Guidelines for Certificate of Taxpayer Identification Number on
Substitute Form W-9.
- --------------------
* Incorporated by reference.
** To be filed by amendment
(b) Financial Statement Schedules.
Report of Independent Public Accountants
SCHEDULE II Walbro Corporation and Subsidiaries
Supplemental Note to Consolidated Financial Statements
- Valuation and Qualifying Accounts.
Item 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes 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.
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-3
<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cass City, State of Michigan on the 22nd day of
September, 1995.
WALBRO CORPORATION
By: /s/ Lambert E. Althaver
----------------------------------
Lambert E. Althaver
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Lambert E. Althaver, Michael A. Shope, Gary L. Vollmar and Howard S. Lanznar
and each of them his true and lawful attorney-in-fact and agent, with full
power of substitution, to sign on his behalf, individually and in each capacity
stated below, all amendments and post- effective amendments to this
Registration Statement on Form S-4 and to file the same, with all exhibits
thereto and any other documents in connection therewith, with the Commission
under the Securities Act, granting unto said attorneys-in- fact and agents full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully and to all intents
and purposes as each might or could do in person, hereby ratifying and
confirming each act that said attorneys-in-fact and agents may lawfully do or
cause to be done by virtue thereof.
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 and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------------------------- ------------------------------------------------ ------------------
<S> <C> <C>
/s/ Lambert E. Althaver Chairman of the Board, President and Chief September 22, 1995
----------------------------- Executive Officer (Principal Executive Officer)
Lambert E. Althaver
/s/ Robert S. Walpole Vice President and Director September 22, 1995
-----------------------------
Robert S. Walpole
/s/ Michael A. Shope Chief Financial Officer and Treasurer (Principal September 22, 1995
----------------------------- Financial and Accounting Officer)
Michael A. Shope
/s/ William T. Bacon, Jr. Director September 22, 1995
-----------------------------
William T. Bacon, Jr.
/s/ Frank E. Bauchiero Director September 22, 1995
-----------------------------
Frank E. Bauchiero
/s/ Herbert M. Kennedy Director September 22, 1995
-----------------------------
Herbert M. Kennedy
/s/ Vernon E. Oechsle Director September 22, 1995
-----------------------------
Vernon E. Oechsle
/s/ Robert D. Tuttle Director September 22, 1995
-----------------------------
Robert D. Tuttle
/s/ John E. Utley Director September 22, 1995
-----------------------------
John E. Utley
</TABLE>
II-4
<PAGE> 178
SIGNATURES
Each of the Guarantors pursuant to the requirements of the Securities
Act of 1933, as amended, certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-4 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cass City, State of Michigan on the
22nd day of September, 1995.
WALBRO AUTOMOTIVE CORPORATION
WALBRO ENGINE MANAGEMENT CORPORATION
SHARON MANUFACTURING COMPANY
WHITEHEAD ENGINEERED PRODUCTS, INC.
By: /s/ Lambert E. Althaver
----------------------------------------
Lambert E. Althaver
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Lambert E. Althaver, Michael A. Shope, Gary L. Vollmar and Howard S.
Lanznar and each of them his true and lawful attorney-in-fact and agent, with
full power of substitution, to sign on his behalf, individually and in each
capacity stated below, all amendments and post-effective amendments to this
Registration Statement on Form S-4 and to file the same, with all exhibits
thereto and any other documents in connection therewith, with the Commission
under the Securities Act, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully and to all intents
and purposes as each might or could do in person, hereby ratifying and
confirming each act that said attorneys-in-fact and agents may lawfully do or
cause to be done by virtue thereof.
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 and on the dates indicated.
Signature Title Date
- ------------------------ ----------------------------- ----------------------
Chairman of the Board,
President and Chief Executive
Officer (Principal Executive
/s/ Lambert E. Althaver Officer) September 22, 1995
- -----------------------
Lambert E. Althaver
Treasurer (Principal Financial
/s/ Michael A. Shope and Accounting Officer) September 22, 1995
- -----------------------
Michael A. Shope
<PAGE> 179
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C>
3.1* Restated Certificate of Incorporation of the Company, filed as
Exhibit 3.1, to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 (the "Form 10-K").
3.2* By-laws of the Company, as amended, filed as Exhibit 3.2, to the
Form 10-K.
4.1* Indenture for the Notes, dated as of July 27, 1995, among the
Company, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc., and
Bankers Trust Company, as Trustee (including form of Exchange
Note), filed as Exhibit 2.3 to the Company's Current Report on
Form 8-K, dated June 27, 1995 (the "Form 8-K").
4.2 Amended and Restated Credit Agreement dated as of September 22,
1995, among the Company, certain of its subsidiaries, Comerica
Bank, as agent, and Harris Bank, as co-agent.
4.3 Purchase Agreement dated as of July 27, 1995 among the
Company, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc., and
the Initial Purchasers.
4.4 Registration Rights Agreement, dated July 21, 1995, among the
Company, Walbro Engine Management Corporation, Sharon
Manufacturing Company, Whitehead Engineered Products, Inc., and
the Initial Purchasers.
4.5* Form of Exchange Note (included in Exhibit 4.1).
4.6* Shareholder Rights Plan, dated December 8, 1988, filed as the
Exhibit to the Company's Registration Statement on Form 8-A for
Shareholder Stock Purchase Rights filed December 12, 1988.
4.7* First Amendment to Rights Agreement, dated February 6, 1991, filed
as Exhibit 4.8 to the Company's 1990 Annual Report on Form 10-K.
4.8* Loan Agreement between City of Ligonier, Indiana and Sharon
Manufacturing Company, dated as of June 1, 1992, filed as Exhibit
4.12 to the Company's 1992 Annual Report on Form 10-K.
4.9* Loan Agreement between Walbro Automotive Corporation and the Town
of Ossian, Indiana, dated as of December 1, 1993, filed as Exhibit
4.13 to the Company's 1993 Annual Report on Form 10-K.
4.10* Note Agreement among the Company and the purchasers named therein,
dated as of October 1, 1994, relating to the 7.68% Senior Notes of
the Company, filed as Exhibit 4.9 to the Company's 1994 Annual
Report on Form 10-K.
5** Form of Opinion of Katten Muchin & Zavis as to the legality of
the securities being registered (including consent).
10.1* Purchase and Sale Agreement dated as of April 7, 1995 by and
between the Company and Dyno filed as Exhibit 2.1 to the
Company's Quarterly Report on Form 10-Q, for the quarter ended
March 31, 1995.
10.2* Addendum to Purchase and Sale Agreement by and between the Company
and Dyno dated as of July 27, 1995, filed as Exhibit 2.2 to the
Form 8-K.
10.3* The Company's 1983 Incentive Stock Option Plan, filed as the
Exhibit to the Company's Registration Statement on Form S-8, filed
November 15, 1989.
10.4* Joint Venture Agreement between the Company and Mitsuba Electric
Manufacturing Company, Ltd., dated December 12, 1986, filed as
Exhibit 10.4 to the Company's 1986 Annual Report on Form 10-K.
10.5* The Company's Equity Based Long-Term Incentive Plan, filed as
Exhibit 4.5 to the Company's Registration Statement on Form S-8,
filed June 15, 1992.
10.6* Executive Disability Plan adopted July 8, 1988, filed as Exhibit
10.10 to the Company's 1988 Annual Report on Form 10-K.
10.7* Retirement Income Plan for Directors, dated February 9, 1988, filed
as Exhibit 10.11 to the Company's 1988 Annual Report on Form 10-K.
10.8* Equipment Leasing Agreement between the Company and NEMLC Leasing
Associates No. 3, without supplements, dated July 1, 1988, filed
as Exhibit 10.13 to the Company's 1988 Annual Report on Form 10-K.
10.9* The Company's Employee Stock Ownership Plan, dated August 15, 1989,
filed as Exhibit 10.14 to the Form 10-K.
10.10* Walbro Engine Management Incentive Compensation Plan, filed as
Exhibit 10.21 to the Company's 1990 Annual Report on Form 10-K.
10.11* Joint Venture Agreement, dated June 17, 1991, between the Company
and Jaeger S.A., an indirect, majority-controlled subsidiary of
Magneti Marelli S.p.A., relating to the Marwal Systems S.A. joint
venture, filed as Exhibit 10.23 to the Company's Registration
Statement on Form S-2, File No. 33-41425.
10.12* Joint Venture Agreement between the Company and Jaeger S.A., dated
as of January 1, 1993, relating to the Marwal do Brasil joint
venture, filed as Exhibit 10.10 to the Company's 1992 Annual
Report on Form 10-K.
10.13* Agreement among AB Svenska Elektromagneter, Opcon AB, Cartona
Fastighetsforvaltning K.B., Erling Edmundson, Four Seasons Venture
Capital AB, SEM-Walbro Corporation and the Company, effective as of
January 2, 1991, filed as Exhibit 10.20 to the Company's 1991
Annual Report on Form 10-K.
10.14* The Company's Advantage Plan, filed as the Exhibit to the Company's
Registration Statement on Form S-8, filed October 28, 1991.
10.15* Aircraft Lease Agreement between the Company and C.I.T. Leasing
Corporation, dated as of October 27, 1992, filed as Exhibit 10.13
to the Company's 1992 Annual Report on Form 10-K.
10.16* Joint Venture Contract among Walbro Engine Management Corporation,
Fujian Fuding Carburetor Factory and Twin Winner Trading Co., Ltd.,
dated December 30, 1993, relating to the Fujian Hualong Carburetor
Co. Ltd. joint venture, filed as Exhibit to the Company's 1993
Annual Report on Form 10-K.
10.17* Assistance Agreement among the State of Connecticut, acting by the
Department of Economic Development, and Walbro Automotive
Corporation and Whitehead Engineered Products, dated February 17,
1995, filed as Exhibit 10.24 to the Company's 1994 Annual Report
on Form 10-K.
10.18* Agreement among the Company, Walbro Automotive Corporation and
Magneti Marelli France S.A., dated February 7, 1995, filed as
Exhibit 10.25 to the Company's 1994 Annual Report on Form 10-K.
10.19* Joint Venture Agreement between the Company and Daewoo Precision
Industries, Ltd., dated November 30, 1994, filed as Exhibit 10.26
to the Company's 1994 Annual Report on Form 10-K.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen & Co. GmbH.
23.3 Consent of Deloitte & Touche.
23.4 Consent of Katten Muchin & Zavis (contained in its opinion to be
filed as Exhibit 5 hereto).
24 Power of Attorney (see signature page).
25 Statement of eligibility under the Trust Indenture Act of
1939, as amended, on Form T-1 of Bankers Trust Company, as
Trustee under the Indenture.
99.1 Form of Letter of Transmittal for New Notes.
</TABLE>
<PAGE> 180
99.2 Form of Notice of Guaranteed Delivery for New Notes.
99.3 Letter to Brokers.
99.4 Letter to Clients.
99.5 Instruction to Registered Holder and/or Book Entry Transfer
Participant from Beneficial Owner.
99.6 Guidelines for Certificate of Taxpayer Identification Number on
Substitute Form W-9.
- --------------------
* Incorporated by reference.
** To be filed by amendment
<PAGE> 181
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Walbro Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Walbro Corporation and
Subsidiaries annual report to shareholders included in this registration
statement, and have issued our report thereon dated February 14, 1995. Our
audits were made for the purpose of forming an opinion on those statements
taken as a whole. The supplemental note to consolidated financial statements
on page S-2 is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not a required part of the basic consolidated financial statements. The
information contained in this supplemental note has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 14, 1995.
S-1
<PAGE> 182
SCHEDULE II
WALBRO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
VALUATION AND QUALIFYING ACCOUNTS
Following is a summary of changes in the valuation and qualifying
accounts for the three years ended December 31, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
RESERVE FOR LOSS ON DISCONTINUANCE AND PLANT CLOSINGS:
Balance Beginning of Year $ -- $ 258 $ 1,400
Additions charged to operations -- -- --
Deductions (A) -- (258) (1,142)
------- ------- --------
Balance End of Year $ -- $ -- $ 258
======= ======= ========
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Balance Beginning of Year $ 413 $ 340 $ 162
Additions charged to operations 115 86 178
Deductions for uncollectible accounts
written off, net of recoveries (160) (13) --
-------- ------- --------
Balance End of Year $ 368 $ 413 $ 340
======== ======= ========
RESERVE FOR INVENTORY VALUATION:
Balance Beginning of Year $ 482 $ 669 $ 70
Additions charged to operations 159 2 644
Deductions for inventory disposal (403) (189) (45)
-------- ------- --------
Balance End of Year $ 238 $ 482 $ 669
======== ======= ========
ALLOWANCE FOR NOTES RECEIVABLE:
Balance Beginning of Year $ 214 214 $ --
Additions charged to operations 240 -- 214
Deductions -- -- --
-------- ------- --------
Balance End of Year $ 454 $ 214 $ 214
======== ======= ========
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS:
Balance Beginning of Year $ 355 $ -- $ --
Additions charged to operations 389 355 --
Deductions -- -- --
-------- ------- --------
Balance End of Year $ 744 $ 355 $ --
======== ======= ========
</TABLE>
- ------------------
(A) Represents costs of discontinuance incurred subsequent to decision date.
S-2
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
================================================================================
================================================================================
AMENDED AND RESTATED WALBRO CORPORATION
$135,000,000 CREDIT AGREEMENT
DATED AS OF SEPTEMBER 22, 1995
COMERICA BANK, AS AGENT
HARRIS BANK, AS CO-AGENT
================================================================================
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 "Account(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Account Debtor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Account Party(ies)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Activation Fee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Advance(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 "Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 "Agent's Correspondent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Agent's Fees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 "Alternate Base Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Alternative Currency" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "Alternative Currency Principal Limit" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Applicable Fee Percentage" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 "Applicable Interest Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 "Applicable Margin" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 "Assignment Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 "Banks" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 "Capital Expenditures" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 "Capitalized Lease Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 "Closing Fee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.22 "Co-Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 "Collateral" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 "Collateral Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 "Collateral Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 "Company Collateral Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.28 "Company Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 "Company Security Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 "Consolidated" or "Consolidating" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.31 "Consolidated Intangible Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.32 "Consolidated Net Income" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 "Consolidated Tangible Net Worth" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.34 "Continuing Directors" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.35 "Contractual Obligation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.36 "Covenant Compliance Report" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.37 "Current Dollar Equivalent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.38 "Current Shareholder and Management Group" . . . . . . . . . . . . . . . . . . . . . . . 7
1.39 "De Minimis Matters" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.40 "Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.41 "Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.42 "Dollar Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.43 "Dollars" and the sign "$" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.44 "Domestic Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.45 "Domestic Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.46 "Domestic Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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1.47 "Dyno" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.48 "Dyno Acquisition Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.49 "Dyno Acquisition" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.50 "Dyno Capital Expenditures" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.51 "EBITDA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.52 "Equity Offering" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.53 "Equity Offering Adjustment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.54 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.55 "ERISA Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.56 "Eurocurrency-based Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.57 "Eurocurrency-based Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.58 "Eurocurrency-Interest Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.59 "Eurocurrency Lending Office" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.60 "Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.61 "Excess Cash Flow" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.62 "Existing Senior Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.63 "Existing Senior Debt Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.64 "Existing Senior Note Purchasers" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.65 "Existing Senior Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.66 "Federal Funds Effective Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.67 "Fees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.68 "Fixed Charge Coverage Ratio" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.69 "Fixed Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.70 "Fixed Rate Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.71 "Fixed Rate Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.72 "Fixed Rate Election" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.73 "Foreign Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.74 "Funded Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.75 "Funded Debt Ratio" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.76 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.77 "Guaranties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.78 "Guarantor Collateral Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.79 "Guarantor Security Agreement[s]" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.80 "Guarantor(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.81 "Hazardous Material" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.82 "Hazardous Material Law(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.83 "Hereof", "hereto", "hereunder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.84 "HLT Determination" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.85 "Indebtedness" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.86 "Intercreditor Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.87 "Intercompany Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.88 "Intercompany Loans, Advances or
Investments" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.89 "Interest Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.90 "Internal Revenue Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.91 "Investment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.92 "Issuing Office" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.93 "Japanese Term Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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1.94 "Joinder Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.95 "Joint Venture" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.96 "Lender Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.97 "Lenders" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.98 "Letter of Credit Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.99 "Letter of Credit Fees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.100 "Letter of Credit Maximum Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.101 "Letter of Credit Obligation(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.102 "Letter of Credit Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.103 "Letter(s) of Credit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.104 "Lien" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.105 "Loan Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.106 "Majority Banks" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.107 "Material Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.108 "Minority Interests" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.109 "Multiemployer Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.110 "Net Income Adjustment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.111 "New Senior Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.112 "New Senior Debt Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.113 "New Senior Note Purchasers" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.114 "New Senior Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.115 "Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.116 "PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.117 "Pension Plan(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.118 "Percentage" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.119 "Permitted Acquisitions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
1.120 "Permitted Borrower" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.121 "Permitted Borrower Guaranty" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.122 "Permitted Currency(ies)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.123 "Permitted Guaranties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.124 "Permitted Investments" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.125 "Permitted Liens" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.126 "Permitted Merger(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.127 "Permitted Transfer(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.128 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.129 "Prime Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.130 "Prime-based Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.131 "Prime-based Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.132 "Prohibited Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.133 "Quoted Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.134 "Quoted Rate Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.135 "Quoted Rate Interest Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.136 "Reference Banks" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.137 "Refunded Swing Line Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.138 "Reportable Event" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.139 "Request for Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.140 "Required Consummation Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.141 "Revolving Credit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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1.142 "Revolving Credit Aggregate Commitment" . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.143 "Revolving Credit Commitment Fee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.144 "Revolving Credit Designated Unused
Portion" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.145 "Revolving Credit Maturity Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.146 "Revolving Credit Maximum Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.147 "Revolving Credit Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.148 "Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.149 "Sharon" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.150 "Special Conditions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.151 "Special Purpose Letter(s) of Credit" . . . . . . . . . . . . . . . . . . . . . . . . . . 29
1.152 "Significant Subsidiary(ies)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
1.153 "Significant Domestic Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
1.154 "Significant Foreign Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.155 "Single Employer Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.156 "Sublimit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.157 "Subordinated Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.158 "Subsidiary(ies)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.159 "Swing Line Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.160 "Swing Line Bank" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.161 "Swing Line Maximum Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.162 "Swing Line Note(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.163 "Term Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.164 "Term Loan Aggregate Commitment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.165 "Term Loan Funding Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.166 "Term Loan Maturity Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.167 "Term Loan Permitted Amortization
Schedule" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.168 "Term Loan Initial Request" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.169 "Term Loan Rate Request" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.170 "Term Loan Request" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.171 "Term Notes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.172 "UCC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.173 "Walbro Automotive" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.174 "Walbro Engine Management" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.175 "Walbro Belgium" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.176 "Walbro England" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.177 "Walbro France" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.178 "Walbro Germany" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.179 "Walbro Japan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.180 "Walbro Netherlands" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.181 "Walbro Norway" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.182 "Walbro Spain" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.183 "Whitehead" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.184 "Yield Maintenance Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2. REVOLVING CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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2.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.2 Accrual of Interest and Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.3 Requests for and Refundings and
Conversions of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.4 Disbursement of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.5 (a) Swing Line Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Accrual of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(c) Requests for Swing Line Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(d) Disbursement of Swing Line
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Refunding of or Participation
Interest in Swing Line
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.6 Prime-based Interest Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.7 Eurocurrency-based and Quoted Rate
Interest Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.8 Interest Payments on Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.9 Interest on Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.10 Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.11 Determination, Denomination and
Redenomination of Alternative Currency
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.12 Prime-based Advance in Absence of Election
or Upon Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.13 Revolving Credit Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.14 Currency Appreciation; Sublimits;
Mandatory Reduction of Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 48
2.15 Optional Reduction or Termination of
Revolving Credit Maximum Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.16 Revolving Credit Designated Unused
Portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2.17 Activation of Designated Unused Portion. . . . . . . . . . . . . . . . . . . . . . . . . 52
2.18 Extension of Revolving Credit Maturity
Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.19 Revolving Credit as Renewal; Application
of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.1 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.2A Conditions to Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.2B Special Purpose Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.3 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.4 Letter of Credit Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.5 Issuance Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3.6 Draws and Demands for Payment Under
Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3.7 Obligations Irrevocable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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3.8 Risk Under Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
3.9 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
3.10 Right of Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
3.11 Existing Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
4. TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.2 Repayment of Principal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.3 Excess Cash Flow Recapture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
4.4 Accrual of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.5 Prime-based Interest Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.6 Eurocurrency-based Interest Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.7 Interest Payments on Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.8 Interest on Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.9A Initial Requests for Funding Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . 67
4.9B Term Loan Rate Requests; Refundings and
Conversions of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
4.9C Term Loan Certifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.9D Failure to Refund or Convert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.9E Limited Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.9F Unavailability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.9G Reconversion to Applicable Alternative
Currency and Eurocurrency-based Rate on
Re-availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.9H Repayment on Reconversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.9I Interest Payments on Conversions and
Reconversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.10 Disbursement of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
4.11 Fixed Rate Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4.12 Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
4.13 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5. MARGIN ADJUSTMENTS; HLT DETERMINATION; SPECIAL LIMITATION . . . . . . . . . . . . . . . . . . . . . . 79
5.1 Margin Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5.2 HLT Determination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5.3 Special Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.1 Execution of Notes, this Agreement and the
other Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.2 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6.3 Company Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.4 Domestic Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.5 Foreign Permitted Borrower Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . 82
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6.6 Company Collateral Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.7 Guarantor Collateral Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
6.8 Representations and Warranties -- All
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.9 Compliance with Certain Documents and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.10 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.11 Intercreditor Agreement and Existing
Senior Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.12 Company's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
6.13 Payment of Agent's and Other Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
6.14 Other Documents and Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
6.15 Continuing Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.1 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.2 Due Authorization - Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.3 Due Authorization -- Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
7.4 Title to Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.5 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.8 No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.9 Enforceability of Agreement and Loan
Documents -- Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.10 Enforceability of Loan Documents --
Significant Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.11 Non-contravention -- Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.12 Non-contravention -- Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
7.13 No Litigation -- Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.14 No Litigation -- Other Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.15 Consents, Approvals and Filings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.16 Agreements Affecting Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . 89
7.17 No Investment Company; No Margin Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.18 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7.19 Environmental Matters and Safety Matters. . . . . . . . . . . . . . . . . . . . . . . . . 90
7.20 Accuracy of Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.1 Preservation of Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8.2 Keeping of Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.3 Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
8.4 Consolidated Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
8.5 Funded Debt Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
8.6 Maintain Fixed Charge Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . 95
8.7 Inspections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
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8.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
8.9 Further Assurances; Financing Statements. . . . . . . . . . . . . . . . . . . . . . . . . 96
8.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
8.11 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.12 Governmental and Other Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.13 Compliance with Contractual Obligations
and Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.14 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.15 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.16 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
8.17 Significant Subsidiaries; Joinder
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.18 Financial Covenant Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.1 Capital Structure and Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
9.2 Business Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.3 Mergers or Dispositions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.4 Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.5 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
9.6 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.7 Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.8 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
9.9 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.10 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.11 Dyno Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
9.12 No Further Negative Pledges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.13 Prepayment of Debts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
9.14 Amendment of Existing Senior Debt
Documents and New Senior Debt Documents and Subordinated Debt. . . . . . . . . . . . 107
10. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
10.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
10.2 Exercise of Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
10.3 Rights Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
10.4 Waiver by Company and the Permitted
Borrowers of Certain Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
10.5 Waiver of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
11. PAYMENTS, RECOVERIES AND COLLECTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.1 Payment Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.2 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
11.3 Pro-rata Recovery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
11.4 Deposits and Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
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12. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 115
12.1 Reimbursement of Prepayment Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
12.2 Eurocurrency Lending Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
12.3 Availability of Alternative Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . 116
12.4 Refunding Advances in Same Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . 116
12.5 Circumstances Affecting Eurocurrency-based
Rate or Alternative Currency
Availability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
12.6 Laws Affecting Eurocurrency-based or
Alternative Currency Advance
Availability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
12.7 Increased Cost of Eurocurrency-based or
Alternative Currency Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
12.8 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
12.9 Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
12.10 Other Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
13. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
13.1 Appointment of Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
13.2 Deposit Account with Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
13.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
13.4 Successor Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.5 Loans by Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.6 Credit Decisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.7 Notices by Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
13.8 Agent's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
13.9 Nature of Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
13.10 Actions; Confirmation of Agent's Authority
to Act in Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
13.11 Authority of Agent to Enforce Notes and
This Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
13.12 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.13 Knowledge of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.14 Agent's Authorization; Action by Banks. . . . . . . . . . . . . . . . . . . . . . . . . . 124
13.15 Enforcement Actions by the Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
13.16 Co-Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
14.1 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
14.2 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
14.3 Law of Michigan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
14.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
14.5 Closing Costs; Other Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
14.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
14.7 Further Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
</TABLE>
- ix -
<PAGE> 11
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
14.8 Successors and Assigns; Assignments and
Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
14.9 Indulgence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
14.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
14.11 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
14.12 Taxes and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
14.13 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
14.14 Withholding Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
14.15 Effective Upon Execution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
14.16 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
14.17 Table of Contents and Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
14.18 Construction of Certain Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
14.19 Independence of Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
14.20 Reliance on and Survival of Various
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
14.21 Complete Agreement; Amendment and
Restatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
<CAPTION>
EXHIBITS
- --------
<S> <C>
FORM OF REQUEST FOR ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
FORM OF REVOLVING CREDIT NOTE -- COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
FORM OF REVOLVING CREDIT NOTE -- PERMITTED BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
PERCENTAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C
SUBLIMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D
FORM OF SWING LINE NOTE -- COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
FORM OF SWING LINE NOTE -- PERMITTED BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-2
FORM OF REQUEST FOR SWING LINE ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F
FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G
FORM OF TERM NOTE -- COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
FORM OF TERM NOTE -- PERMITTED BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-2
FORM OF TERM LOAN INITIAL REQUEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
FORM OF TERM LOAN RATE REQUEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J
FORM OF FIXED RATE ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K
FORM OF COVENANT COMPLIANCE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L
FORM OF JOINDER AGREEMENT:
DOMESTIC GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M-1
PERMITTED BORROWER GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M-2
FORM OF ASSIGNMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N
<CAPTION>
SCHEDULES
- ---------
<S> <C> <C>
Schedule 1.104 Schedule 9.4
Schedule 5.1 Schedule 9.5
Schedule 7.6 Schedule 9.6
Schedule 7.13 Schedule 9.8
Schedule 7.14
Schedule 7.19
Schedule 8.17
</TABLE>
- x -
<PAGE> 12
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is made as of
the 22nd day of September, 1995, by and among the Banks signatory hereto
(individually, "Bank", and collectively "Banks"), Comerica Bank, as agent for
the Banks (in such capacity, "Agent"), and Walbro Corporation, a Delaware
corporation ("Company").
RECITALS:
A. Company has requested that the Banks amend, renew and extend
to it and to the Permitted Borrowers (as defined below), credit in the
aggregate amount of up to One Hundred Thirty-Five Million Dollars
($135,000,000) previously extended to Company and the Permitted Borrowers
pursuant to that certain Walbro Corporation $135,000,000 Credit Agreement dated
as of July 26, 1995, as amended ("Prior Credit Agreement"), by and among the
Company, certain of the Permitted Borrowers (by their execution and delivery of
promissory notes thereunder) and Comerica Bank, individually as a Bank and in
its capacity as Agent, and consisting of the Revolving Credit, Swing Line
Advances, Letters of Credit and Term Loans (each as defined below), on the
terms and conditions set forth herein.
B. The Banks are prepared to extend such credit by amendment and
renewal (but not in novation), as aforesaid, but only upon the terms and
conditions set forth in this Agreement.
NOW THEREFORE, COMPANY, AGENT AND THE BANKS AGREE:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
1.1 "Account(s)" shall mean any account or account receivable
as defined under the UCC, including without limitation, with respect to any
Person, any right of such Person to payment for goods sold or leased or for
services rendered.
1.2 "Account Debtor" shall mean the party who is obligated on
or under any Account.
1.3 "Account Party(ies)" shall mean, with respect to any Letter
of Credit, the account party or parties (which shall be Company individually,
or jointly and severally with a Permitted Borrower which has issued Revolving
Credit Notes hereunder) named in an application to the Agent for the issuance
of such Letter of Credit.
1.4 "Activation Fee" shall mean the fee payable by Company to
Agent, for distribution to the Banks based on their respective Percentages, in
connection with each activation of the Revolving edit Designated Unused Portion
under Section 2.17 hereof and each
<PAGE> 13
request for the funding of a Term Loan under Section 4.9A hereof, in each case
in the respective amounts set forth therein.
1.5 "Advance(s)" shall mean, as the context may indicate, a
borrowing requested by Company or by a Permitted Borrower, and made by Banks
under Section 2.1 or 4.1 of this Agreement, as the case may be, or requested by
the Company or by a Permitted Borrower and made by the Swing Line Bank under
Section 2.5 hereof, including without limitation any readvance, refunding or
conversion of such borrowing pursuant to Section 2.3, 2.5(c) or 4.9B hereof,
any advance in respect of a Letter of Credit under Section 3.6 hereof
(including without limitation the unreimbursed amount of any draws under any
Letters of Credit), and shall include, as applicable, a Eurocurrency-based
Advance, a Prime-based Advance, a Quoted Rate Advance, a Fixed Rate Advance and
a Swing Line Advance.
1.6 "Affiliate" shall mean, with respect to any Person, any
other Person or group acting in concert in respect of the first Person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with such first Person. For purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person or group of Persons, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
1.7 "Agent" shall mean Comerica Bank, a Michigan banking
corporation, or any successor appointed in accordance with Section 13.4 hereof.
1.8 "Agent's Correspondent" shall mean such bank or banks as
Agent may from time to time designate by written notice to Company, the
Permitted Borrowers and the Banks as its correspondent for Advances in
Eurodollars or in particular Alternative Currencies.
1.9 "Agent's Fees" shall mean those fees and expenses required
to be paid by Company to Agent under Section 13.8 hereof.
1.10 "Alternate Base Rate" shall mean, for any day, an interest
rate per annum equal to the Federal Funds Effective Rate in effect on such day,
plus one percent (1%).
1.11 "Alternative Currency" shall mean British Pounds Sterling
("Sterling"), French Francs ("FF"), Japanese Yen ("Y"), Deutsche Marks ("DM"),
Norwegian Krone ("K"), Spanish Peseta ("SP"), Belgian Francs ("BF") and,
subject to the prior written approval of Agent and each of the Banks and to the
terms and conditions of this Agreement, such other freely convertible foreign
currencies (which, when referred to herein or in any of the other Loan
Documents, shall be referred to using the currency codes in
2
<PAGE> 14
effect from time to time under ISO International Standard 4217, or any such
successor publication or standard) as requested by the Company or a Permitted
Borrower.
1.12 "Alternative Currency Principal Limit" shall mean, with
respect to each Term Loan funded in an Alternative Currency, the initial
principal amount of such Term Loan (stated in the applicable Alternative
Currency) minus the sum of (a) the amount of any payments or prepayments of
principal made on such Term Loan on or prior to the date of any determination
of such Alternative Currency Principal Limit and (b) the amount of any
principal repayments on the Term Loan scheduled to be paid under Section 4.3
hereof or required to be paid under Section 4.2 hereof on or prior to the date
of any determination of such Alternative Currency Principal Limit.
1.13 "Applicable Fee Percentage" shall mean, as of any date of
determination thereof, the applicable percentage used to calculate certain of
the fees due and payable hereunder, determined (based on the Funded Debt Ratio)
by reference to the appropriate columns in the Pricing Matrix attached to this
Agreement as Schedule 5.1.
1.14 "Applicable Interest Rate" shall mean the
Eurocurrency-based Rate, the Quoted Rate or the Prime-based Rate, as selected
by Company or a Permitted Borrower from time to time, subject to the terms and
conditions of this Agreement, and, if elected by the Company or a Permitted
Borrower pursuant to Section 4.11 hereof, the Fixed Rate.
1.15 "Applicable Margin" shall mean, as of any date of
determination thereof, the applicable interest rate margin, determined (based
on the Funded Debt Ratio) by reference to the appropriate columns in the
Pricing Matrix attached to this Agreement as Schedule 5.1.
1.16 "Assignment Agreement" shall have the meaning ascribed to
such term in Section 14.8(d) hereof.
1.17 "Banks" shall mean Comerica Bank, any other Banks signatory
hereto, and any assignee which becomes a Bank pursuant to Section 14.8(d)
hereof.
1.18 "Business Day" shall mean any day on which commercial banks
are open for domestic and international business (including dealings in foreign
exchange) in Detroit, London (except with respect to any Prime-based Advances),
and New York and if funds are to be paid or made available in any Alternative
Currency, on such day in the place where such funds are to be paid or made
available.
1.19 "Capital Expenditures" shall mean, without duplication, any
amounts paid or accrued for a period in respect of any purchase or other
acquisition for value of fixed or capital assets; provided that, in no event
shall Capital Expenditures include amounts
3
<PAGE> 15
expended in respect of normal repair and maintenance of plant facilities,
machinery, fixtures and other like capital assets utilized in the ordinary
conduct of business (to the extent such amounts would not be capitalized in
preparing a balance sheet determined in accordance with GAAP).
1.20 "Capitalized Lease Obligations" shall mean, at any time, a
lease obligation with respect to which the lessee is required by GAAP to
recognize the acquisition of an asset and the incurrence of a liability at such
time.
1.21 "Closing Fee" shall mean the fee payable to the Agent upon
closing of this Agreement in accordance with the Agency Fee Letter.
1.22 "Co-Agent" shall mean Harris Bank, in its capacity as
Co-Agent hereunder.
1.23 "Collateral" shall mean all property or rights in which a
security interest, mortgage, lien or other encumbrance for the benefit of the
Lenders is or has been granted or arises or has arisen, under or in connection
with this Agreement, the Loan Documents, the Existing Senior Debt Documents, or
otherwise.
1.24 "Collateral Agent" shall mean Comerica, acting in its
capacity as Collateral Agent for the Lenders under the Intercreditor Agreement.
1.25 "Collateral Documents" shall mean the Company Collateral
Documents and the Guarantor Collateral Documents executed and delivered by
Company and by certain of Company's Subsidiaries, as the case may be, to the
Collateral Agent, in accordance with the terms and conditions of this
Agreement, as the same may be amended from time to time.
1.26 "Company" shall mean Walbro Corporation, a Delaware
corporation.
1.27 "Company Collateral Documents" shall mean the Company
Security Agreement, and all of the other acknowledgments, certificates,
financing statements, instruments and other security documents executed by
Company and delivered to the Collateral Agent, as of the date of the Prior
Credit Agreement or, from time to time, subsequent thereto, in connection with
such security agreement, this Agreement, the Prior Credit Agreement, the Loan
Documents, and the Existing Senior Debt Documents, as such collateral documents
may be amended, restated, supplemented or replaced from time to time.
1.28 "Company Guaranty" shall mean that certain guaranty of all
of the Indebtedness outstanding from the Permitted Borrowers hereunder,
executed and delivered by the Company to the Agent, on behalf of the Banks as
of the date of the Prior Credit Agreement, as amended, restated, supplemented
or replaced from time to time.
4
<PAGE> 16
1.29 "Company Security Agreement" shall mean that certain stock
pledge and security agreement encumbering the Accounts, Inventory and general
intangibles of Company and the shares of stock or share capital of Company in
certain of its Subsidiaries, now owned or hereafter acquired (all as set forth
therein), executed and delivered by Company to the Collateral Agent as of the
date of the Prior Credit Agreement, or from time to time subsequent thereto,
hereof as security for the Lender Debt, as the same may be amended, restated,
supplemented or replaced from time to time.
1.30 "Consolidated" or "Consolidating" shall, when used with
reference to any financial information pertaining to (or when used as a part of
any defined term or statement pertaining to the financial condition of) Company
and its Subsidiaries, mean the accounts of Company and its Subsidiaries
determined on a consolidated or consolidating basis, as the case may be, all
determined as to principles of consolidation and, except as otherwise
specifically required by the definition of such term or by such statements, as
to such accounts, in accordance with GAAP applied on a consistent basis and
consistent with the financial statements as at and for the fiscal year ended
December 31, 1994.
1.31 "Consolidated Intangible Assets" shall mean, as of any date
of determination thereof, the amount of good will, patents, trade names, trade
marks, copyrights, franchises, experimental expense, organization expense,
unamortized debt discount and expense, deferred assets other than prepaid
insurance and prepaid taxes, the excess of cost of shares acquired over book
value of related assets and such other assets as are properly classified as
"intangible assets" determined on a Consolidated basis in accordance with GAAP
(but expressly excluding the value of the technology licenses for Orbital
Engine Company Ltd. and cash surrender values under key employee insurance
policies), in each case determined for the Company and its Subsidiaries on a
Consolidated basis.
1.32 "Consolidated Net Income" shall mean, in respect of any
period, the net income (loss) of Company and its Subsidiaries, determined on a
Consolidated basis in accordance with GAAP, for such period.
1.33 "Consolidated Tangible Net Worth" shall mean, as of any
date of determination thereof, (a) the amount of capital stock accounts plus
(or minus in the case of a deficit) the paid-in capital and retained earnings
of the Company and its Subsidiaries; plus (b) to the extent not included in
subparagraph (a) above, an amount equal to the liquidation preference of issued
and outstanding preferred stock of the Company; plus (c) to the extent not
included in subparagraph (a) above, Minority Interests; plus (d) deferred
income taxes; plus (e) the unpaid principal amount of any outstanding
Subordinated Debt; plus (f) $2,900,000; minus (g) the net book value, after
deducting any reserves applicable thereto, of all items of the following
character which are included in the assets of the Company and its Subsidiaries:
(i) Consolidated
5
<PAGE> 17
Intangible Assets; (ii) any increment resulting from any reappraisal,
revaluation or writeup of assets; and (iii) treasury stock, all determined on a
Consolidated basis for the Company and its Subsidiaries in accordance with
GAAP.
1.34 "Continuing Directors" shall mean the directors of the
Company on the effective date of this Agreement and each other director of the
Company, if such other director's nomination or election to the board of
directors of the Company is recommended by a majority of the then Continuing
Directors.
1.35 "Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or written undertaking to which such Person is a party or by which it or any of
its property is bound.
1.36 "Covenant Compliance Report" shall mean the report to be
furnished by the Company to the Agent, in substantially the form attached to
this Agreement as Exhibit "L" and certified by the chief financial officer of
the Company pursuant to Section 8.3(b) and 8.3(c), hereof, as to whether the
Company and its Subsidiaries are in compliance with the financial and other
covenants contained in Sections 8.4 through 8.6, inclusive, and 9.5, 9.6, 9.8
and 9.11, inclusive, of this Agreement, in which report the Company shall set
forth its calculations and the resultant ratios or financial tests determined
thereunder.
1.37 "Current Dollar Equivalent" shall mean at any time, with
respect to any Advance in an Alternative Currency, the amount of Dollars which
is equivalent to the then outstanding principal amount of such Advance at the
most favorable spot exchange rate determined by the Agent to be available to it
for the sale of Dollars for such Alternative Currency for delivery at
approximately 11:00 A.M. (Detroit time) two (2) Business Days after such date.
Alternative Currency equivalents of Advances in Dollars (to the extent used
herein) shall be determined by Agent in a manner consistent herewith.
1.38 "Current Shareholder and Management Group" shall mean (i)
Lambert A. Althaver, Robert H. Walpole, Gary L. Vollmar, Richard H. Whitehead
III, Michael A. Shope and Daniel L. Hittler; (ii) the spouses, lineal
descendants and spouses of the lineal descendants of the persons named in
clause (i); and (iii) the estates or legal representatives of the persons named
in clauses (i) and (ii).
1.39 "De Minimis Matters" shall mean environmental or other
matters, the existence of which and any liability which may result therefrom,
could not, individually or in the aggregate, have a material adverse effect on
the financial condition or businesses of the Company or any of its Subsidiaries
or on the ability of the Company or any of its Subsidiaries to pay its Debts,
as such Debts become due.
6
<PAGE> 18
1.40 "Debt" shall mean, as of any applicable date of
determination, all items of indebtedness, obligation or liability of a Person,
whether matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP, including without limitation, any items so
classified on a balance sheet or the accompanying footnotes and any
reimbursement obligations in respect of letters of credit, obligations in
respect of bankers acceptances, payment obligations, if any, under interest
rate protection agreements (including without limitation interest rate swaps
and similar agreements), and currency swaps and hedges and similar agreements;
provided, however that for purposes of calculating the aggregate Debt of
Company and its Subsidiaries, the direct and indirect and absolute and
contingent obligations of Company and the Guarantors (whether direct or
contingent) shall be determined without duplication.
1.41 "Default" shall mean any event which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
1.42 "Dollar Amount" shall mean (i) with respect to each Advance
made or carried (or to be made or carried) in Dollars, the principal amount
thereof and (ii) with respect to each Advance made or carried (or to be made or
carried) in an Alternative Currency, the amount of Dollars which is equivalent
to the principal amount of such Advance at the most favorable spot exchange
rate determined by the Agent to be available to it for the sale of Dollars for
such Alternative Currency at approximately 11:00 A.M. (Detroit time) two (2)
Business Days before such Advance is made (or to be made), as such Dollar
Amount may be adjusted from time to time pursuant to Section 2.11 hereof or
otherwise hereunder. When used with respect to any Alternative Currency portion
of an Advance being repaid or remaining outstanding at any time or with respect
to any other sum expressed in an Alternative Currency, "Dollar Amount" shall
mean the amount of Dollars which is equivalent to the principal amount of such
Advance, or the amount so expressed in such Alternative Currency, at the most
favorable spot exchange rate determined by the Agent to be available to it for
the sale of Dollars for such Alternative Currency at the relevant time.
Alternative Currency amounts of Advances made, carried or expressed in Dollars
(to the extent used herein) shall be determined by Agent in a manner consistent
herewith.
1.43 "Dollars" and the sign "$" shall mean lawful money of the
United States of America.
1.44 "Domestic Advance" shall mean any Advance other than a
Eurocurrency-based Advance or any other Advance denominated in an Alternative
Currency.
1.45 "Domestic Guaranty" shall mean that certain guaranty
agreement containing the unconditional guaranties of borrowings hereunder by
Company and the Permitted Borrowers, executed and
7
<PAGE> 19
delivered by the Significant Domestic Subsidiaries to the Banks as of the date
hereof (or, pursuant to Section 8.17 hereof, subsequent to the date of this
Agreement), as amended, restated, supplemented or replaced from time to time.
1.46 "Domestic Subsidiaries" shall mean those Subsidiaries of
the Company incorporated under the laws of the United States of America, or any
state thereof.
1.47 "Dyno" shall mean Dyno Industrier AS, a Norwegian
corporation.
1.48 "Dyno Acquisition Agreement" shall mean that certain
Purchase and Sale Agreement entered into between Dyno, as seller, and the
Company, as purchaser, dated as of April 7, 1995, as amended to the date
hereof, and as further amended (subject to the terms hereof) from time to time.
1.49 "Dyno Acquisition" shall mean the acquisition by the
Company, subject to the terms hereof, of the assets, properties, rights and
business of Dyno (and certain subsidiaries of Dyno) for the price and on the
terms and conditions set forth in the Dyno Acquisition Agreement.
1.50 "Dyno Capital Expenditures" shall mean all Capital
Expenditures of the Company and its Subsidiaries made as part of, or in support
(whether directly or indirectly) of the operations acquired by the Company and
its Subsidiaries pursuant to or in connection with the Dyno Acquisition,
excluding Capital Expenditures in an amount not to exceed Twelve Million
Dollars ($12,000,000) in the aggregate, for or in connection with the European
research and development facility to be constructed by the Company or a
Significant Foreign Subsidiary.
1.51 "EBITDA" shall mean, with respect to any period, net
earnings (or loss) before gross interest expense, depreciation, good will,
amortization and taxes and before reflecting extraordinary gains (losses),
gains (losses) from discontinued operations and gains (losses) from Minority
Interests and Joint Ventures for such period, as determined in accordance with
GAAP.
1.52 "Equity Offering" shall mean the issuance and sale by the
Company or any of its Subsidiaries of additional capital stock or other equity
interests.
1.53 "Equity Offering Adjustment" shall mean that amount to be
added to the minimum Consolidated Tangible Net Worth required to be maintained
under Section 8.4 hereof consisting of an amount equal to one hundred percent
(100%) of each Equity Offering conducted by the Company or any of its
Subsidiaries (plus the result of any merger or acquisition), net of costs of
issuance, on or after the date hereof, on a cumulative basis.
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1.54 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, or any successor act or code, and the regulations in
effect from time to time thereunder.
1.55 "ERISA Affiliate" shall mean any trade or business (whether
or not incorporated) which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Company and would be treated as a single employer under Section 414(b) or (c)
of the Internal Revenue Code.
1.56 "Eurocurrency-based Advance" shall mean any Advance
(including a Swing Line Advance) which bears interest at the Eurocurrency-based
Rate.
1.57 "Eurocurrency-based Rate" shall mean a per annum interest
rate which is the Applicable Margin (subject in each case to adjustment under
Section 5.1 hereof) above the quotient of:
(i) the per annum interest rate at which deposits in the
relevant eurocurrency are offered to Agent's
Eurocurrency Lending Office by other prime banks in
the eurocurrency market in an amount comparable to
the relevant Eurocurrency-based Advance and for a
period equal to the relevant Eurocurrency-Interest
Period at approximately 11:00 A.M. Detroit time two
(2) Business Days prior to the first day of such
Eurocurrency-Interest Period, divided by
(ii) a percentage equal to 100% minus the maximum rate on
such date at which Agent or any of the Reference
Banks is required to maintain reserves on
`Eurocurrency Liabilities' as defined in and
pursuant to Regulation D of the Board of Governors
of the Federal Reserve System or, if such regulation
or definition is modified, and as long as Agent is
required to maintain reserves against a category of
liabilities which includes eurocurrency deposits or
includes a category of assets which includes
eurocurrency loans, the rate at which such reserves
are required to be maintained on such category,
such sum to be rounded upward, if necessary, to the nearest whole multiple of
1/100th of 1%.
1.58 "Eurocurrency-Interest Period" shall mean, (a) for Swing
Line Advances, an Interest Period of one month (or any lesser number of days
agreed to in advance by Company or a Permitted Borrower, Agent and the Swing
Line Bank) and (b) for all other Eurocurrency-based Advances, an Interest
Period of one, two, three
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or six months (or any lesser or greater number of days agreed to in advance by
Company or a Permitted Borrower, Agent and the Banks), as selected by Company
or a Permitted Borrower, as applicable, for a Eurocurrency-based Advance
pursuant to Section 2.3, 2.5 or 4.9B hereof, as the case may be.
1.59 "Eurocurrency Lending Office" shall mean, (a) with respect
to the Agent, Agent's office located at its Grand Caymans Branch or such other
branch of Agent, domestic or foreign, as it may hereafter designate as its
Eurocurrency Lending Office by notice to Company, the Permitted Borrower and
the Banks and (b) as to each of the Banks, its office, branch or affiliate
located at its address set forth on the signature pages hereof (or identified
thereon as its Eurocurrency Lending Office), or at such other office, branch or
affiliate of such Bank as it may hereafter designate as its Eurocurrency
Lending Office by notice to Company and Agent.
1.60 "Event of Default" shall mean each of the Events of Default
specified in Section 10.1 hereof.
1.61 "Excess Cash Flow" shall mean for any fiscal year (using
the terms contained in the Company's Consolidated financial statements for its
fiscal year ending December 31, 1994 and the sources and uses statement
contained in Company's 10-K Report filed with the Federal Securities and
Exchange Commission in respect of such period), net cash provided by operating
activities for such fiscal year, less purchase of property and equipment for
such fiscal year, less principal payments on long-term debt for such fiscal
year (including all principal payments based on Excess Cash Flow made on the
Term Loan under Section 4.3 hereof, if any, during such fiscal year, but
excluding all payments on the Revolving Credit, or any other revolving loan
facility utilized at any time by Company or any of its Subsidiaries), all
calculated based upon Company's annual Consolidated financial statements
required to be delivered to Agent and the Banks under Section 8.3(b) hereof.
1.62 "Existing Senior Debt" shall mean the senior debt issued by
the Company pursuant to the Senior Debt Documents in an aggregate principal
amount of Forty-Five Million Dollars ($45,000,000).
1.63 "Existing Senior Debt Documents" shall mean that certain
Walbro Corporation Note Purchase Agreement dated as of October 1, 1994
($45,000,000 7.68% Senior Notes due October 1, 2004) and the Existing Senior
Notes issued thereunder, together with any and all other documents, instruments
and certificates executed and delivered pursuant thereto, as the same may be
amended from time to time (subject to the terms hereof) and any and all other
documents executed in exchange therefor or in replacement or renewal thereof.
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1.64 "Existing Senior Note Purchasers" shall mean the note
purchasers which are signatories to the Existing Senior Debt Documents, and
their respective successors and assigns.
1.65 "Existing Senior Notes" shall mean the senior notes issued
by the Company to the Existing Senior Note Purchasers pursuant to the Existing
Senior Debt Documents as evidence of the Existing Senior Debt, as such notes
may be amended, extended or supplemented from time to time, and any other notes
issued in substitution, renewal or replacement thereof from time to time.
1.66 "Federal Funds Effective Rate" shall mean, for any day, a
fluctuating interest rate per annum equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal funds brokers of recognized
standing selected by it.
1.67 "Fees" shall mean the Agent's Fees, the Closing Fee, the
Activation Fee, the Letter of Credit Fees and the Revolving Credit Commitment
Fee and the other fees and charges payable hereunder.
1.68 "Fixed Charge Coverage Ratio" shall mean a ratio, the
numerator of which consists of the EBITDA of Company and its Subsidiaries for
the four fiscal quarters immediately preceding the applicable date of
determination, minus the aggregate Capital Expenditures of Company and its
Subsidiaries during such period (excluding in such calculations through and
including June 30, 1996, all Dyno Capital Expenditures, but including in such
calculations beginning September 30, 1996 all Dyno Capital Expenditures) and
the denominator of which consists of gross interest expense of Company and its
Subsidiaries for such period, all determined without duplication in accordance
with GAAP on a Consolidated basis.
1.69 "Fixed Rate" shall mean the per annum fixed rate of
interest for a specified Term Loan established by the Agent under Section 4.11
hereof, such rate to be based on (a) an average of the funding cost of each of
the Reference Banks on that date which is three (3) Business Days prior to the
effective date of an election of the Fixed Rate Option pursuant to Section 4.11
hereof, as determined by each such Reference Bank in the interbank swap market
for the weighted average life of the specified Term Loan then remaining, plus
(b) the Applicable Margin which would then be in effect for Eurocurrency-based
Rate Advances of such Term Loan if the Company or the applicable Permitted
Borrower had selected such rate, subject to any applicable margin adjustment
under Section 5.1 hereof, giving immediate effect thereto based on the most
current
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quarterly financial statement delivered by the Company under Section 8.3(b) or
8.3(c) hereof, as the case may be.
1.70 "Fixed Rate Advance" shall mean any Advance of a Term Loan
carried at the Fixed Rate.
1.71 "Fixed Rate Option" shall mean the right of the Company or
a Permitted Borrower, subject to and in accordance with Section 4.11 hereof, to
elect the Fixed Rate as the Applicable Interest Rate for a specified Term Loan.
1.72 "Fixed Rate Election" shall mean the written election of
the Fixed Rate as the Applicable Interest Rate for a specified Term Loan,
submitted by the Company or a Permitted Borrower under Section 4.11 hereof, in
the form attached hereto as Exhibit "K."
1.73 "Foreign Subsidiaries" shall mean all of the Company's
Subsidiaries other than the Domestic Subsidiaries.
1.74 "Funded Debt" shall mean, on a Consolidated basis and
without duplication (i) all Debt of the Company and its Subsidiaries for
borrowed money or which has been incurred in connection with the acquisition of
assets, excluding intercompany items, (ii) all Capitalized Lease Obligations of
the Company and its Subsidiaries, and (iii) all guaranties by Company or any of
its Subsidiaries of Funded Debt of any other person, including without
limitation any and all agreements, contingent or otherwise, to support the
obligation of such other Person, whether or not denominated as a guaranty, any
letter of credit reimbursement obligations and any other such agreement or
undertaking which would constitute a guaranty for purposes of GAAP,
consistently applied.
1.75 "Funded Debt Ratio" shall mean a ratio, the numerator of
which consists of the Funded Debt of the Company and its Subsidiaries as of the
applicable date of determination, and the denominator of which consists of the
EBITDA of the Company and its Subsidiaries for the four fiscal quarters
immediately preceding such date of determination, all determined without
duplication in accordance with GAAP on a Consolidated basis.
1.76 "GAAP" shall mean generally accepted accounting principles
in the United States of America (except as otherwise expressly stated herein)
as in effect (i) for purposes of calculating any financial covenants or ratios
hereunder, on the date hereof, consistently applied, and (ii) for all other
purposes, as in effect from time to time.
1.77 "Guaranties" shall mean the Company Guaranty, the Domestic
Guaranty and the Permitted Borrowers Guaranty, and "Guaranty" shall mean each
and any of such Guaranties, as the context may indicate.
1.78 "Guarantor Collateral Documents" shall mean the Guarantor
Security Agreement and the local share pledges identified
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and defined therein ("Local Share Pledges") and all other acknowledgments,
certificates, financing statements, instruments, local share pledges and other
security documents executed by the Domestic Guarantors and delivered to
Collateral Agent, as of the date of the Prior Credit Agreement or, from time to
time, subsequent thereto, in connection with such security agreements, this
Agreement, the Prior Credit Agreement, any of the other Loan Documents and the
Existing Senior Debt Documents, as such collateral documents may be amended,
restated, supplemented or replaced from time to time.
1.79 "Guarantor Security Agreement[s]" shall mean those certain
stock pledges and security agreements encumbering the accounts, inventory and
general intangibles of the Domestic Guarantors and the shares of stock or share
capital of certain of the Significant Subsidiaries now owned or hereafter
acquired by the Domestic Guarantors (or any of them) (as set forth therein),
executed and delivered by the Domestic Guarantors to the Collateral Agent, as
of the date of the Prior Credit Agreement or from time to time subsequent
thereto, as security for the Lender Debt, as amended, restated, supplemented or
replaced from time to time, and each security agreement or other security
document executed and delivered from and after the date hereof by a Significant
Domestic Subsidiary which becomes a Guarantor hereunder subsequent to the date
hereof in accordance with this Agreement.
1.80 "Guarantor(s)" shall mean each Significant Subsidiary of
the Company and each Person otherwise becoming a Significant Subsidiary of the
Company subsequent to the date hereof or otherwise entering into a Guaranty (by
joinder agreement or otherwise) from time to time and shall as of the date of
execution of this Agreement consist of those Subsidiaries designated as
Guarantors on Schedule 7.6 hereto.
1.81 "Hazardous Material" shall mean and include any hazardous,
toxic or dangerous waste, substance or material defined as such in (or for
purposes of) the Hazardous Material Laws or in respect of which liability or
standards of conduct may be imposed under any such laws.
1.82 "Hazardous Material Law(s)" shall mean all laws, codes,
ordinances, rules, regulations, orders, decrees and directives issued by any
federal, state, local, foreign or other governmental or quasi-governmental
authority or body (or any agency, instrumentality or political subdivision
thereof) pertaining to any hazardous, toxic, or dangerous waste, substance or
material on or about the Material Property or any portion thereof including,
without limitation, those relating to soil, surface, subsurface ground water
conditions and the condition of the ambient air; any so-called "superfund" or
"superlien" law; and any other federal, state, foreign or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic
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or dangerous waste, substance or material, as now or at any time hereafter in
effect.
1.83 "Hereof", "hereto", "hereunder" and similar terms shall
refer to this Agreement in its entirety and not to any particular paragraph or
provision of this Agreement.
1.84 "HLT Determination" shall mean any determination by the
Agent or by the Majority Banks, or by applicable federal or state regulatory
authorities (including without limitation any central bank or other
governmental body having jurisdiction over any of the Banks) that the
Indebtedness (or any specific loan facility or portion thereof pursuant to this
Agreement) would be classified as a "highly-leveraged transaction" or an "HLT"
under applicable federal or state law, regulations or guidelines in effect from
time to time, provided that (a), with any determination of HLT status by Agent
or the Majority Banks, Agent shall have given Company not less than thirty (30)
days prior written notice of such determination, accompanied by a certificate
setting forth in reasonable detail the basis for such determination (which
shall be presumed correct absent manifest error) and (b) with respect to any
determination of HLT status by a federal or state regulatory authority, Agent
shall have given written notice thereof to Company, accompanied by a copy of
such determination (if in writing).
1.85 "Indebtedness" shall mean all indebtedness and liabilities,
whether direct or indirect, absolute or contingent, owing by Company or any of
the Permitted Borrowers to the Banks (or any of them) or to the Agent, in any
manner and at any time, under this Agreement or the other Loan Documents,
whether evidenced by the Notes, the Company Guaranty, the Domestic Guaranty,
the Permitted Borrower Guaranty, or otherwise, due or hereafter to become due,
now owing or that may hereafter be incurred by the Company, or any of the
Permitted Borrowers to, or acquired by, the Banks or by Agent, and any
judgments that may hereafter be rendered on such indebtedness or any part
thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all consolidations, amendments, renewals,
replacements or extensions of any of the foregoing.
1.86 "Intercreditor Agreement" shall mean that certain
Intercreditor Agreement dated as of the date of the Prior Credit Agreement, as
the same may be amended from time to time, by and among Company, the Agent, the
Collateral Agent and the Lenders.
1.87 "Intercompany Loan" shall mean any loan (or advance in the
nature of a loan) by the Company or any 100% Subsidiary to another 100%
Subsidiary, provided that each such loan or advance is subordinated in right of
payment and priority to the Indebtedness on terms and conditions satisfactory
to Agent and the Majority Banks.
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1.88 "Intercompany Loans, Advances or Investments" shall mean
any Intercompany Loan, and any advance or investment by the Company or any 100%
Subsidiary (including without limitation any guaranty of obligations or
indebtedness to third parties) to or in another 100% Subsidiary.
1.89 "Interest Period" shall mean a Eurocurrency-Interest Period
commencing on the day a Eurocurrency-based Advance is made, or on the effective
date of an election of the Eurocurrency-based Rate made under Section 2.3,
2.5(c) or 4.9B hereof, as the case may be, or a Quoted Rate Interest Period
commencing on the day a Quoted-Rate Advance is made under Section 2.5(c)
hereof, provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Business Day shall be extended to the next
succeeding Business Day, except that as to a Eurocurrency-Interest
Period, if the next succeeding Business Day falls in another calendar
month, such Eurocurrency-Interest Period shall end on the next
preceding Business Day, and when a Eurocurrency-Interest Period begins
on a day which has no numerically corresponding day in the calendar
month during which such Eurocurrency-Interest Period is to end, it
shall end on the last Business Day of such calendar month, and
(b) no Interest Period shall extend beyond the maturity
date set forth in the Note to which such Interest Period is to apply.
1.90 "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time, and the regulations promulgated
thereunder.
1.91 "Investment" shall mean any loan, advance or extension of
credit by Company or any of its Subsidiaries to, or any other loan, advance
investment by Company or any of its Subsidiaries in (or guaranty or similar
undertaking for the benefit of), any Person (including without limitation, any
Subsidiary of Company), without offset, reduction or other adjustment, whether
such loan, advance or investment shall be in the nature of an investment in
shares of stock or other capital or securities, any contribution of capital,
general or limited partnership or joint venture interests, debentures,
evidences of indebtedness or otherwise.
1.92 "Issuing Office" shall mean Agent's office located at One
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48275 or such other
office as Agent shall designate as its Issuing Office.
1.93 "Japanese Term Loan" shall mean that certain Term Loan in
the aggregate principal amount of Seven Hundred Fifty Million Yen (Y
750,000,000) to be advanced by the Banks to Walbro Japan pursuant to Section
4.1 hereof.
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1.94 "Joinder Agreement" shall mean a joinder agreement in the
form attached to this Agreement as Exhibits "M-1" or "M- 2"; as the case may
be, to be executed and delivered pursuant to Section 8.17 of this Agreement by
any Subsidiary specified therein or which becomes a Significant Subsidiary
subsequent to the date hereof.
1.95 "Joint Venture" shall mean any corporation, partnership,
association, joint stock company, business trust or other combined enterprise,
other than a Consolidated Subsidiary, in which (or to which) the Company or any
of its Subsidiaries has made a loan, investment or advance or has an ownership
stake or interest, whether in the nature of Share Capital, partnership or
equity interest or otherwise.
1.96 "Lender Debt" shall mean the Indebtedness and the Existing
Senior Debt.
1.97 "Lenders" shall mean each of the Banks and each of the
Existing Senior Note Purchasers and their respective successors and assigns.
1.98 "Letter of Credit Agreement" shall mean, in respect of each
Letter of Credit, the application and related documentation satisfactory to the
Agent of an Account Party or Account Parties requesting Agent to issue such
Letter of Credit, as amended from time to time.
1.99 "Letter of Credit Fees" shall mean the fees payable to
Agent for the accounts of the Banks in connection with Letters of Credit
pursuant to Section 3.4 hereof.
1.100 "Letter of Credit Maximum Amount" shall mean as of any date
of determination the lesser of: (a) Seventeen Million Dollars ($17,000,000); or
(b) the Revolving Credit Aggregate Commitment of the Banks as of such date,
minus the aggregate principal amount of Advances outstanding as of such date
under the Revolving Credit Notes and the Swing Line Note.
1.101 "Letter of Credit Obligation(s)" shall mean the obligation
of an Account Party or Account Parties under each Letter of Credit Agreement to
reimburse the Agent for each payment made by the Agent under the Letter of
Credit issued pursuant to such Letter of Credit Agreement, together with all
other sums, fees, charges and amounts which may be owing to the Agent under
such Letter of Credit Agreement.
1.102 "Letter of Credit Payment" shall mean any amount paid or
required to be paid by the Agent in its capacity hereunder as issuer of a
Letter of Credit as a result of a draft or other demand for payment under any
Letter of Credit.
1.103 "Letter(s) of Credit" shall mean any standby or documentary
letters of credit issued by Agent at the request of or for the account of an
Account Party or Account Parties pursuant to
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Article 3 hereof, including without limitation any Special Purpose Letter of
Credit and those existing Letters of Credit ("Existing Letters of Credit")
issued under the Prior Credit Agreement, as identified on Schedule 1.103
hereto.
1.104 "Lien" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, option, trust receipt,
conditional sale or title retaining contract, sale and leaseback transaction,
or any other type of lien, charge or encumbrance, whether based on common law,
statute or contract.
1.105 "Loan Documents" shall mean, collectively, this Agreement,
the Prior Credit Agreement, the Notes, the Company Guaranty, the Domestic
Guaranty, the Permitted Borrower Guaranty, the Company Collateral Documents,
the Guarantor Collateral Documents (including the Local Share Pledges), the
Intercreditor Agreement and any other documents, instruments or agreements
executed pursuant to or in connection with any such document, or this
Agreement, as such documents may be amended, renewed, supplemented or replaced
from time to time.
1.106 "Majority Banks" shall mean at any time Banks holding
66-2/3% of the aggregate principal amount of the Indebtedness then outstanding
under the Notes (provided that, for purposes of determining Majority Banks
hereunder, Indebtedness outstanding under the Swing Line Notes shall be
allocated among the Banks based upon their respective Percentages), or, if no
Indebtedness is then outstanding, Banks holding 66-2/3% of the Percentages.
1.107 "Material Property" shall mean any property, whether
personal or real, owned, leased or otherwise used by the Company or any of its
Subsidiaries which is material to the operations of the Company and its
Subsidiaries, taken as a whole, or which is material to the operations of
Company or any of the Significant Subsidiaries.
1.108 "Minority Interests" shall mean any shares of stock of any
class of a Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority
Interests in preferred stock.
1.109 "Multiemployer Plan" shall mean any Pension Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
1.110 "Net Income Adjustment" shall mean that amount to be added
to the minimum Consolidated Tangible Net Worth required to be
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maintained under Section 8.4 hereof consisting of fifty percent (50%) of
Company's Consolidated Net Income for each of Company's fiscal years ending on
or after December 31, 1995 (in each case, only if a positive number), on a
cumulative basis.
1.111 "New Senior Debt" shall mean the additional senior debt to
be issued by the Company pursuant to the New Senior Debt Documents in an
aggregate principal amount of One Hundred Ten Million Dollars ($110,000,000).
1.112 "New Senior Debt Documents" shall mean that certain note
purchase agreement to be entered into between the Company and the New Senior
Note Purchasers with respect to the New Senior Debt, and the New Senior Notes
to be issued thereunder (all in form and substance acceptable to Agent and the
Majority Banks), together with any and all other documents, instruments and
certificates executed and delivered pursuant thereto, as the same may be
amended from time to time (subject to the terms hereof), and all other
documents executed in exchange therefor or in replacement or renewal thereof.
1.113 "New Senior Note Purchasers" shall mean the note purchasers
which become signatories to the New Senior Debt Documents, and their respective
successors and assigns.
1.114 "New Senior Notes" shall mean the senior notes to be issued
by the Company to the New Senior Note Purchasers.
1.115 "Notes" shall mean the Revolving Credit Notes, the Swing
Line Note, or the Term Notes or any or all of the Revolving Credit Notes, the
Swing Line Note and the Term Notes as the context indicates, and in the absence
of such indication, all such notes.
1.116 "PBGC" shall mean the Pension Benefit Guaranty Corporation
under ERISA, or any successor corporation.
1.117 "Pension Plan(s)" shall mean all employee pension benefit
plans of Company or any ERISA Affiliate, as defined in Section 3(2) of ERISA,
to the extent such Person is subject to ERISA, as provided in Section 4 of
ERISA, which is subject to Section 412 of the Code or Section 302 of ERISA.
1.118 "Percentage" shall mean, with respect to any Bank, its
percentage share, as set forth on Exhibit "C" hereto, of the Revolving Credit,
Letters of Credit and/or the Term Loans, as the context indicates, as such
Exhibit may be revised from time to time by Agent in accordance with Section
14.8(d) hereof.
1.119 "Permitted Acquisitions" shall mean (x) subject to
satisfaction by the Company of the Special Conditions on or before the Required
Consummation Date, the Dyno Acquisition and (y) any acquisition by the Company
or any of its Subsidiaries of assets, businesses or business interests or
shares of stock or other ownership interests of or in any Person primarily
engaged in those
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businesses in which Company and its Subsidiaries are engaged on the date hereof
or other businesses directly related thereto, conducted in accordance with the
following requirements:
(a) not less than thirty (30) nor more than ninety (90)
days prior to the commencement of each such proposed acquisition, the
Company provides written notice thereof to Agent (with drafts of all
material documents pertaining to such proposed acquisition to be
furnished to Agent not less than thirty (30) days prior to such
proposed acquisition), whereupon Agent shall promptly notify each of
the Banks of its receipt thereof and, upon the written request of a
Bank, shall distribute copies of all notices and other materials
received from Company under this Section 1.119 to each such requesting
Bank;
(b) on the date of any such acquisition, all necessary
or appropriate governmental, quasi-governmental, agency, regulatory or
similar approvals of applicable jurisdictions (or the respective
agencies, instrumentalities or political subdivisions, as applicable,
of such jurisdictions) and all necessary or appropriate
non-governmental and other third-party approvals which, in each case,
are material to such acquisition have been obtained and are in effect,
and the Company and its Subsidiaries are in full compliance therewith,
and all necessary or appropriate declarations, registrations or other
filings with any court, governmental or regulatory authority,
securities exchange or any other person have been made;
(c) the aggregate value of all of such acquisitions,
including the value of any proposed new acquisition, conducted while
this Agreement remains in effect as Permitted Acquisitions (but
excluding the Dyno Acquisition, and any acquisition conducted with the
specific written approval of the Majority Banks, and not as a Permitted
Acquisition hereunder) computed on the basis of total acquisition
consideration paid or incurred, or to be paid or incurred, by the
Company or its Subsidiaries with respect thereto, including all
indebtedness which is assumed or to which such assets, businesses or
business or ownership interests or shares, or any Person so acquired,
is subject, shall not exceed Twenty-Five Million Dollars ($25,000,000)
(or the Alternative Currency equivalent thereof, if applicable),
determined as of the date of such acquisition;
(d) concurrently with such acquisition, the Company, its
Subsidiaries and any of the corporate entities involved in such
acquisition shall execute or cause to be executed, and provide or cause
to be provided to Agent, for the Banks, any Loan Documents required
hereunder and such other documents and instruments (including without
limitation opinions of counsel, amendments, acknowledgments, consents
and evidence of approvals or filings) as reasonably requested by
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Agent, if any, and otherwise comply with the terms and conditions of
this Agreement; and
(e) both immediately before and after such acquisition,
no Default or Event of Default (whether or not related to such
acquisition), has occurred and is continuing.
1.120 "Permitted Borrower" shall mean, prior to the Dyno
Acquisition, Walbro Automotive, Walbro Engine Management, Sharon, Whitehead and
Walbro Japan; and from and after the Dyno Acquisition, Walbro Automotive,
Walbro Engine Management, Sharon, Whitehead, Walbro Japan, Walbro Norway,
Walbro England, Walbro Germany, Walbro France, Walbro Belgium and Walbro Spain;
provided however that the aggregate Advances of the Revolving Credit available
to Company and the Permitted Borrowers hereunder shall be subject at all times
to the applicable Sublimits and to the Revolving Credit Aggregate Commitment
and to the other terms and conditions hereof.
1.121 "Permitted Borrower Guaranty" shall mean that certain
unconditional guaranty of all Indebtedness outstanding from the Permitted
Borrowers which are Foreign Subsidiaries hereunder, executed and delivered by
the Significant Foreign Subsidiaries to the Banks as of the date hereof (or,
pursuant to Section 8.17 hereof, subsequent to the date of this Agreement), as
amended from time to time.
1.122 "Permitted Currency(ies)" shall mean Dollars or any
Alternative Currency.
1.123 "Permitted Guaranties" shall mean those guaranties executed
and delivered, or to be executed and delivered, by the Significant Domestic
Subsidiaries in favor of the Existing Senior Note Purchasers and the New Senior
Note Purchasers according to the terms of the Existing Senior Debt Documents or
the New Senior Debt Documents, as the case may be, provided that the guarantors
thereunder are also Guarantors hereunder, and those existing guaranties
identified on Schedule 9.4 hereto.
1.124 "Permitted Investments" shall mean:
(a) Investments in direct obligations of, or obligations
guarantied by, the United States of America or any agency of the United
States of America the obligations of which agency carry the full faith
and credit of the United States of America, provided that such
obligations mature within one (1) year from the date of acquisition
thereof;
(b) Investments in any obligation of any state or
municipality thereof that at the time of acquisition thereof have an
assigned rating of "A" or higher by Standard & Poor's Ratings Group (or
an equivalent or higher rating by another credit rating agency of
recognized national standing in the United States of America), provided
that such obligations
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mature within one (1) year from the date of acquisition thereof;
(c) Investments in negotiable certificates of deposit
issued by commercial banks organized under the laws of the United
States of America or any state thereof, having capital, surplus and
undivided profits aggregating at least Five Hundred Million Dollars
($500,000,000) and the long-term unsecured debt obligations of which
are rated "A" or higher by Standard & Poor's Ratings Group (or an
equivalent or higher rating by another credit rating agency of
recognized national standing in the United States of America), provided
that such certificates of deposit mature within one (1) year from the
date of acquisition thereof;
(d) Investments in corporate debt obligations of
corporations organized under the laws of the United States of America
or any state thereof that at the time of acquisition thereof have an
assigned rating of "A" or higher by Standard & Poor's Rating Group (or
an equivalent or higher rating by another credit rating agency of
recognized national standing in the United States of America); and
(e) Investments in preferred stock of corporations
organized under the laws of the United States of America or any state
thereof (other than preferred stock convertible into common shares)
that have an assigned rating of "A" or higher by Standard & Poor's
Ratings Group (or an equivalent or higher rating by another credit
rating agency of recognized national standing in the United States of
America).
1.125 "Permitted Liens" shall mean, with respect to any Person:
(a) any Liens granted under or established by this
Agreement or the other Loan Documents;
(b) Liens for taxes not yet due and payable or which are
being contested in good faith by appropriate proceedings diligently
pursued, provided that such provision for the payment of all such taxes
known to such Person has been made on the books of such Person as may
be required by GAAP;
(c) mechanics', materialmen's, banker's, carriers',
warehousemen's and similar Liens arising in the ordinary course of
business and securing obligations of such Person that are not overdue
for a period of more than 60 days or are being contested in good faith
by appropriate proceedings diligently pursued, provided that in the
case of any such contest (i) any proceedings commenced for the
enforcement of such liens and encumbrances shall have been duly
suspended; and (ii) such provision for the payment of such liens and
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encumbrances has been made on the books of such Person as may be
required by GAAP;
(d) Liens arising in connection with worker's
compensation, unemployment insurance, old age pensions (subject to the
applicable provisions of this Agreement) and social security benefits
which are not overdue or are being contested in good faith by
appropriate proceedings diligently pursued, provided that in the case
of any such contest (i) any proceedings commenced for the enforcement
of such Liens shall have been duly suspended; and (ii) such provision
for the payment of such Liens has been made on the books of such Person
as may be required by GAAP;
(e) (i) Liens incurred in the ordinary course of business
to secure the performance of statutory obligations arising in
connection with progress payments or advance payments due under
contracts with the United States or any foreign government or any
agency thereof entered into in the ordinary course of business and (ii)
liens incurred or deposits made in the ordinary course of business to
secure the performance of statutory obligations, bids, leases, fee and
expense arrangements with trustees and fiscal agents and other similar
obligations (exclusive of obligations incurred in connection with the
borrowing of money, any lease-purchase arrangements or the payment of
the deferred purchase price of property), provided that full provision
for the payment of all such obligations set forth in clauses (i) and
(ii) has been made on the books of such Person as may be required by
GAAP;
(f) Liens in the nature of any minor imperfections of
title, including but not limited to easements, covenants, rights-of-way
or other similar restrictions, which, either individually or in the
aggregate would not (i) materially adversely affect the present or
future use of the property to which they relate, or (ii) have a
material adverse effect on the sale or lease of such property, or (iii)
render title thereto unmarketable;
(g) Liens (i) arising from judicial attachments and
judgments, (ii) securing appeal bonds or supersedeas bonds, and (iii)
arising in connection with court proceedings (including, without
limitation, surety bonds and letters of credit or any other instrument
serving a similar purpose), provided that (1) the execution or other
enforcement of such Liens is effectively stayed, (2) the claims secured
thereby are being contested in good faith and by appropriate
proceedings, (3) adequate book reserves in accordance with GAAP shall
have been established and maintained and shall exist with respect
thereto, (4) such Liens do not in the aggregate detract from the value
of such property and (5) the title of the Company or a Subsidiary, as
the case may be, to, and its right to use, such property, is not
materially adversely affected thereby; and
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(h) those Liens of the Company or its Subsidiaries
identified in Schedule 9.6 hereto.
1.126 "Permitted Merger(s)" shall mean any merger of any
Subsidiary (including any of the Permitted Borrowers) into Company or another
Permitted Borrower or the merger of any Subsidiary (other than a Permitted
Borrower) into any 100% Subsidiary which, in each case, satisfies and/or is
conducted in accordance with the following requirements:
(a) not less than thirty (30) nor more than
ninety (90) days prior to the commencement of such proposed
merger, Company provides written notice thereof to Agent
(with drafts of all material documents pertaining to such
proposed merger to be furnished to Agent not less than
twenty (20) days prior to such proposed merger) whereupon
Agent shall promptly notify each of the Banks of its
receipt thereof and, upon the request of a Bank, shall
distribute copies of all notices and other materials
received from Company under this Section 1.126, to each
such requesting Bank;
(b) immediately following and as the direct
result of any such merger, the surviving or successor
entity has succeeded by operation of applicable law (as
confirmed by an opinion(s) of counsel in form and substance
satisfactory to the Majority Banks) to all of the
obligations of the non-surviving entity under this
Agreement and the other Loan Documents, and to all of the
property rights of such non-surviving entity subject to the
applicable Loan Documents and, if the shares of stock of
the non-surviving entity have been pledged to the
Collateral Agent on behalf of the Lenders in accordance
with this Agreement, the shares of stock of the surviving
or successor entity are, or concurrently with such merger,
will be similarly pledged, and such steps have been taken
as necessary under applicable law to perfect such pledge;
(c) concurrently with such proposed merger, the
surviving entity involved in such merger shall execute or
cause to be executed, and provide or cause to be provided
to Agent for the Banks (or the Collateral Agent for the
Lenders, if applicable), any Loan Documents required
hereunder and such other documents and instruments
(including without limitation Collateral Documents,
opinions of counsel, amendments, acknowledgments and
consents) as reasonably requested by the Majority Banks;
and
(d) both immediately before and immediately after
such merger, no Default or Event of Default (whether or not
related to such restructuring), has occurred and is
continuing.
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1.127 "Permitted Transfer(s)" shall mean:
(a) any sale, assignment, transfer or other disposition of
inventory or worn-out or obsolete machinery, equipment or other such personal
property in the ordinary course of business; and
(b) any sale, lease, assignment, transfer or other disposition
of real estate or tangible personal property having a net book value,
determined in accordance with GAAP, at the time of disposition thereof,
aggregating (with all other such dispositions during the period commencing on
the date of this Agreement and ending on the Revolving Credit Maturity Date),
an amount not to exceed fifteen percent (15%) of the Company's Consolidated
Tangible Net Worth determined as of the applicable date of disposition,
provided that, immediately before and after each such disposition (giving
effect thereto), no Default or Event of Default has occurred and is continuing.
1.128 "Person" shall mean an individual, corporation,
partnership, trust, incorporated or unincorporated organization, joint venture,
joint stock company, or a government or any agency or political subdivision
thereof or other entity of any kind.
1.129 "Prime Rate" shall mean the per annum interest rate
established by Agent as its prime rate for its borrowers as such rate may vary
from time to time, which rate is not necessarily the lowest rate on loans made
by Agent at any such time.
1.130 "Prime-based Advance" shall mean an Advance (including a
Swing Line Advance) which bears interest at the Prime- based Rate.
1.131 "Prime-based Rate" shall mean that rate of interest which
is the greater of (i) the Prime Rate or (ii) the Alternate Base Rate.
1.132 "Prohibited Transaction" shall mean any transaction
involving a Pension Plan which constitutes a non-exempt "prohibited
transaction" under Section 406 of ERISA or Section 4975 of the Internal Revenue
Code.
1.133 "Quoted Rate" shall mean the rate of interest per annum
offered by the Swing Line Bank in its sole discretion with respect to a Swing
Line Advance.
1.134 "Quoted Rate Advance" means any Swing Line Advance which
bears interest at the Quoted Rate.
1.135 "Quoted Rate Interest Period" shall mean an Interest Period
of up to thirty (30) days, as offered by the Swing Line Bank and accepted by
the Company or a Permitted Borrower with respect to a Quoted Rate Advance
pursuant to Section 2.5 hereof.
1.136 "Reference Banks" shall mean Comerica, Harris Bank and
Societe Generale, or such other Banks as may be agreed to
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constitute the "Reference Banks" by Company, Agent and the Majority Banks.
1.137 "Refunded Swing Line Advance" is defined in Section 2.5(e)
hereof.
1.138 "Reportable Event" shall mean a "reportable event" within
the meaning of Section 4043 of ERISA and the regulations promulgated
thereunder, which is material to the Company and its Subsidiaries, taken as a
whole.
1.139 "Request for Advance" shall mean a Request for Advance of
the Revolving Credit issued by Company or by a Permitted Borrower and
countersigned by the Company under Section 2.3 of this Agreement in the form
annexed hereto as Exhibit "A".
1.140 "Required Consummation Date" shall mean December 31, 1995,
or such later date as may be approved in writing by each of the Banks.
1.141 "Revolving Credit" shall mean the revolving credit loan to
be advanced to the Company and the Permitted Borrowers by the Banks pursuant to
Section 2 hereof, in an aggregate principal amount not to exceed (subject to
the terms hereof) the Revolving Credit Maximum Amount.
1.142 "Revolving Credit Aggregate Commitment" shall mean, as of
the applicable date of determination, the Revolving Credit Maximum Amount minus
the Revolving Credit Designated Unused Portion, subject to reduction or
termination pursuant to Sections 2.15 or 10.2 hereof.
1.143 "Revolving Credit Commitment Fee" shall mean the commitment
fee payable to Agent for distribution to the Banks pursuant to Section 2.13
hereof.
1.144 "Revolving Credit Designated Unused Portion" shall mean
that portion of the Revolving Credit Aggregate Commitment, not to exceed Forty
Million Dollars ($40,000,000) in the aggregate, designated by Company as not
immediately available for borrowing hereunder in accordance with and subject to
Section 2.16 hereof.
1.145 "Revolving Credit Maturity Date" shall mean the earlier to
occur of (i) July 26, 2000, as such date may be extended from time to time
pursuant to Section 2.18 hereof, and (ii) the date on which the Revolving
Credit Maximum Amount shall be terminated pursuant to Section 2.15 hereof or
any commitments to make Advances of the Revolving Credit shall be terminated
pursuant to Section 10.2 hereof.
1.146 "Revolving Credit Maximum Amount" shall mean One Hundred
Thirty-Five Million Dollars ($135,000,000), less any reductions in the
Revolving Credit Maximum Amount under Section 2.15 or 4.9A of this Agreement.
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1.147 "Revolving Credit Notes" shall mean the Notes described in
Section 2.1 hereof, made or to be made by Company or the Permitted Borrowers to
each of the Banks in the form annexed to this Agreement as Exhibit "B-1" or
"B-2", as the case may be, as such Notes may be amended, renewed, replaced or
extended from time to time.
1.148 "Shares", "share capital", "capital stock", "stock" and
words of similar import shall mean and refer to the equity capital interest
under applicable law of any Person in a corporation, howsoever such interest is
created or arises, whether such capital consists of common stock, preferred
stock or preference shares, or other stock, and whether such capital is
evidenced by a certificate, share register entry or otherwise.
1.149 "Sharon" shall mean Sharon Manufacturing Company, a
Michigan corporation.
1.150 "Special Conditions" shall mean those special terms and
conditions required to be satisfied prior to or concurrently with the
consummation of the Dyno Acquisition, as follows:
(a) the Company and its Subsidiaries shall have furnished,
executed and delivered, or caused to be furnished, executed
and delivered, to Collateral Agent, in form to be
satisfactory to Collateral Agent and the Lenders, the Local
Share Pledges, supported by (i) certified copies of such
parties' Articles of Incorporation and Bylaws or other
constitutional documents to the extent required in the
jurisdiction of incorporation, (ii) appropriate resolutions
in certified form authorizing same, and (iii) certificates
of good standing meeting the requirements set forth in
Section 6.2 hereof;
(b) the Collateral Agent shall have received, to the extent
necessary for perfection of the security interests and
pledges under applicable law, certificates representing the
issued and outstanding capital stock of the Subsidiaries
encumbered by the Collateral Documents, transferred for
security purposes into the name of the Collateral Agent (or
its nominees), on behalf of the Lenders or the bearer or
properly endorsed or with assignments separate from
certificate for transfer and proof that each such pledge
has been duly registered or filed under applicable law, and
that appropriate financing statements, local share pledges,
nantissements, collateral and other documents covering such
Collateral have been executed and delivered by the
appropriate parties and registered, recorded or filed in
such jurisdictions as necessary to perfect the security
interests, stock pledges or other liens granted thereby;
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(c) there shall have been no material adverse change in the
condition, financial or otherwise, or prospects of, Dyno
and its subsidiaries, generally, or in the condition,
financial or otherwise, or prospects of the properties,
business, results or operations of Dyno and its
subsidiaries to be acquired by the Company and its
subsidiaries pursuant to the Dyno Acquisition Agreement
(taken as a whole) from that existing as of the date of
this Agreement (as determined in reference to the financial
statements of Dyno covering fiscal years 1993 and 1994, as
previously delivered by the Company to the Banks); nor
shall any omission, inconsistency, inaccuracy, or any
change in presentation or accounting standards which
renders such financial statements materially misleading
have been determined by Agent or the Majority Banks to
exist;
(d) all governmental, quasi-governmental, agency, regulatory or
similar licenses, authorizations, exemptions,
qualifications, consents and approvals necessary or
appropriate under any laws applicable to Company or any of
its Subsidiaries, or Dyno or any of its subsidiaries for or
in connection with the Dyno Acquisition and all necessary
or appropriate non-governmental and other third-party
approvals which, in each case, are material to such
acquisition shall have been obtained, and all necessary or
appropriate declarations, registrations or other filings
with any court, governmental or regulatory authority,
securities exchange or any other person have been made, and
evidence thereof satisfactory in form and substance to
Agent and the Majority Banks shall have been delivered, or
cause to be delivered, by Company to Agent;
(e) the New Senior Notes shall have been executed and delivered
by the Company to and accepted by the New Senior Note
Purchasers, the funding of the New Senior Debt shall have
occurred, all New Senior Debt Documents shall have been
executed and delivered in form and substance satisfactory
to the Banks and Agent; and
(f) the Company shall have delivered or caused to be delivered
to Agent (as evidenced by Agent's written confirmation
thereof) updated schedule(s) of the Permitted Liens, and
the matters shown on such updated schedule(s) do not differ
materially adversely from the matters disclosed by Company
on Schedule 9.6, hereto (as evidenced by Agent's written
confirmation thereof), or have been approved by the
Majority Banks, in their sole discretion (upon which event
Schedule 9.6 hereto shall be deemed amended to include such
additional matters).
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1.151 "Special Purpose Letter(s) of Credit" shall mean any letter
of credit which is issued for the purpose of supporting industrial development
revenue bonds or other obligations of the Company or an Account Party for
borrowed money.
1.152 "Significant Subsidiary(ies)" shall mean, as of any date of
determination, any Subsidiary which is or becomes a Permitted Borrower or a
Guarantor or which has total assets in excess of Ten Million Dollars
($10,000,000) (or the Alternative Currency equivalent thereof), determined by
Agent as of the end of the most recent fiscal quarter of the Company.
1.153 "Significant Domestic Subsidiaries" shall mean those
Domestic Subsidiaries identified on Schedule 7.6 hereto, and any Domestic
Subsidiaries which become Significant Subsidiaries subsequent to the date
hereof.
1.154 "Significant Foreign Subsidiaries" shall mean those Foreign
Subsidiaries identified on Schedule 7.6 hereto, and any Foreign Subsidiaries
which become Significant Subsidiaries subsequent to the date hereof.
1.155 "Single Employer Plan" shall mean any Pension Plan which
does not constitute a Multiemployer Plan.
1.156 "Sublimit" shall mean the maximum aggregate amount of Swing
Line Advances, Letters of Credit and of Advances of the Revolving Credit and
Term Loans available at any time to each of the Permitted Borrowers hereunder,
as set forth on Exhibit "D" hereto.
1.157 "Subordinated Debt" shall mean any unsecured Debt
subordinated to the prior payment and discharge in full of the Indebtedness, on
written terms and conditions approved by and acceptable to each of the Banks,
in their sole discretion.
1.158 "Subsidiary(ies)" shall mean any other corporation,
association, partnership, joint venture, limited liability partnership or
company, joint stock company, or business trust of which more than fifty
percent (50%) of the outstanding voting stock is owned either directly or
indirectly by Company or one or more of its Subsidiaries or by Company and one
or more of its Subsidiaries, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or
both, by Company and/or its Subsidiaries. "100% Subsidiary(ies)" shall mean any
of the Company's Subsidiaries whose stock (other than directors' or qualifying
shares to the extent required under applicable law) is owned 100% by any other
100% Subsidiary and/or the Company.
1.159 "Swing Line Advance" shall mean an Advance made by Swing
Line Bank to Company or a Permitted Borrower pursuant to Section 2.5 hereof.
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1.160 "Swing Line Bank" shall mean Comerica Bank, in its capacity
as lender under Section 2.5 of this Agreement, and its successors and assigns.
1.161 "Swing Line Maximum Amount" shall mean Five Million Dollars
($5,000,000).
1.162 "Swing Line Note(s)" shall mean the swing line notes
described in Section 2.5 hereof, made or to be made by Company or the Permitted
Borrowers to the Swing Line Bank in the form annexed hereto as Exhibit "E-1" or
"E-2", as the case may be, as such Notes may be amended or supplemented from
time to time, and any notes issued in substitution, replacement or renewal
thereof from time to time.
1.163 "Term Loans" shall mean the term loans to be advanced by
the Banks to the Company or any of the Permitted Borrowers pursuant to Section
4.1 hereof (including without limitation the Japanese Term Loan), in an
aggregate amount not to exceed the Term Loan Aggregate Commitment, and "Term
Loan" shall mean any specified Term Loan funded pursuant thereto.
1.164 "Term Loan Aggregate Commitment" shall mean Seventy Million
Dollars ($70,000,000) as reduced from time to time pursuant to Section 4.9A
hereof by the Dollar Amount or the Current Dollar Equivalent, as the case may
be, of each Term Loan funded from time to time hereunder as of the date of the
funding of each such Term Loan.
1.165 "Term Loan Funding Period" shall mean (a) with respect to
the Japanese Term Loan, a period commencing on the date hereof and ending
ninety (90) days following the date of this Agreement and (b) with respect to
each of the other Term Loans, a period commencing thirty (30) days following
the date hereof, and ending on July 26, 1998.
1.166 "Term Loan Maturity Date" shall mean a maturity date for a
Term Loan selected by the Company or the applicable Permitted Borrower pursuant
to Section 4.9A hereof, not less than two years from the date of funding of
such Term Loan and not more than seven years from the date of this Agreement;
provided, however, that the Japanese Term Loan shall have a maturity date three
years from the date of funding of such loan.
1.167 "Term Loan Permitted Amortization Schedule" shall mean the
amortization schedule selected by Company or the applicable Permitted Borrower
for a specified Term Loan based on equal annual installments of principal
sufficient to pay and discharge the full initial amount of the Term Loan over
the stated term of such loan (without regard to any principal reductions
resulting from Excess Cash Flow), commencing on the first anniversary date of
the funding of such loan and continuing on each anniversary date thereof to and
including the applicable Term Loan Maturity Date; provided however that Company
or the applicable Permitted Borrower, in establishing
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the applicable amortization schedule, may elect to make payments of interest
only during the first two years of the term of any such loan (or any portion
thereof), in which event principal amortization will be required in equal
annual installments sufficient to pay and discharge in full the initial amount
of the applicable Term Loan over the remaining term of the loan commencing on
the first anniversary date of the expiration of the interest-only period and
continuing on each anniversary date thereof to and including the applicable
Term Loan Maturity Date; and provided further that for the Japanese Term Loan
and for each Term Loan with a Maturity Date of two years or less from the date
of funding thereof, no principal amortization will be required during the
stated term of the loan and (if no amortization is provided) the entire
outstanding principal balance shall be due and payable on the applicable Term
Loan Maturity Date.
1.168 "Term Loan Initial Request" shall mean a request for the
initial funding of a Term Loan submitted by the Company or the applicable
Permitted Borrower to the Agent under Section 4.9A of this Agreement in the
form annexed hereto as Exhibit "I".
1.169 "Term Loan Rate Request" shall mean a request for the
refunding or conversion of any Advance of a Term Loan, other than any Advance
carried at the Fixed Rate, submitted by Company or the applicable Permitted
Borrower under Section 4.9B of this Agreement in the form annexed hereto as
Exhibit "J".
1.170 "Term Loan Request" shall mean a Term Loan Initial Request
or a Term Loan Rate Request, or both such requests, as the context may
indicate.
1.171 "Term Notes" shall mean the term notes described in Section
4.1 hereof, made by Company or a Permitted Borrower to each of the Banks in the
form annexed to this Agreement as Exhibit "H-1" or "H-2", as the case may be,
as such notes may be amended, renewed, replaced, extended or supplemented from
time to time.
1.172 "UCC" shall mean the Uniform Commercial Code, as in effect
from time to time in the State of Michigan.
1.173 "Walbro Automotive" shall mean Walbro Automotive
Corporation, a Delaware corporation.
1.174 "Walbro Engine Management" shall mean Walbro Engine
Management Corporation, a Delaware corporation.
1.175 "Walbro Belgium" shall mean Walbro Automotive N.V., a
Belgium corporation.
1.176 "Walbro England" shall mean Walbro Automotive Limited, an
English corporation.
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1.177 "Walbro France" shall mean Dynoplast S.A., a French
corporation, whose name is to be changed, concurrently with or subsequent to
the Dyno Acquisition, to Walbro Automotive S.A.
1.178 "Walbro Germany" shall mean Walbro Automotive GmbH, a
German corporation.
1.179 "Walbro Japan" shall mean Walbro Japan, Inc., a Japanese
corporation.
1.180 "Walbro Netherlands" shall mean Walbro Automotive N.V., a
Dutch corporation.
1.181 "Walbro Norway" shall mean Walbro Automotive A.S., a
Norwegian company.
1.182 "Walbro Spain" shall mean Dynoplast S.A., a Spanish
corporation, whose name is to be changed, concurrently with or subsequent to
the Dyno Acquisition, to Walbro Automotive S.A.
1.183 "Whitehead" shall mean Whitehead Engineered Products, Inc.,
a Delaware Corporation.
1.184 "Yield Maintenance Payment" shall mean the yield
maintenance payment required to be paid by the Company under Section 4.12(b)
hereof in connection with any prepayment of the Term Loan following the
Company's or a Permitted Borrower's Fixed Rate Election hereunder.
2. REVOLVING CREDIT
2.1 Commitment. Subject to the terms and conditions of this
Agreement (including without limitation Section 2.3 hereof), each Bank
severally and for itself alone agrees to make Advances of the Revolving Credit
in any one or more of the Permitted Currencies to the Company or to any of the
Permitted Borrowers from time to time on any Business Day during the period
from the effective date hereof until (but excluding) the Revolving Credit
Maturity Date in an aggregate amount, based on the Dollar Amount of any
Advances outstanding in Dollars and the Current Dollar Equivalent of any
Advances outstanding in Alternative Currencies, not to exceed at any one time
outstanding each Bank's Percentage of the Revolving Credit Aggregate
Commitment. Except as provided in Section 2.12, for purposes of this Agreement,
Advances in Alternative Currencies shall be determined, denominated and
redenominated as set forth in Section 2.11 hereof. All of the Advances of the
Revolving Credit hereunder shall be evidenced by Revolving Credit Notes made by
Company or the Permitted Borrowers to each of the Banks in the form attached
hereto as Exhibit "B-1" or "B-2", as the case may be, subject to the terms and
conditions of this Agreement. Advances of the Revolving Credit shall be subject
to the following additional conditions and limitations:
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(a) A Permitted Borrower shall not be entitled to
request an Advance of the Revolving Credit hereunder until it has executed and
delivered to the Banks, as aforesaid, the Revolving Credit Notes, accompanied
by authority documents, legal opinions and other supporting documents as
required hereunder.
(b) None of the Permitted Borrowers shall be entitled to
request or maintain (or, in the case of any Eurocurrency-based Advance,
maintain beyond any applicable Interest Period then in effect) an Advance of
the Revolving Credit hereunder if it ceases to be a 100% Subsidiary of the
Company.
(c) The maximum aggregate amount of Advances of the
Revolving Credit available to each of the Permitted Borrowers at any time
hereunder, using the Current Dollar Equivalent of any Advances outstanding in
any Alternative Currency (determined and tested pursuant to and in accordance
with Section 2.14 hereof), shall not exceed the Sublimit applicable to such
Permitted Borrower.
2.2 Accrual of Interest and Maturity. The Revolving Credit Notes,
and all principal and interest outstanding thereunder, shall mature (unless
required to be paid prior thereto) and become due and payable in full on the
Revolving Credit Maturity Date, and each Advance of Indebtedness evidenced by
the Revolving Credit Notes from time to time outstanding hereunder shall, from
and after the date of such Advance, bear interest at its Applicable Interest
Rate. The amount and date of each Advance, its Applicable Interest Rate, its
Interest Period, if any, and the amount and date of any repayment shall be
noted on Agent's records, which records will be rebuttably presumptive evidence
thereof, absent demonstrable error; provided, however, that any failure by the
Agent to record any such information shall not relieve the Company or the
applicable Permitted Borrower of its obligation to repay the outstanding
principal amount of such Advance, all interest accrued thereon and any amount
payable with respect thereto in accordance with the terms of this Agreement and
the other Loan Documents.
2.3 Requests for and Refundings and Conversions of Advances.
Company or a Permitted Borrower may request an Advance, refund any Advance in
the same type of Advance or convert any Advance to any other type of Advance
only after delivery to Agent of a Request for Advance executed by an authorized
officer of Company or of such Permitted Borrower, subject to the following and
to the remaining provisions hereof:
(a) each such Request for Advance shall set forth the
information required on the Request for Advance form annexed hereto as
Exhibit "A", including without limitation:
(i) the proposed date of such Advance, which must
be a Business Day;
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(ii) whether such Advance is a refunding or
conversion of an outstanding Advance;
(iii) whether such Advance is to be a Prime-based
Advance or a Eurocurrency-based Advance, and,
except in the case of a Prime-based Advance,
the first Interest Period applicable thereto;
and
(iv) in the case of a Eurocurrency-based Advance,
the Permitted Currency in which such Advance
is to be made.
(b) each such Request for Advance shall be delivered to
Agent by 12:00 noon (Detroit time) three (3) Business Days prior to the
proposed date of Advance, except in the case of a Prime-based Advance,
for which the Request for Advance must be delivered by 12:00 noon
(Detroit time) on such proposed date;
(c) the principal amount (or Dollar Amount of the
principal amount, if such Advance of the Revolving Credit is being
funded in an Alternative Currency) of such requested Advance, plus the
principal amount of all other Advances of the Revolving Credit then
outstanding hereunder, whether to Company or the Permitted Borrowers
(using the Current Dollar Equivalent of any such Advances outstanding
in any Alternative Currency, determined pursuant to the terms hereof as
of the date of such requested Advance), plus the aggregate principal
amount of all Swing Line Advances hereunder (using the Current Dollar
Equivalent of any such Advances outstanding in any Alternative
Currency) plus the aggregate undrawn portion of any Letters of Credit
which shall be outstanding as of the date of the requested Advance
(based on the Dollar Amount of the undrawn portion of any Letters of
Credit denominated in Dollars and the Current Dollar Equivalent of the
undrawn portion of any Letters of Credit denominated in any Alternative
Currency) and the aggregate face amount of Letters of Credit requested
but not yet issued (determined as aforesaid), plus the unreimbursed
amount of any draws under any Letters of Credit (using the Current
Dollar Equivalent thereof for any Letters of Credit denominated in any
Alternative Currency) shall not exceed the Revolving Credit Aggregate
Commitment; provided however, that, in the case of any Advance of the
Revolving Credit being applied to refund an outstanding Swing Line
Advance, the aggregate principal amount of Swing Line Advances to be
refunded shall not be included for purposes of calculating the
limitation under this Section 2.3(c);
(d) in the case of each of the Permitted Borrowers, the
principal amount of the requested Advance of the Revolving Credit
(determined as aforesaid), plus the aggregate principal amount of any
other Advances of the Revolving Credit and of
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<PAGE> 45
any Swing Line Advances then outstanding to such Permitted Borrower
hereunder (determined as aforesaid), plus the aggregate undrawn portion
of any Letters of Credit which shall be outstanding as of the date of
the requested Advance for the account of such Permitted Borrower
hereunder and the aggregate face amount of Letters of Credit requested
but not yet issued for the account of such Permitted Borrower hereunder
(in each case determined as aforesaid), plus the unreimbursed amount of
any draws under any Letters of Credit (using the Current Dollar
Equivalent thereof for any Letters of Credit denominated in any
Alternative Currency) issued for the account of such Permitted Borrower
hereunder, plus the aggregate principal amount of any Term Loans then
outstanding to such Permitted Borrower (determined as aforesaid) shall
not exceed the applicable Sublimit;
(e) the principal amount of such requested Advance, plus
the amount of any other outstanding Advance of the Revolving Credit to
be then combined therewith having the same Applicable Interest Rate and
Interest Period, if any, shall be (i) in the case of a Prime-based
Advance at least Three Million Dollars ($3,000,000) and (ii) in the
case of a Eurocurrency-based Advance at least Five Million Dollars
($5,000,000) or the equivalent thereof in an Alternative Currency (or a
larger integral multiple of One Million Dollars ($1,000,000), or the
equivalent thereof in the Applicable Alternative Currency), and at any
one time there shall not be in effect more than (x) for Advances in
Dollars, eight (8) Applicable Interest Rates and Interest Periods, and
(y) for Advances in any Alternative Currency, four (4) Applicable
Interest Rates and Interest Periods for each such currency;
(f) a Request for Advance, once delivered to Agent,
shall not be revocable by Company or the Permitted Borrowers;
(g) each Request for Advance shall constitute and
include a certification by the Company and the applicable Permitted
Borrower as of the date thereof that:
(i) both before and after such Advance, the
obligations of the Company and the Permitted
Borrowers set forth in this Agreement and the
Loan Documents to which such Persons are
parties are valid, binding and enforceable
obligations of the Company and the Permitted
Borrowers, as the case may be;
(ii) all conditions to Advances of the Revolving
Credit have been satisfied, and shall remain
satisfied to the date of such Advance (both
before and after giving effect to such
Advance);
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<PAGE> 46
(iii) there is no Default or Event of Default in
existence, and none will exist upon the
making of such Advance (both before and after
giving effect to such Advance);
(iv) the representations and warranties contained
in this Agreement and the Loan Documents are
true and correct in all material respects and
shall be true and correct in all material
respects as of the making of such Advance
(both before and after giving effect to such
Advance); and
(v) the execution of the Request for Advance will
not violate the material terms and conditions
of any material contract, agreement or other
borrowing of Company or the Permitted
Borrowers.
2.4 Disbursement of Advances.
(a) Upon receiving any Request for Advance from Company
or a Permitted Borrower under Section 2.3 hereof, Agent shall promptly
notify each Bank by wire, telex or telephone (confirmed by wire,
telecopy or telex) of the amount and currency of such Advance to be
made and the date such Advance is to be made by said Bank pursuant to
its Percentage of such Advance. Unless such Bank's commitment to make
Advances of the Revolving Credit hereunder shall have been suspended or
terminated in accordance with this Agreement, each Bank shall make
available the amount of its Percentage of each Advance in immediately
available funds in the currency of such Advance to Agent, as follows:
(i) for Domestic Advances, at the office of Agent
located at One Detroit Center, Detroit,
Michigan 48226, not later than 2:00 p.m.
(Detroit time) on the date of such Advance;
and
(ii) for Eurocurrency-based Advances, at the
Agent's Correspondent for the account of the
Eurocurrency Lending Office of the Agent, not
later than 12 noon (the time of the Agent's
Correspondent) on the date of such Advance.
(b) Subject to submission of an executed Request for
Advance by Company or a Permitted Borrower without exceptions noted in
the compliance certification therein, Agent shall make available to
Company or to the applicable Permitted Borrower, as the case may be,
the aggregate of the amounts so received by it from the Banks in like
funds and currencies:
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<PAGE> 47
(i) for Domestic Advances, not later than 4:00
p.m. (Detroit time) on the date of such
Advance by credit to an account of Company or
such Permitted Borrower maintained with Agent
or to such other account or third party as
Company or such Permitted Borrower may
reasonably direct; and
(ii) for Eurocurrency-based Advances, not later
than 4:00 p.m. (the time of the Agent's
Correspondent) on the date of such Advance,
by credit to an account of Company or such
Permitted Borrower maintained with Agent's
Correspondent or to such other account or
third party as Company or such Permitted
Borrower may reasonably direct.
(c) Agent shall deliver the documents and papers
received by it for the account of each Bank to such Bank or upon its
order. Unless Agent shall have been notified by any Bank prior to the
date of any proposed Advance that such Bank does not intend to make
available to Agent such Bank's Percentage of such Advance, Agent may
assume that such Bank has made such amount available to Agent on such
date and in such currency, as aforesaid and may, in reliance upon such
assumption, make available to Company or to the applicable Permitted
Borrower, as the case may be, a corresponding amount. If such amount is
not in fact made available to Agent by such Bank, as aforesaid, Agent
shall be entitled to recover such amount on demand from such Bank. If
such Bank does not pay such amount forthwith upon Agent's demand
therefor, the Agent shall promptly notify Company and the applicable
Permitted Borrower, and Company and the applicable Permitted Borrower,
shall pay such amount to Agent. Agent shall also be entitled to recover
from such Bank or Company, as the case may be, interest on such amount
in respect of each day from the date such amount was made available by
Agent to Company or the applicable Permitted Borrower to the date such
amount is recovered by Agent, at a rate per annum equal to:
(i) in the case of such Bank, with respect to
Domestic Advances, the Federal Funds
Effective Rate, and with respect to
Eurocurrency-based Advances, Agent's
aggregate marginal cost (including the cost
of maintaining any required reserves or
deposit insurance and of any fees, penalties,
overdraft charges or other costs or expenses
incurred by Agent as a result of such failure
to deliver funds hereunder) of carrying such
amount; and
(ii) in the case of Company or any of the
Permitted Borrowers, the rate of interest
then
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<PAGE> 48
applicable to such Advance of the Revolving
Credit.
The obligation of any Bank to make any Advance of the Revolving Credit
hereunder shall not be affected by the failure of any other Bank to
make any Advance hereunder, and no Bank shall have any liability to the
Company or any of its Subsidiaries, the Agent, any other Bank, or any
other party for another Bank's failure to make any loan or Advance
hereunder.
2.5 (a) Swing Line Advances. The Swing Line Bank shall, on
the terms and subject to the conditions hereinafter set forth (including
without limitation Section 2.5(c) hereof), make one or more advances in Dollars
or in any Alternative Currency (each such advance being a "Swing Line Advance")
to Company or any of the Permitted Borrowers (provided that any such Permitted
Borrower has executed a Swing Line Note and Revolving Credit Notes in
compliance with this Agreement) from time to time on any Business Day during
the period from the date hereof to (but excluding) the Revolving Credit
Maturity Date in an aggregate amount, based on the Dollar Amount of any such
Advances outstanding in Dollars and the Current Dollar Equivalent of any such
Advances outstanding in Alternative Currencies, not to exceed at any time
outstanding the Swing Line Maximum Amount. All Swing Line Advances shall be
evidenced by the Swing Line Notes, under which advances, repayments and
readvances may be made, subject to the terms and conditions of this Agreement.
Each Swing Line Advance shall mature and the principal amount thereof shall be
due and payable by Company or the applicable Permitted Borrower on the last day
of the Interest Period applicable thereto, if any. In no event whatsoever shall
any outstanding Swing Line Advance be deemed to reduce, modify or affect any
Bank's commitment to make Revolving Credit Advances based upon its Percentage.
(b) Accrual of Interest. Each Swing Line Advance shall,
from time to time after the date of such Advance, bear interest at its
Applicable Interest Rate. The amount and date of each Swing Line Advance, its
Applicable Interest Rate, its Interest Period, and the amount and date of any
repayment shall be noted on Agent's records, which records will be rebuttably
presumptive evidence thereof, absent demonstrable error; provided, however,
that any failure by the Agent to record any such information shall not relieve
Company or the applicable Permitted Borrower of its obligation to repay the
outstanding principal amount of such Advance, all interest accrued thereon and
any amount payable with respect thereto in accordance with the terms of this
Agreement and the other Loan Documents.
(c) Requests for Swing Line Advances. Company or a
Permitted Borrower may request a Swing Line Advance only after delivery to
Swing Line Bank of a Request for Swing Line Advance executed by an authorized
officer of Company or such Permitted
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<PAGE> 49
Borrower, subject to the following and to the remaining provisions hereof:
(i) each such Request for Swing Line Advance shall set
forth the information required on the Request for Swing Line Advance form
annexed hereto as Exhibit "F", including without limitation:
(A) the proposed date of such Swing Line Advance,
which must be a Business Day;
(B) whether such Swing Line Advance is to be a
Prime-based Advance, Eurocurrency-based Advance or a Quoted
Rate Advance; and
(C) except in the case of a Prime-based Advance,
the duration of the Interest Period applicable thereto; and
(D) in the case of a Eurocurrency-based Advance,
the Permitted Currency in which such Advance is to be made.
(ii) the principal amount (or Dollar Amount of the
principal amount, if such Advance is being funded in an Alternative Currency)
of such requested Swing Line Advance, plus the aggregate principal amount of
all other Swing Line Advances and all Advances of the Revolving Credit then
outstanding hereunder (including any Revolving Credit Advances requested to be
made on such date) whether to Company or to any of the Permitted Borrowers
(using the Current Dollar Equivalent of any such Advances outstanding in any
Alternative Currency, determined pursuant to the terms hereof as of the date of
such requested Advance), and the aggregate undrawn portion of any Letters of
Credit which shall be outstanding as of the date of the Requested Swing Line
Advance (based on the Dollar Amount of the undrawn portion of any Letters of
Credit denominated in Dollars and the Current Dollar Equivalent of the undrawn
portion of any Letters of Credit denominated in any Alternative Currency) and
the aggregate face amount of Letters of Credit required but not yet issued
(determined as aforesaid), plus the unreimbursed amount of any draws under
Letters of Credit (using the Current Dollar Equivalent thereof for any Letters
of Credit denominated in any Alternative Currency) shall not exceed the
Revolving Credit Aggregate Commitment;
(iii) in the case of each of the Permitted Borrowers, the
principal amount of the requested Swing Line Advance to the applicable
Permitted Borrower (determined as aforesaid), plus the aggregate principal
amount of any other Swing Line Advances and all Advances of the Revolving
Credit then outstanding to such Permitted Borrower hereunder (including any
Revolving Credit Advances requested to be made on such date) determined as
aforesaid, plus the aggregate undrawn portion of any Letters of Credit which
shall be outstanding as of the date of the requested Swing Line Advance for the
account of such Permitted Borrower hereunder, plus the aggregate face amount of
any Letters of Credit requested but not
38
<PAGE> 50
yet issued for the account of such Permitted Borrower hereunder (in each case
determined as aforesaid), plus the unreimbursed amount of any draws under any
Letters of Credit (using the Current Dollar Equivalent thereof for any Letters
of Credit denominated in any Alternative Currency) issued for the account of
such Permitted Borrower plus the aggregate principal amount of any Term Loans
then outstanding to such Permitted Borrower (determined as aforesaid) shall not
exceed the applicable Sublimit;
(iv) the principal amount of such Swing Line Advance,
plus the amount of any other outstanding Advance of the Swing Line to be then
combined therewith having the same Applicable Interest Rate and Interest
Period, if any, shall be (i) in the case of a Prime-based Advance at least Five
Hundred Thousand Dollars ($500,000) and (ii) in the case of a Quoted Rate
Advance or a Eurocurrency-based Advance at least Five Hundred Thousand Dollars
($500,000), or the equivalent thereof in an Alternative Currency (or a larger
integral multiple of Five Hundred Thousand Dollars ($500,000), or the
equivalent thereof in the Applicable Alternative Currency), and at any one time
there shall not be in effect more than (x) for Advances in Dollars, three (3)
Applicable Interest Rates and Interest Periods, and (y) for Advances in any
Alternative Currency (other than eurodollars), one (1) Applicable Interest
Rates and Interest Periods for each such currency;
(v) each such Request for Swing Line Advance shall be
delivered to the Swing Line Bank (x) for each Advance in Dollars, by 2:00 p.m.
(Detroit time) on the proposed date of the Advance and (y) for each Advance in
any Alternative Currency, by 12:00 noon (Detroit time) two Business Days prior
to the proposed date of Advance;
(vi) each Request for Swing Line Advance, once delivered
to Swing Line Bank, shall not be revocable by Company or the Permitted
Borrowers, and shall constitute and include a certification by the Company and
the applicable Permitted Borrower as of the date thereof that:
(A) both before and after such Swing Line
Advance, the obligations of the Company and the Permitted Borrowers set
forth in this Agreement and the Loan Documents, are valid, binding and
enforceable obligations of the Company and the Permitted Borrowers;
(B) all conditions to the making of Swing Line
Advances have been satisfied (both before and after giving effect to
such Advance);
(C) both before and after the making of such
Swing Line Advance, there is no Default or Event of Default in
existence; and
(D) both before and after such Swing Line
Advance, the representations and warranties contained in this Agreement
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<PAGE> 51
and the other Loan Documents are true and correct in all material
respects.
Swing Line Bank shall promptly deliver to Agent by telecopy a copy of any
Request for Swing Line Advance received hereunder.
(d) Disbursement of Swing Line Advances. Subject to
submission of an executed Request for Swing Line Advance by Company or a
Permitted Borrower without exceptions noted in the compliance certification
therein and to the other terms and conditions hereof, Swing Line Bank shall
make available to Company or the applicable Permitted Borrower the amount so
requested, in like funds and currencies, not later than:
(i) for Domestic Advances, not later than 4:00
p.m. (Detroit time) on the date of such Advance by credit to an account of
Company or the applicable Permitted Borrower maintained with Agent or to such
other account or third party as Company or the Permitted Borrower may
reasonably direct; and
(ii) for Eurocurrency-based advances, not later
than 4:00 p.m. (the time of the Agent's Correspondent) on the date of such
Advance, by credit to an account of Company or the Permitted Borrower
maintained with Agent's Correspondent or to such other account or third party
as Company or the applicable Permitted Borrower may reasonably direct.
Swing Line Bank shall promptly notify Agent of any Swing Line Advance by
telephone, telex or telecopier.
(e) Refunding of or Participation Interest in Swing Line
Advances.
(i) The Agent, at any time in its sole and
absolute discretion, may (or, upon the request of the Swing Line Bank, shall)
on behalf of the Company or the applicable Permitted Borrower (which hereby
irrevocably directs the Agent to act on its behalf) request each of the Banks
(including the Swing Line Bank in its capacity as a Bank) to make an Advance of
the Revolving Credit to each of Company and the Permitted Borrowers, for each
Permitted Currency in which Swing Line Advances are outstanding to such party,
in an amount (in the applicable Permitted Currency, determined in accordance
with Section 2.11(b) hereof) equal to such Bank's Percentage of the principal
amount of the aggregate Swing Line Advances outstanding in each Permitted
Currency to each such party on the date such notice is given (the "Refunded
Swing Line Advances"); provided that at any time as there shall be a Swing Line
Advance outstanding for more than thirty days, the Agent shall, on behalf of
the Company or the applicable Permitted Borrower (which hereby irrevocably
directs the Agent to act on its behalf), promptly request each Bank (including
the Swing Line Bank) to make an Advance of the Revolving Credit in an amount
equal to such Bank's Percentage of the principal amount of such outstanding
Swing Line Advance. In the case of each Refunded Swing Line Advance
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<PAGE> 52
outstanding in Dollars, the applicable Advance of the Revolving Credit used to
refund such Swing Line Advance shall be a Prime-based Advance. In the case of
each Refunded Swing Line Advance outstanding in any Alternative Currency, the
applicable Advance of the Revolving Credit used to refund such Swing Line
Advance shall be an Advance in the applicable Alternative Currency, with an
Interest Period of one month (or any lesser number of days selected by Agent in
consultation with the Banks). In connection with the making of any such
Refunded Swing Line Advances (whether as an Advance of the Revolving Credit or
a participation in the Refunded Swing Line Advance under Section 2.5(e)(ii)
hereof) the Swing Line Bank shall retain its claim against the Company or the
applicable Permitted Borrower for any unpaid interest or fees in respect
thereof. Unless any of the events described in Section 10.1(l) hereof shall
have occurred (in which event the procedures of subparagraph (ii) of this
Section 2.5(e) shall apply) and regardless of whether the conditions precedent
set forth in this Agreement to the making of an Advance of the Revolving Credit
are then satisfied, each Bank shall make the proceeds of its Advance of the
Revolving Credit available to the Agent for the benefit of the Swing Line Bank
at the office of the Agent specified in Section 2.4(a) hereof prior to 11:00
a.m. Detroit time (for Domestic Advances) on the Business Day next succeeding
the date such notice is given, and, in the case of any Eurocurrency-based
Advance, prior to 2:00 p.m. Detroit time on the third Business Day following
the date such notice is given, in each case in immediately available funds in
the applicable Permitted Currency. The proceeds of such Advances of the
Revolving Credit shall be immediately applied to repay the Refunded Swing Line
Advances in accordance with the provisions of Section 11.1 hereof.
(ii) If, prior to the making of an Advance of the
Revolving Credit pursuant to subparagraph (i) of this Section 2.5(e), one of
the events described in Section 10.1(l) hereof shall have occurred, each Bank
will, on the date such Advance of the Revolving Credit was to have been made,
purchase from the Swing Line Bank an undivided participating interest in each
Refunded Swing Line Advance in an amount equal to its Percentage of such
Refunded Swing Line Advance. Each Bank within the time periods specified in
section 2.5(d)(i) and (ii), above, as the case may be, shall immediately
transfer to the Agent, in immediately available funds in the applicable
Permitted Currency of such Swing Line Advance, the amount of its participation
and upon receipt thereof the Agent will deliver to such Bank a participation
certificate evidencing such participation.
(iii) Each Bank's obligation to make Advances of
the Revolving Credit and to purchase participation interests in accordance with
clauses (i) and (ii) above shall, except in respect of any Swing Line Advance
made by the Swing Line Bank following receipt by Agent from such Bank of a
written notice of the type described in Section 13.13, below, captioned "Notice
of Default" and specifically stating that such Bank does not intend to refund
or participate in future Swing Line Advances on the basis of such
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Default or Event of Default, be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank may have
against Swing Line Bank, the Company, the Permitted Borrowers or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of any
Default or Event of Default; (iii) any adverse change in the condition
(financial or otherwise) of the Company, any Permitted Borrower or any other
Person; (iv) any breach of this Agreement by the Company, any Permitted
Borrower or any other Person; (v) any inability of the Company or the Permitted
Borrowers to satisfy the conditions precedent to borrowing set forth in this
Agreement on the date upon which such participating interest is to be purchased
or (vi) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. If any Bank does not make available to the
Agent the amount required pursuant to clause (i) or (ii) above, as the case may
be, the Agent shall be entitled to recover such amount on demand from such
Bank, together with interest thereon for each day from the date of non-payment
until such amount is paid in full at the Federal Funds Effective Rate for
Advances in Dollars (other than eurodollars) and, for Eurocurrency-based
Advances, Agent's marginal cost (including the cost of maintaining any required
reserves or deposit insurance and of any fees, penalties, overdraft charges or
other costs or expenses incurred by Agent as a result of such failure to
deliver funds hereunder) of carrying such amount.
2.6 Prime-based Interest Payments. Interest on the unpaid balance
of all Prime-based Advances of the Revolving Credit and all Swing Line Advances
carried at the Prime-based Rate from time to time outstanding shall accrue from
the date of such Advance to the Revolving Credit Maturity Date (and until
paid), at a per annum interest rate equal to the Prime-based Rate, and shall be
payable in immediately available funds (a) with respect to Swing Line Advances,
monthly commencing on September 1, 1995, and on the first day of each month
thereafter, and (b) with respect to Advances of the Revolving Credit, quarterly
commencing on October 1, 1995, and on the first day of each calendar quarter
thereafter. Interest accruing at the Prime-based Rate shall be computed on the
basis of a 360 day year and assessed for the actual number of days elapsed, and
in such computation effect shall be given to any change in the interest rate
resulting from a change in the Prime-based Rate on the date of such change in
the Prime-based Rate.
2.7 Eurocurrency-based and Quoted Rate Interest Payments. Interest
on each 1 month, 2 month and 3 month Eurocurrency-based Advased Advance or a
Quoted Rate Advance shall, absent a contrary election by the Majority Banks, be
converted automatically to a Prime-based Advance and the Agent shall thereafter
promptly notify Company, the Permitted Borrowers and each of the Banks of said
action. If a Eurocurrency-based Advance or a Quoted Rate Advance converted
hereunder is payable in an Alternative Currency, the Prime- based Advance shall
be in an amount equal to the Dollar Amount of such Eurocurrency-based Advance
or Quoted Rate Advance at such time and the Agent and the Banks shall use said
Prime-based Advance to fund payment of the Alternative Currency obligation, all
subject to the provisions of Section 2.14. The Company and the Permitted
Borrowers, if applicable, shall reimburse the Agent and the Banks on demand for
any costs incurred by the Agent or any of the Banks, as applicable, resulting
from the conversion pursuant to this Section 2.12 of Eurocurrency-based
Advances payable in an Alternative Currency to Prime-based Advances.
2.8 Revolving Credit Commitment Fee. From the date hereof to the
Revolving Credit Maturity Date, the Company shall pay to the Agent, for
distribution to the Banks (as set forth below), a Revolving Credit Commitment
Fee equal to the sum of:
(a) the Applicable Fee Percentage per annum times the
daily average amount by which the Revolving Credit Aggregate Commitment then in
effect hereunder exceeds the Dollar Amount of the principal amount outstanding
from time to time under the Revolving Credit, plus the aggregate daily amount
of Swing Line Advances outstanding from time to time hereunder, plus the
aggregate undrawn portion of any Letters of Credit outstanding from time to
time hereunder (using the Current Dollar Equivalent of any such Letters of
Credit denominated in any Alternative Currency), determined, with respect to
each outstanding Advance in an Alternative Currency, as of the first ance of
the Revolving Credit and all Swing Line Advances carried at the
Eurocurrency-based Rate or the Quoted Rate shall accrue at its Applicable
Interest Rate and shall be payable in immediately available funds on the last
day of the Interest Period applicable thereto. Interest shall be payable on
each 6 month Eurocurrency-based Advance outstanding from time to time, at
intervals of 3 months after the first day of the applicable Interest Period,
and shall also be payable on the last day of the Interest Period
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<PAGE> 54
applicable thereto. Interest accruing at the Eurocurrency-based Rate and the
Quoted Rate shall be computed on the basis of a 360 day year (except that any
such Advances made in Sterling or any other Alternative Currency with respect
to which applicable law or market custom so requires shall be calculated based
on a 365 day year, or as otherwise required under applicable law or market
custom) and assessed for the actual number of days elapsed from the first day
of the Interest Period applicable thereto to but not including the last day
thereof. Interest due on a Eurocurrency-based Advance made in an Alternative
Currency shall be paid in such Alternative Currency.
2.9 Interest Payments on Conversions. Notwithstanding anything to
the contrary in the preceding sections, all accrued and unpaid interest on any
Advance converted pursuant to Section 2.3 hereof shall be due and payable in
full on the date such Advance is converted.
2.10 Interest on Default. In the event and so long as any Event of
Default shall exist, interest shall be payable daily on all Advances of the
Revolving Credit and all Swing Line Advances from time to time outstanding at a
per annum rate equal to the Applicable Interest Rate plus two percent (2%) for
the remainder of the then existing Interest Period, if any, and at all other
such times, with respect to Domestic Advances thereof from time to time
outstanding, at a per annum rate equal to the Prime-based Rate plus two percent
(2%), and, with respect to Eurocurrency-based Advances or Quoted Rate Advances
thereof in any Alternative Currency from time to time outstanding, (i) at a per
annum rate calculated by the Agent, whose determination shall be presumed to be
correct, absent demonstrable error, on a daily basis, equal to two percent (2%)
above the interest rate per annum at which one (1) day deposits (or, if such
amount due remains unpaid for more than three (3) Business Days, then for such
other period of time as the Agent may elect which shall in no event be longer
than six (6) months) in the relevant eurocurrency in the amount of such overdue
payment due to the Agent are offered by Agent's Eurocurrency Lending Office for
the applicable period determined as provided above, or (ii) if at any such time
such deposits are not offered by the Eurocurrency Lending Office, then at a
rate per annum equal to two percent (2%) above the rate determined by the Agent
to be its aggregate marginal cost (including the cost of maintaining any
required reserves or deposit insurance) of carrying the amount of such
Eurocurrency-based Advance or Quoted Rate Advance.
2.11 Prepayment. (a) Company or the Permitted Borrowers may prepay
all or part of the outstanding balance of any Prime- based Advance(s) under
the Revolving Credit Notes at any time, provided that the amount of any partial
prepayment shall be at least One Million Dollars ($1,000,000) and the aggregate
balance of Prime-based Advance(s) of the Revolving Credit remaining outstanding
shall be at least Three Million Dollars ($3,000,000). Company or the applicable
Permitted Borrower may prepay all or part of any Eurocurrency-based Advance
(subject to not less than three (3)
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Business Days' notice to Agent) only on the last day of the Interest Period
therefor, provided that the amount of any such partial prepayment shall be at
least One Million Dollars ($1,000,000), or the equivalent thereof in an
Alternative Currency, and the unpaid portion of such Advance which is refunded
or converted under Section 2.3 hereof shall be at least Five Million Dollars
($5,000,000) or the equivalent thereof in an Alternative Currency.
(b) Company may prepay all or part of the outstanding
balance of any Swing Line Advance carried at the Prime-based Rate at any time,
provided that the amount of any partial prepayment shall be at least Five
Hundred Thousand Dollars ($500,000) and the aggregate balance of such Swing
Line Advances remaining outstanding shall be at least Five Hundred Thousand
Dollars ($500,000). Company may prepay all or part of any Swing Line Advances
carried at the Eurocurrency-based Rate or the Quoted Rate (subject to not less
than three (3) Business Days' notice to Swing Line Bank and Agent) only on the
last day of the Interest Period therefor, provided that the amount of any such
partial payment shall be at least Five Hundred Thousand Dollars ($500,000), or
the equivalent thereof in any Alternative Currency, and the unpaid portion of
such Advance which is refunded or converted under Section 2.5(c) hereof shall
be at least Five Hundred Thousand Dollars ($500,000), or the equivalent thereof
in any Alternative Currency.
(c) Any prepayment made in accordance with this Section
shall be without premium, penalty or prejudice to the right to reborrow under
the terms of this Agreement. Any other prepayment of all or any portion of any
Advance of the Revolving Credit or any Swing Line Advance shall be subject to
Section 12.1 hereof, but otherwise without premium, penalty or prejudice.
2.12 Determination, Denomination and Redenomination of Alternative
Currency Advances. Whenever, pursuant to any provision of this Agreement:
(a) an Advance of the Revolving Credit or a Swing Line
Advance is initially funded, as opposed to any refunding or conversion thereof,
in an Alternative Currency, the amount to be advanced hereunder will be the
equivalent in such Alternative Currency of the Dollar Amount of such Advance;
(b) an existing Advance of the Revolving Credit or a
Swing Line Advance denominated in an Alternative Currency is to be refunded, in
whole or in part, with an Advance denominated in the same Alternative Currency,
the amount of the new Advance shall be continued in the amount of the
Alternative Currency so refunded;
(c) an existing Advance of the Revolving Credit
denominated in an Alternative Currency is to be converted, in whole or in part,
to an Advance denominated in another Alternative Currency, the amount of the
new Advance shall be that amount of the Alternative Currency of the new Advance
which may be purchased,
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using the most favorable spot exchange rate determined by Agent to be available
to it for the sale of Dollars for such other Alternative Currency at
approximately (11:00 a.m.) (Detroit time) two (2) Business Days prior to the
last day of the Eurocurrency Interest Period applicable to the existing
Advance, with the Dollar Amount of the existing Advance, or portion thereof
being converted; and
(d) an existing Advance of the Revolving Credit
denominated in an Alternative Currency is to be converted, in whole or in part,
to an Advance denominated in Dollars, the amount of the new Advance shall be
the Dollar Amount of the existing Advance, or portion thereof being converted
(determined as aforesaid).
2.13 Prime-based Advance in Absence of Election or Upon Default.
If, as to any outstanding Eurocurrency-based Advance of the Revolving Credit,
or any Swing Line Advance carried at the Eurocurrency-based Rate or the Quoted
Rate, Agent has not received payment on the last day of the Interest Period
applicable thereto, or does not receive a timely Request for Advance meeting
the requirements of Section 2.3 hereof with respect to the refunding or
conversion of such Advance, or, subject to Section 2.9 hereof, if on such day a
Default or an Event of Default shall have occurred and be continuing, the
principal amount thereof which is not then prepaid in the case of a
Eurocurrency-based Advance or a Quoted Rate Advance shall, absent a contrary
election by the Majority Banks, be converted automatically to a Prime-based
Advance and the Agent shall thereafter promptly notify Company, the Permitted
Borrowers and each of the Banks of said action. If a Eurocurrency-based Advance
or a Quoted Rate Advance converted hereunder is payable in an Alternative
Currency, the Prime-based Advance shall be in an amount equal to the Dollar
Amount of such Eurocurrency-based Advance or Quoted Rate Advance at such time
and the Agent and the Banks shall use said Prime-based Advance to fund payment
of the Alternative Currency obligation, all subject to the provisions of
Section 2.14. The Company and the Permitted Borrowers, if applicable, shall
reimburse the Agent and the Banks on demand for any costs incurred by the Agent
or any of the Banks, as applicable, resulting from the conversion pursuant to
this Section 2.12 of Eurocurrency-based Advances payable in an Alternative
Currency to Prime-based Advances.
2.14 Revolving Credit Commitment Fee. From the date hereof to the
Revolving Credit Maturity Date, the Company shall pay to the Agent, for
distribution to the Banks (as set forth below), a Revolving Credit Commitment
Fee equal to the sum of:
(a) the Applicable Fee Percentage per annum times the
daily average amount by which the Revolving Credit Aggregate Commitment then in
effect hereunder exceeds the Dollar Amount of the principal amount outstanding
from time to time under the Revolving Credit, plus the aggregate daily amount
of Swing Line Advances outstanding from time to time hereunder, plus the
aggregate undrawn portion of any Letters of Credit outstanding from
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time to time hereunder (using the Current Dollar Equivalent of any such Letters
of Credit denominated in any Alternative Currency), determined, with respect to
each outstanding Advance in an Alternative Currency, as of the first day of
each Interest Period and with respect to each Letter of Credit denominated in
an Alternative Currency, on the first day of each calendar month (but otherwise
computed on a daily basis); and
(b) the Applicable Fee Percentage per annum, times the
Revolving Credit Designated Unused Portion in effect under Section 2.16 hereof
during such period, calculated on a daily basis.
The Revolving Credit Commitment Fee shall be payable quarterly in arrears
commencing on October 1, 1995 (in respect of the prior calendar quarter), and
on the first day of each calendar quarter thereafter and at the Revolving
Credit Maturity Date, and shall be computed on the basis of a year of three
hundred sixty (360) days and assessed for the actual number of days elapsed.
Whenever any payment of the Revolving Credit Commitment Fee shall be due on a
day which is not a Business Day, the date for payment thereof shall be extended
to the next Business Day. Upon receipt of such payment Agent shall make prompt
payment to each Bank of its share of the Revolving Credit Commitment Fee based
upon its respective Percentage. It is expressly understood that the Revolving
Credit Commitment Fee shall not be refundable under any circumstances.
2.15 Currency Appreciation; Sublimits; Mandatory Reduction of
Indebtedness. (a) If at any time and for any reason, the aggregate principal
amount (tested in the manner set forth below) of all Advances of the Revolving
Credit hereunder to the Company and to the Permitted Borrowers made in Dollars
and the aggregate Current Dollar Equivalent of all Advances hereunder to the
Company and to the Permitted Borrowers in any Alternative Currency as of such
time, plus the aggregate principal amount of Swing Line Advances outstanding
hereunder as of such time, plus the aggregate undrawn portion of any Letters of
Credit which shall be outstanding (based on the Dollar Amount of the undrawn
portion of any Letters of Credit denominated in Dollars and the Current Dollar
Equivalent of the undrawn portion of any Letters of Credit denominated in any
Alternative Currency), plus the unreimbursed amount of any draws under any
Letters of Credit (using the Current Dollar Equivalent thereof for any Letters
of Credit denominated in any Alternative Currency) as of such time exceeds the
Revolving Credit Aggregate Commitment (as used in this subparagraph (a), the
"Excess"), the Company and the Permitted Borrowers shall:
(i) immediately (x) repay that portion of such
Indebtedness then carried as a Prime-based Advance, if any, by the Dollar
Amount of such Excess, and/or (y) reduce any pending request for an Advance in
Dollars on such day by the Dollar Amount of such Excess, and/or (z) activate
any portion of the Revolving Credit Designated Unused Portion available to be
activated under Section 2.17 hereof, if any, in compliance with said Section
2.17, to the extent of such Excess, in each case to the extent thereof; and
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(ii) on the last day of each Interest Period of
any Eurocurrency-based Advance or Quoted Rate Advance outstanding as of such
time, until the necessary reductions of Indebtedness under this Section 2.14(a)
have been fully made, repay the Indebtedness carried in such Advances and/or
reduce any requests for refunding or conversion of such Advances submitted (or
to be submitted) by the Company or the applicable Permitted Borrower in respect
of such Advances, by the Amount in Dollars or the applicable Alternative
Currency, as the case may be, of such Excess, to the extent thereof.
Compliance with this Section 2.14(a) shall be tested on a daily or other basis
satisfactory to Agent in its sole discretion, provided that, so long as no
Default or Event of Default has occurred and is continuing, at any time while
the aggregate Advances of the Revolving Credit available to be borrowed
hereunder (based on the Revolving Credit Aggregate Commitment then in effect)
equal or exceed Five Million Dollars ($5,000,000), compliance with this Section
2.14(a) shall be tested as of the last day of each calendar quarter.
Notwithstanding the foregoing, upon the occurrence and during the continuance
of any Default or Event of Default, or if any Excess remains after
recalculating said Excess based on ninety-five percent (95%) of the Current
Dollar Equivalent of any Advances or Letters of Credit denominated in
Alternative Currencies (and one hundred percent (100%) of any Advances or
Letters of Credit denominated in Dollars), Company and the Permitted Borrowers
shall be obligated immediately to reduce the foregoing Indebtedness hereunder
by an amount sufficient to eliminate such Excess.
(b) If at any time and for any reason with respect to a
Permitted Borrower the aggregate principal amount (tested in the manner set
forth below) of all Advances of the Revolving Credit, all Swing Line Advances,
the aggregate undrawn portion of any Letters of Credit, the unreimbursed amount
of any draws under any Letters of Credit and the aggregate principal amount of
any Term Loans hereunder to or for the account of such Permitted Borrower
denominated in Dollars and ninety-five percent (95%) of the aggregate Current
Dollar Equivalent of all such Advances, Letters of Credit (including
unreimbursed draws) and Term Loans hereunder to or for the account of such
Permitted Borrower in any Alternative Currency as of such time, exceeds the
Sublimit applicable to such Permitted Borrower, the applicable Permitted
Borrower shall (i) immediately repay that portion of the Indebtedness
outstanding to such Permitted Borrower then carried as a Prime-based Advance,
if any, by the Dollar Amount of such excess, and/or reduce on such day any
pending request for an Advance in Dollars submitted by such Permitted Borrower
by the Dollar Amount of such excess, to the extent thereof; and (ii) on the
last day of each Interest Period of any Eurocurrency-based Advance or Quoted
Rate Advance outstanding to such Permitted Borrower as of such time, until the
necessary reductions of Indebtedness under this Section 2.14(b) have been fully
made, repay such Indebtedness carried in such Advances and/or reduce any
requests for refunding or conversion of such Advances submitted (or to be
submitted) by the applicable Permitted Borrower
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in respect of such Advances, by the Amount in Dollars or the applicable
Alternative Currency, as the case may be, of such excess, to the extent
thereof. Provided that no Default or Event of Default has occurred and is
continuing, each Permitted Borrower's compliance with this Section 2.14(b)
shall be tested as of the last day of each calendar quarter. Upon the
occurrence and during the continuance of any Default or Event of Default,
compliance with this Section 2.14(b) shall be tested on a daily or other basis
satisfactory to Agent in its sole discretion.
2.16 Optional Reduction or Termination of Revolving Credit Maximum
Amount. Provided that the Revolving Credit Designated Unused Portion then in
effect is zero (0), the Company may, upon at least twenty (20) Business Days'
prior written notice to Agent (except in the case of a request submitted
pursuant to Section 4.9A hereof, in which event only five (5) Business Days
prior written notice shall be required), permanently reduce the Revolving
Credit Maximum Amount in whole at any time, or in part from time to time,
without premium or penalty, provided that: (i) each partial reduction of the
Revolving Credit Maximum Amount shall be in an aggregate amount equal to at
least Ten Million Dollars ($10,000,000) or a larger integral multiple of One
Million Dollars ($1,000,000); (ii) each reduction shall be accompanied by the
payment of the Revolving Credit Commitment Fee, if any, accrued to the date of
such reduction; (iii) the Company shall prepay in accordance with the terms
hereof the amount, if any, by which the aggregate unpaid principal amount of
Revolving Credit Notes, plus the aggregate undrawn amount of outstanding
Letters of Credit, plus the unreimbursed amount of any draws under any Letters
of Credit, plus the aggregate principal amount of all Swing Line Advances (in
the case of any advances in Alternative Currencies, determined as aforesaid)
exceeds the amount of the Revolving Credit Maximum Amount, taking into account
the aforesaid reductions thereof, together with interest thereon to the date of
prepayment; (iv) if the termination or reduction of the Revolving Credit
Maximum Amount requires the prepayment of a Eurocurrency-based Advance, the
termination or reduction may be made only on the last Business Day of the then
current Interest Period applicable to such Eurocurrency-based Advance and (v)
no reduction shall reduce the amount of the Revolving Credit Maximum Amount to
an amount which is less than the sum of the aggregate undrawn amount of any
Letters of Credit outstanding at such time. Reductions of the Revolving Credit
Maximum Amount and any accompanying prepayments of the Revolving Credit Notes
shall be distributed by Agent to each Bank in accordance with such Bank's
Percentage thereof, and will not be available for reinstatement by or readvance
to the Company. Any reductions of the Revolving Credit Maximum Amount hereunder
shall reduce each Bank's portion thereof proportionately (based upon the
applicable Percentages), shall automatically reduce the maximum amount thereof
which may be designated as the Revolving Credit Designated Unused Portion
(except in the case of requests for reductions submitted pursuant to Section
4.9A hereof, which shall be governed by Section 2.14 hereof) and shall be
permanent and irrevocable. Any payments made pursuant to this Section shall be
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applied first to outstanding Prime-based Advances under the Revolving Credit,
next to Swing Line Advances carried at the Prime-based Rate, next to
Eurocurrency-based Advances of the Revolving Credit, next to Swing Line
Advances carried at the Eurocurrency-based Rate and then to Swing Line Advances
carried at the Quoted Rate.
2.17 Revolving Credit Designated Unused Portion. The Company may at
any time and from time to time, upon at least five (5) Business Days' prior
written notice to the Agent, subject to any prior activations of the Revolving
Credit Designated Unused Portion which shall remain in effect for a period of
not less than one hundred eighty (180) days in accordance with Section 2.17
hereof, designate a portion of the Revolving Credit Aggregate Commitment not
exceeding Forty Million Dollars ($40,000,000) at any time in the aggregate so
designated (or such lesser amount resulting from the application of Section
2.15 hereof), as not presently available for borrowing hereunder, provided that
(i) each such designation shall be in an aggregate amount equal to at least Ten
Million Dollars ($10,000,000) or a larger One Million Dollar ($1,000,000)
integral multiple thereof; (ii) each such designation shall be accompanied by
the payment of the Revolving Credit Commitment Fee, if any, accrued to the date
of such designation; (iii) the Company shall prepay in accordance with the
terms hereof the amount, if any, by which the aggregate unpaid principal amount
of the Revolving Credit, then outstanding, plus the aggregate principal amount
of Swing Line Advances then outstanding, plus the aggregate amount of any
outstanding Letters of Credit (using the Dollar Amount of any such Advances or
Letters of Credit denominated in Dollars and the Current Dollar Equivalent of
such Advances or Letter of Credit denominated in any Alternative Currency),
exceeds the amount of the Revolving Credit Aggregate Commitment, taking into
account the aforesaid designation under this Section 2.16, together with
interest thereon to the date of prepayment; (iv) if the designation under this
Section 2.16 requires the prepayment of a Eurocurrency-based Advance or Quoted
Rate Advance, such designation may be effective only on the last Business Day
of the then current Interest Period applicable to such Advance and (v) no such
designation shall reduce the amount of the Revolving Credit Aggregate
Commitment to an amount which is less than the sum of the aggregate undrawn
amount (determined as aforesaid) of any Letters of Credit outstanding at such
time. The Revolving Credit Aggregate Commitment shall be reduced by the
aggregate amount so designated under this Section 2.16 as the Revolving Credit
Designated Unused Portion, upon the effective date of each such designation.
2.18 Activation of Designated Unused Portion. Provided that no
Default or Event of Default has occurred and is continuing, Company may, upon
not less than five (5) Business Days' prior written notice to the Agent (except
for any activation under Section 2.14(a)(i) hereof, which shall be effective
upon Agent's receipt of written notice thereof) elect to activate all or any
part of the Revolving Credit Designated Unused Portion, provided that on or
before the requested date for activation, Company shall pay to the
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Agent, for distribution to the Banks based on their respective Percentages, an
Activation Fee in the amount of the Applicable Fee Percentage times that
portion of the Revolving Credit Designated Unused Portion thereby activated.
Each activation of the Revolving Credit Designated Unused Portion hereunder
shall remain in effect (and shall not be reduced by a subsequent designation
under Section 2.16 hereof) for a period of not less than 180 consecutive days.
Upon the effecen-current Revolving Credit Maturity Date shall remain in effect
(with no further right on the part of Company to request extensions thereof
under this Section 2.18) and (z) the commitments of the Banks to make Advances
of the Revolving Credit hereunder shall terminate on the Revolving Credit
Maturity Date then in effect, and Agent shall promptly notify Company and the
Banks thereof.
2.19 Revolving Credit as Renewal; Application of Advances. The
Revolving Credit Notes issued by the Company and the Permitted Borrowers
hereunder shall constitute renewal and replacement evidence of all present
Indebtedness of such parties outstanding under the Prior Credit Agreement and
the notes issued thereunder. Advances of the Revolving Credit and Swing Line
Advances shall be available, subject to the terms hereof, to fund working
capital
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needs or other general corporate purposes of the Company and the Permitted
Borrowers.
3. LETTERS OF CREDIT.
3.1 Letters of Credit. Subject to the terms and conditions of this
Agreement, Agent may through its Issuing Office, at any time and from time to
time from and after the date hereof until thirty (30) days prior to the
Revolving Credit Maturity Date, upon the written request of an Account Party
accompanied by a duly executed Letter of Credit Agreement and such other
documentation related to the requested Letter of Credit as the Agent may
require, issue standby or documentary Letters of Credit for the account of such
Account Party, in an aggregate amount for all Letters of Credit issued
hereunder at any one time outstanding not to exceed the Letter of Credit
Maximum Amount. Each Letter of Credit shall be in a minimum face amount of One
Hundred Thousand Dollars ($100,000) and, other than any Special Purpose Letter
of Credit, shall have an expiration date not later than one (1) year from its
date of issuance; provided that each Letter of Credit (including any renewal
thereof, and any Special Purpose Letter of Credit) shall expire not later than
ten (10) Business Days prior to the Revolving Credit Maturity Date in effect on
the date of issuance thereof. The submission of all applications and the
issuance of each Letter of Credit hereunder shall be subject in all respects to
applicable provisions of U.S. law and regulations, including without
limitation, the Trading With the Enemy Act, Export Administration Act,
International Emergency Economic Powers Act, and the Regulations of the Office
of Foreign Assets Control of the U.S. Department of the Treasury.
3.2A Conditions to Issuance. No Letter of Credit shall be issued at
the request and for the account of any Account Party unless, as of the date of
issuance of such Letter of Credit:
(a) the face amount of the Letter of Credit requested
(based on the Dollar Amount of the undrawn portion
of any Letter of Credit denominated in Dollars and
the Current Dollar Equivalent of the undrawn portion
of any Letter of Credit denominated in any
Alternative Currency), plus the undrawn portion of
all other outstanding Letters of Credit (determined
as aforesaid), does not exceed the Letter of Credit
Maximum Amount;
(b) the face amount of the Letter of Credit requested,
plus the aggregate undrawn portion of all other
outstanding Letters of Credit (in each case
determined as aforesaid), plus the unreimbursed
amount of any draws under Letters of Credit (using
the Current Dollar Equivalent thereof for any
Letters of Credit denominated in any Alternative
Currency), plus the aggregate principal amount of
all Advances outstanding under the Revolving Credit
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Notes and the Swing Line Notes, including any
Advances requested to be made on such date
(determined on the basis of the Current Dollar
Equivalent of any Advances denominated in any
Alternative Currency, and the Dollar Amount of any
Advances in Dollars), do not exceed the then
applicable Revolving Credit Aggregate Commitment;
(c) whenever the Account Party is a Permitted Borrower,
the face amount of the Letter of Credit requested by
such Permitted Borrower, plus the aggregate undrawn
portion of all other outstanding Letters of Credit
issued for the account of such Permitted Borrower
(in each case determined as aforesaid), plus the
unreimbursed amount of any draws under Letters of
Credit (using the Current Dollar Equivalent thereof
for any Letters of Credit denominated in any
Alternative Currency) issued for the account of such
Permitted Borrower, plus the aggregate principal
amount of all Advances outstanding under the
Revolving Credit Notes and the Swingline Notes to
such Permitted Borrower, including any Advances
requested to be made on such date (in each case
determined as aforesaid), plus the aggregate
principal amount of all Term Loans outstanding
hereunder in the name of such Permitted Borrower
(determined as aforesaid) do not exceed the Sublimit
applicable to such Permitted Borrower;
(d) the obligations of Company and the Permitted
Borrowers set forth in this Agreement and the Loan
Documents are valid, binding and enforceable
obligations of Company and the valid, binding and
enforceable nature of this Agreement and the Loan
Documents has not been disputed by Company or the
Permitted Borrowers;
(e) the representations and warranties contained in this
Agreement and the Loan Documents are true in all
material respects as if made on such date, and both
immediately before and immediately after issuance of
the Letter of Credit requested, no Default or Event
of Default exists;
(f) the execution of the Letter of Credit Agreement with
respect to the Letter of Credit requested will not
violate the terms and conditions of any contract,
agreement or other borrowing of Company or the
Permitted Borrowers;
(g) the Account Party requesting the Letter of Credit
shall have delivered to Agent at its Issuing Office,
not less than five (5) Business Days prior to the
requested date for issuance (or such shorter
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time as the Agent, in its sole discretion, may
permit), the Letter of Credit Agreement related
thereto, together with such other documents and
materials as may be required pursuant to the terms
thereof, and the terms of the proposed Letter of
Credit shall be satisfactory to Agent and its
Issuing Office;
(h) no order, judgment or decree of any court,
arbitrator or governmental authority shall purport
by its terms to enjoin or restrain Agent from
issuing the Letter of Credit, or any Bank from
taking an assignment of its Percentage thereof
pursuant to Section 3.6 hereof, and no law, rule,
regulation, request or directive (whether or not
having the force of law) shall prohibit or request
that Agent refrain from issuing, or any Bank refrain
from taking an assignment of its Percentage of, the
Letter of Credit requested or letters of credit
generally;
(i) there shall have been no introduction of or change
in the interpretation of any law or regulation that
would make it unlawful or unduly burdensome for the
Agent to issue the requested Letter of Credit, no
suspension of or material limitation on trading on
the New York Stock Exchange or any other national
securities exchange, no declaration of a general
banking moratorium by banking authorities in the
United States, Michigan or the respective
jurisdictions in which the Banks, the Account Party
and the beneficiary of the requested Letter of
Credit are located, and no establishment of any new
restrictions on transactions involving letters of
credit or on banks materially affecting the
extension of credit by banks; and
(j) Agent shall have received the issuance fees required
in connection with the issuance of such Letter of
Credit pursuant to Section 3.5 hereof.
Each Letter of Credit Agreement submitted to Agent pursuant hereto shall
constitute the certification by the Company and the Account Party of the
matters set forth in this Section 3.2(A) (a) through (f). The Agent shall be
entitled to rely on such certification without any duty of inquiry.
3.2B Special Purpose Letters of Credit. Notwithstanding anything
herein to the contrary, in connection with the requested issuance of any
Special Purpose Letter of Credit, the Agent shall be entitled to impose such
additional conditions to issuance as it may in its sole discretion require.
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3.3 Notice. Agent shall give notice, substantially in the form
attached as Exhibit "G", to each Bank of the issuance of each Letter of Credit,
not later than three (3) Business Days after issuance of each Letter of Credit,
specifying the amount thereof and the amount of such Bank's Percentage thereof.
3.4 Letter of Credit Fees. Company shall pay to the Agent for
distribution to the Banks in accordance with the Percentages, Letter of Credit
Fees as follows:
(a) A per annum Letter of Credit Fee with respect to the
undrawn amount of each Letter of Credit issued pursuant hereto (based on the
Dollar Amount of any Letters of Credit denominated in Dollars and the Current
Dollar Equivalent of any Letters of Credit denominated in any Alternative
Currency) in the amount of the Applicable Fee Percentage (determined with
reference to Schedule 5.1 to this Agreement), inclusive of the facing fee of
one-eighth of one percentage point (1/8%) per annum on the face amount thereof
to be retained by Agent under Section 3.5 hereof.
(b) If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or
cause to be deemed applicable any reserve, special deposit, limitation or
similar requirement against letters of credit issued by, or assets held by, or
deposits in or for the account of, Agent or the Banks or (ii) impose on Agent
or the Banks any other condition regarding this Agreement or the Letters of
Credit, and the result of any event referred to in clause (i) or (ii) above
shall be to increase the cost or expense to Agent or the Banks of issuing or
maintaining or participating in any of the Letters of Credit (which increase in
cost or expense shall be determined by the Agent's or such Bank's reasonable
allocation of the aggregate of such cost increases and expense resulting from
such events), then, upon demand by the Agent or such Bank, as the case may be,
the Company shall, within ten days following demand for payment, pay to Agent
or such Bank, as the case may be, from time to time as specified by the Agent
or such Bank, additional amounts which shall be sufficient to compensate the
Agent or such Bank for such increased cost and expense, together with interest
on each such amount from ten days after the date demanded until payment in full
thereof at the Prime-based Rate. A certificate as to such increased cost or
expense incurred by the Agent or such Bank, as the case may be, as a result of
any event mentioned in clause (i) or (ii) above, submitted to the Company,
shall be rebuttably presumptive evidence, absent demonstrable error, as to the
amount thereof.
(c) All payments by the Company or any Permitted
Borrower to the Agent or the Banks under this Section 3.4 shall be made in
Dollars and in immediately available funds at the Agent's Issuing Office or
such other office of the Agent as may be designated from time to time by
written notice to the Company and the Permitted Borrowers by the Agent. The
aforesaid fees shall be
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nonrefundable under all circumstances, shall be payable annually in advance (or
such lesser period, if applicable, for Letters of Credit issued with stated
expiration dates of less than one year) upon the issuance of each such Letter
of Credit, and shall be calculated on the basis of a 360 day year and assessed
for the actual number of days from the date of the issuance thereof to the
stated expiration thereof.
3.5 Issuance Fees. In connection with the Letters of Credit, and
in addition to the Letter of Credit Fees (including a letter of credit facing
fee of one-eighth of one percentage point (1/8%) to be retained by Agent for
its own account), the Company and the applicable Account Party shall pay, for
the sole account of the Agent, standard documentation, administration, payment
and cancellation charges assessed by Agent or its Issuing Office, at the times,
in the amounts and on the terms set forth or to be set forth from time to time
in the standard fee schedule of Agent's Issuing office in effect from time to
time.
3.6 Draws and Demands for Payment Under Letters of Credit.
(a) The Company and each applicable Account Party agrees
to pay to the Agent, on the day on which the Agent shall honor a draft or other
demand for payment presented or made under any Letter of Credit, an amount
equal to the amount paid by the Agent in respect of such draft or other demand
under such Letter of Credit and all expenses paid or incurred by the Agent
relative thereto. Unless the Company or the applicable Account Party shall
have made such payment to the Agent on such day, upon each such payment by the
Agent, the Agent shall be deemed to have disbursed to the Company or the
applicable Account Party, and the Company or the applicable Account Party shall
be deemed to have elected to substitute for its reimbursement obligation, with
respect to Letters of Credit denominated in Dollars, a Prime-based Advance and,
with respect to Letters of Credit denominated in any Alternative Currency, a
Eurocurrency-based Advance in the applicable Alternative Currency with an
Interest Period, commencing three (3) Business Days following the date of
Agent's payment pursuant to the applicable Letter of Credit, of one month (or,
if unavailable, such other Interest Period as selected by Agent in its sole
discretion) in each case for the account of the Banks in an amount equal to the
amount so paid by the Agent in respect of such draft or other demand under such
Letter of Credit. Such Prime-based Advance or Eurocurrency Advance shall be
deemed disbursed notwithstanding any failure to satisfy any conditions for
disbursement of any Advance set forth in Section 2 hereof and, to the extent of
the Advances so disbursed, the reimbursement obligation of the Company or the
applicable Account Party under this Section 3.6 shall be deemed satisfied,
provided that, with respect to any such Eurocurrency Advance deemed to have
been made hereunder, Company or the applicable Permitted borrower shall also be
obligated to pay to the Agent, for Agent's sole account, interest on the
aggregate amount paid by the Agent under the applicable draft or other demand
for payment at Agent's aggregate
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marginal cost (including the cost of maintaining any required reserves or
deposit insurance and of any fees, penalties, overdraft charges or other costs
or expenses incurred by Agent as a result of such failure to deliver funds
hereunder) of carrying such amount plus the Applicable Margin then in effect
for Eurocurrency-based Advances, from the date of Agent's payment pursuant to
any Letter of Credit to the date of the commencement of the Interest Period for
the applicable Eurocurrency-based Advance deemed to have been made, as
aforesaid, such interest (the "Gap Interest") to be due and payable on the last
day of the initial Interest Period established for such deemed Advance.
(b) If the Agent shall honor a draft or other demand for payment
presented or made under any Letter of Credit, the Agent shall provide notice
thereof to the Company and the applicable Account Party on the date such draft
or demand is honored, and to each Bank on such date unless the Company or
applicable Account Party shall have satisfied its reimbursement obligation
under Section 3.6(a) by payment to the Agent on such date. The Agent shall
further use reasonable efforts to provide notice to the Company or applicable
Account Party prior to honoring any such draft or other demand for payment, but
such notice, or the failure to provide such notice, shall not affect the rights
or obligations of the Agent with respect to any Letter of Credit or the rights
and obligations of the parties hereto, including without limitation the
obligations of the Company or applicable Account Party under Section 3.6(a)
hereof.
(c) Upon issuance by the Agent of each Letter of Credit hereunder,
each Bank shall automatically acquire a pro rata risk participation interest in
such Letter of Credit and related Letter of Credit Payment based on its
respective Percentage. Each Bank, on the date a draft or demand under any
Letter of Credit is honored (or the next succeeding Business Day if the notice
required to be given by Agent to the Banks under Section 3.6(b) hereof is not
given to the Banks prior to 2:00 p.m. (Detroit time) on such date of draft or
demand) or three (3) Business Days thereafter in respect of draws or demands
under Letters of Credit issued in any Alternative Currency, shall make its
Percentage share of the amount paid by the Agent, and not reimbursed by the
Company or applicable Account Party on such day, available in the applicable
Permitted Currency and in immediately available funds at the principal office
of the Agent for the account of the Agent. If and to the extent such Bank
shall not have made such pro rata portion available to the Agent, such Bank,
the Company and the applicable Account Party severally agree to pay to the
Agent forthwith on demand such amount together with interest thereon, for each
day from the date such amount was paid by the Agent until such amount is so
made available to the Agent at a per annum rate equal to the interest rate
applicable during such period to the related Advance deemed to have been
disbursed under Section 3.6(a) in respect of the reimbursement obligation of
the Company and the applicable Account Party, as set forth in Section 2.4(b)(i)
or 2.4(b)(ii), as the case may be. If such Bank shall pay such amount to the
Agent together with such
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interest, such amount so paid shall be deemed to constitute an Advance by such
Bank disbursed in respect of the reimbursement obligation of the Company or
applicable Account Party under Section 3.6(a) for purposes of this Agreement,
effective as of the dates applicable under said Section 3.6(a). The failure of
any Bank to make its pro rata portion of any such amount paid by the Agent
available to the Agent shall not relieve any other Bank of its obligation to
make available its pro rata portion of such amount, but no Bank shall be
responsible for failure of any other Bank to make such pro rata portion
available to the Agent. Furthermore, in the event of the failure by Company or
the applicable Permitted Borrower to pay the Gap Interest required under the
proviso to Section 3.6(a) hereof, each of the Banks shall pay to Agent, within
one Business Day following receipt from Agent of written request therefor, its
pro rata portion of said Gap Interest, excluding any portion thereof
attributable to the Applicable Margin.
(d) Nothing in this Agreement shall be construed to require or
authorize any Bank to issue any Letter of Credit, it being recognized that the
Agent shall be the sole issuer of Letters of Credit under this Agreement.
3.7 Obligations Irrevocable. The obligations of Company and any
Account Party to make payments to Agent or the Banks with respect to Letter of
Credit Obligations under Section 3.6 hereof, shall be unconditional and
irrevocable and not subject to any qualification or exception whatsoever,
including, without limitation:
(a) Any lack of validity or enforceability of any Letter
of Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of Credit
Documents");
(b) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any interest in
collateral or security, with respect to any of the Letter of Credit Documents;
(c) The existence of any claim, setoff, defense or other
right which the Company or any Account Party may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any persons or
entities for whom any such beneficiary or any such transferee may be acting),
the Agent or any Bank or any other person or entity, whether in connection with
any of the Letter of Credit Documents, the transactions contemplated herein or
therein or any unrelated transactions;
(d) Any draft or other statement or document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
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(e) Payment by the Agent to the beneficiary under any
Letter of Credit against presentation of documents which do not comply with the
terms of the Letter of Credit, including failure of any documents to bear any
reference or adequate reference to such Letter of Credit;
(f) Any failure, omission, delay or lack on the part of
the Agent or any Bank or any party to any of the Letter of Credit Documents to
enforce, assert or exercise any right, power or remedy conferred upon the
Agent, any Bank or any such party under this Agreement, any of the Loan
Documents or any of the Letter of Credit Documents, or any other acts or
omissions on the part of the Agent, any Bank or any such party; or
(g) Any other event or circumstance that would, in the
absence of this Section 3.7, result in the release or discharge by operation of
law or otherwise of Company or any Account Party from the performance or
observance of any obligation, covenant or agreement contained in Section 3.6.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which Company or any Account Party has or may
have against the beneficiary of any Letter of Credit shall be available
hereunder to Company or any Account Party against the Agent or any Bank.
Nothing contained in this Section 3.7 shall be deemed to prevent Company or the
Account Parties, after satisfaction in full of the absolute and unconditional
obligations of Company and the Account Parties hereunder, from asserting in a
separate action any claim, defense, set off or other right which they (or any
of them) may have against Agent or any Bank.
3.8 Risk Under Letters of Credit. (a) In assigning and the
handling of Letters of Credit and any security therefor, or any documents or
instruments given in connection therewith, Agent shall have the sole right to
take or refrain from taking any and all actions under or upon the Letters of
Credit.
(b) Subject to other terms and conditions of this
Agreement, Agent shall issue the Letters of Credit and shall hold the documents
related thereto in its own name and shall make all collections thereunder and
otherwise administer the Letters of Credit in accordance with Agent's regularly
established practices and procedures and, except pursuant to Section 13.3
hereof, Agent will have no further obligation with respect thereto. In the
administration of Letters of Credit, Agent shall not be liable for any action
taken or omitted on the advice of counsel, accountants, appraisers or other
experts selected by Agent with due care and Agent may rely upon any notice,
communication, certificate or other statement from Company, any Account Party,
beneficiaries of Letters of Credit, or any other Person which Agent believes to
be authentic. Agent will, upon request, furnish the Banks with copies of Letter
of Credit Agreements, Letters of Credit and documents related thereto.
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(c) In connection with the issuance and administration
of Letters of Credit and the assignments hereunder, Agent makes no
representation and shall have no responsibility with respect to (i) the
obligations of Company or any Account Party or, the validity, sufficiency or
enforceability of any document or instrument given in connection therewith, or
the taking of any action with respect to same, (ii) the financial condition of,
any representations made by, or any act or omission of Company, the applicable
Account Party or any other Person, or (iii) any failure or delay in exercising
any rights or powers possessed by Agent in its capacity as issuer of Letters of
Credit in the absence of its gross negligence or willful misconduct. Each of
the Banks expressly acknowledge that they have made and will continue to make
their own evaluations of Company's and the Account Parties' creditworthiness
without reliance on any representation of Agent or Agent's officers, agents and
employees.
(d) If at any time Agent shall recover any part of any
unreimbursed amount for any draw or other demand for payment under a Letter of
Credit, or any interest thereon, Agent shall receive same for the pro rata
benefit of the Banks in accordance with their respective Percentage interests
therein and shall promptly deliver to each Bank its share thereof, less such
Bank's pro rata share of the costs of such recovery, including court costs and
attorney's fees. If at any time any Bank shall receive from any source
whatsoever any payment on any such unreimbursed amount or interest thereon in
excess of such Bank's Percentage share of such payment, such Bank will promptly
pay over such excess to Agent, for redistribution in accordance with this
Agreement.
3.9 Indemnification. (a) The Company and each Account Party hereby
indemnifies and agrees to hold harmless the Banks and the Agent, and their
respective officers, directors, employees and agents, from and against any and
all claims, damages, losses, liabilities, costs or expenses of any kind or
nature whatsoever which the Banks or the Agent or any such person may incur or
which may be claimed against any of them by reason of or in connection with any
Letter of Credit, and neither any Bank nor the Agent or any of their respective
officers, directors, employees or agents shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or for any acts or
omissions of any beneficiary in connection therewith; (ii) the validity,
sufficiency or genuineness of documents or of any endorsement thereon, even if
such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (iii) payment by the Agent to the
beneficiary under any Letter of Credit against presentation of documents which
do not comply with the terms of any Letter of Credit (unless such payment
resulted from the gross negligence or willful misconduct of the Agent),
including failure of any documents to bear any reference or adequate reference
to such Letter of Credit; (iv) any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising
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in connection with any Letter of Credit; provided, however, that Company and
Account Parties shall not be required to indemnify the Banks and the Agent and
such other persons, and the Agent shall be liable to the Company and the
Account Parties to the extent, but only to the extent, of any direct, as
opposed to consequential or incidental, damages suffered by Company and the
Account Parties which were caused by the Agent's gross negligence, willful
misconduct or wrongful dishonor of any Letter of Credit after the presentation
to it by the beneficiary thereunder of a draft or other demand for payment and
other documentation strictly complying with the terms and conditions of such
Letter of Credit.
(b) It is understood that in making any payment under a Letter of
Credit the Agent will rely on documents presented to it under such Letter of
Credit as to any and all matters set forth therein without further
investigation and regardless of any notice or information to the contrary. It
is further acknowledged and agreed that Company or an Account Party may have
rights against the beneficiary or others in connection with any Letter of
Credit with respect to which Agent or the Banks are alleged to be liable and it
shall be a condition of the assertion of any liability of Agent or the Banks
under this Section that Company or applicable Account Party shall
contemporaneously pursue all remedies in respect of the alleged loss against
such beneficiary and any other parties obligated or liable in connection with
such Letter of Credit and any related transactions.
3.10 Right of Reimbursement. Each Bank agrees to reimburse the
Agent on demand, pro rata in accordance with its respective Percentage, for (i)
the reasonable out-of-pocket costs and expenses of the Agent to be reimbursed
by Company or any Account Party pursuant to any Letter of Credit Agreement or
any Letter of Credit, to the extent not reimbursed by Company or Account Party
and (ii) any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, fees, expenses or disbursements of any kind
and nature whatsoever which may be imposed on, incurred by or asserted against
Agent (in its capacity as issuer of any Letter of Credit) in any way relating
to or arising out of this Agreement, the Prior Credit Agreement, any Letter of
Credit, any documentation or any transaction relating thereto, or any Letter of
Credit Agreement, except to the extent that such liabilities, losses, costs or
expenses were incurred by Agent solely as a result of Agent's gross negligence
or willful misconduct or by the Agent's wrongful dishonor of any Letter of
Credit after the presentation to it by the beneficiary thereunder of a draft or
other demand for payment and other documentation strictly complying with the
terms and conditions of such Letter of Credit.
3.11 Existing Letters of Credit. Each Existing Letter of Credit
shall be deemed for all purposes of this Agreement to be a Letter of Credit
(except that Letter of Credit Fees paid under the Prior Credit Agreement shall
be redistributed by Agent to the Banks pro rata (based on the applicable
Percentages) from the effective date of this Agreement), and each application
submitted in
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connection with each Existing Letter of Credit shall be deemed for all purposes
of this Agreement to be a Letter of Credit Application. On the date of
execution of this Agreement, the Agent shall be deemed automatically to have
sold and transferred, and each other Bank shall be deemed automatically,
irrevocably, and unconditionally to have purchased and received from the Agent,
without recourse or warranty, an undivided interest and risk participation, to
the extent of such other Bank's Percentage, in each Existing Letter of Credit
and the applicable Letter of Credit Obligations with respect thereto and any
security therefor or guaranty pertaining thereto.
4. TERM LOANS
4.1 Commitment. Subject to the terms and conditions of this
Agreement, each Bank, severally and for itself alone, agrees from and after the
date hereof through the expiration of the Term Loan Funding Period to advance
to the Company or to any Permitted Borrower, in a single Advance for each such
loan in Dollars or any Alternative Currency (determined on the basis set forth
in Section 4.9A hereof), sums not to exceed in the aggregate for each such Bank
an amount equal to such Bank's respective Percentage of each Term Loan funded
pursuant to Section 4.9A hereof; provided, however, that the aggregate Term
Loans funded under this Agreement, determined as set forth in Section 4.9A
hereof, shall not exceed the Term Loan Aggregate Commitment. Upon the
expiration of the Term Loan Funding Period, the Banks' respective commitments
to make additional Term Loans hereunder shall expire and be of no further force
and effect. Each of the Term Loans funded under this Section 4.1 shall be
evidenced by Term Notes to be executed and delivered by Company or the
applicable Permitted Borrower to each of the Banks, substantially in the form
attached hereto as Exhibit "H-1" or "H-2", as applicable, with appropriate
insertions acceptable to the Agent and the Banks in form and substance, and in
the face amount of each Bank's Percentage of the applicable Term Loan to be
funded by the Banks hereunder.
4.2 Repayment of Principal. Until the applicable Term Loan
Maturity Date (as selected by the Company or the applicable Permitted Borrower
hereunder), when the entire unpaid principal balance of the applicable Term
Loan and all accrued interest and other sums outstanding thereon shall be paid
in full in Dollars or the applicable Alternative Currency (subject to the terms
hereof), the principal Indebtedness evidenced by each Term Loan shall be repaid
(irrespective of and in addition to any principal payments based on Excess Cash
Flow required hereunder or any optional prepayments hereunder), in Dollars or
the Applicable Alternative Currency, as the case may be, in accordance with the
Term Loan Permitted Amortization Schedule selected by the Company or the
applicable Permitted Borrower for such Term Loan under Section 4.9A hereof.
The applicable Term Loan Maturity Date and the Term Loan Permitted Amortization
Schedule selected for such Term Loan under Section 4.9A hereof shall be set
forth in the Term Notes executed for such Term Loan. There shall be no
readvance or reborrowing of
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any principal reductions of the Term Loans, whether pursuant to this Section
4.2, or consisting of optional prepayments or payments based on Excess Cash
Flow or otherwise.
4.3 Excess Cash Flow Recapture. (a) Subject to the terms and
conditions hereof, the Term Loans shall be subject to additional required
principal reductions in the amount of fifty percent (50%) of Excess Cash Flow,
to be applied pro rata to the Term Notes issued by the Company and the
Permitted Borrowers (based on the principal amounts outstanding under such
Notes at the time any such payments are made hereunder, using the Current
Dollar Equivalent of the outstanding principal balances of any Term Loans
denominated in any Alternative Currency), payable in Dollars or the applicable
Alternative Currency in respect of each calendar year (or portion thereof)
beginning with calendar year 1997 and continuing so long as this Agreement
remains in effect, on the earlier of (i) the respective dates of Company's
delivery of financial statements for such calendar years under Section 8.3(b)
hereof or (ii) May 31st of the succeeding year, as applicable, commencing on
May 31, 1998 and on each May 31st thereafter until the Term Loans have been
irrevocably paid and discharged in full.
(b) If the Applicable Interest Rate for any Term Loan
then in effect is the Fixed Rate, principal reductions based on Excess Cash
Flow otherwise required under this Section 4.3 shall be applied (in the manner
set forth above) first, against those Term Loans, if any, for which the Fixed
Rate has not been selected. To the extent Excess Cash Flow remains after such
principal reductions, such Excess Cash Flow shall be applied against the
remaining Term Loans carried at the Fixed Rate, in the manner set forth above
and subject to the payment of a Yield Maintenance Payment in respect of each
such Term Loan so prepaid, in the amount required under Section 4.12(b);
provided, however, that Company may elect, so long as no Default or Event of
Default has occurred and is continuing hereunder, to deposit such Excess Cash
Flow into a cash collateral account to be held by Agent for and on behalf of
the Banks (which may be an interest bearing account, with interest earnings to
be available to Company so long as no Default or Event of Default has occurred
and is continuing) on such terms and conditions as acceptable to Agent and the
Majority Banks, in their reasonable discretion. Subject to the terms and
conditions of the cash collateral account so maintained, such sums on deposit
therein shall be held in the cash collateral account until no Term Loans are
outstanding under this Agreement.
Principal reductions based on Excess Cash Flow shall be in addition to
scheduled principal payments under Section 3.2 hereof, as the case may be, or
any optional prepayments made prior thereto, and shall be applied against
principal installments due hereunder in the inverse order of their maturity.
4.4 Accrual of Interest. Each Advance of Indebtedness evidenced by
the Term Notes from time to time outstanding hereunder shall, from and after
the date of such Advance, bear interest at
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its Applicable Interest Rate. The amount and date of each Advance, its
Applicable Interest Rate, its Interest Period, and the amount and date of any
repayment shall be noted on Agent's records, which records will be rebuttably
presumptive evidence thereof, absent demonstrable error; provided, however,
that any failure by the Agent to record any such information shall not relieve
Company or the applicable Permitted Borrower of its obligation to repay the
outstanding principal amount of such Advance, all interest accrued thereon and
any amount payable with respect thereto in accordance with the terms of this
Agreement and the other Loan Documents.
4.5 Prime-based Interest Payments. Interest on the unpaid balance
of each Term Loan which is funded or carried as a Prime-based Advance from
time to time shall accrue from the date of such Advance to the Term Loan
Maturity Date applicable to such Term Loan (or until refunded, converted or
paid), at a per annum interest rate equal to the Prime-based Rate, and shall be
payable in immediately available funds quarterly commencing on the first day of
the calendar quarter immediately following the calendar quarter in which the
Advance under the applicable Term Loan is made, and continuing on the first day
of each calendar quarter thereafter until the applicable Term Loan Maturity
Date. Interest accruing at the Prime-based Rate shall be computed on the basis
of a 360-day year and assessed for the actual number of days elapsed, and in
such computation effect shall be given to any change in the interest rate
resulting from a change in the Prime-based Rate on the date of such change in
the Prime-based Rate.
4.6 Eurocurrency-based Interest Payments. Interest on the unpaid
balance of each Term Loan which is funded or carried as a 1-month, 2-month and
3-month Eurocurrency-based Advance from time to time shall accrue at its
Applicable Interest Rate and shall be payable in immediately available funds on
the last day of the Interest Period applicable thereto. Interest on the unpaid
balance of each Term Loan which is funded or carried as a 6-month
Eurocurrency-based Advance outstanding from time to time shall be payable in
immediately available funds at intervals of 3 months after the first day of the
applicable Interest Period, and on the last day of the applicable Interest
Period. Interest accruing at the Eurocurrency-based Rate shall be computed on
the basis of a 360-day year (except that any such Advances made in Sterling or
any other Alternative Currency with respect to which applicable law or market
custom so requires shall be calculated based on a 365 day year, or as otherwise
required under applicable law or market custom) and assessed for the actual
number of days elapsed from the first day of the Interest Period applicable
thereto to, but not including, the last day thereof. Interest due on a
Eurocurrency-based Advance made in an Alternative Currency shall be paid in
such Alternative Currency.
4.7 Interest Payments on Conversions. Notwithstanding anything to
the contrary in the preceding Sections, all accrued and unpaid interest on any
Advance of the Term Loan converted pursuant
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to Section 4.9B hereof shall be due and payable in full on the date such
Advance of the Term Loan is converted.
4.8 Interest on Default. Subject to Section 4.11(f) hereof with
respect to any Fixed Rate Advances, in the event and so long as any Event of
Default shall exist under any Term Note or under this Agreement, interest shall
be payable daily on all Advances evidenced by the Term Notes from time to time
outstanding at a per annum rate equal to the Applicable Interest Rate, plus two
percent (2%) for the remainder of the then existing Interest Period, if any,
and at all other such times, with respect to any Advances carried in Dollars
from time to time outstanding, at a per annum rate equal to the Prime-based
Rate plus two percent (2%), and, with respect to any Advances denominated in
any Alternative Currency from time to time outstanding under the Term Notes,
(i) at a per annum rate calculated by the Agent, whose determination shall be
presumed correct (absent demonstrable error), on a daily basis, equal to two
percent (2%) above the interest rate per annum at which one (1) day deposits
(or, if such amount due remains unpaid for more than three (3) Business Days,
then for such other period of time as the Agent may elect which shall in no
event be longer than six (6) months) in the relevant eurocurrency in the amount
of such overdue payment due to the Agent are offered by the Eurocurrency
Lending Office for the applicable period determined as provided above, or (ii)
if at any such time such deposits are not offered by the Eurocurrency Lending
Office, then at a rate per annum equal to two percent (2%) above the rate
determined by the Agent to be its aggregate marginal cost (including the cost
of maintaining any required reserves or deposit insurance) of carrying the
amount of such Eurocurrency Advance.
4.9A Initial Requests for Funding Term Loans. Company or the
applicable Permitted Borrower may request the funding of a Term Loan only upon
delivery to the Agent of a Term Loan Initial Request executed by an authorized
officer of Company or the applicable Permitted Borrower not less than ten (10)
nor greater than thirty (30) Business Days prior to the proposed date of
funding, subject to the following conditions:
(a) Each such Term Loan Initial Request shall set forth the
information required on the form annexed hereto as Exhibit "I", including
without limitation:
(i) whether the borrower will be the Company or an
applicable Permitted Borrower (specifying such
Permitted Borrower);
(ii) the proposed date that the applicable Term Loan is
to be funded which must be a Business Day;
(iii) whether such Term Loan is to be funded in Dollars or
in an Alternative Currency, and, if in an
Alternative Currency, the applicable Alternative
Currency;
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(iv) the principal amount of the Term Loan requested to
be funded, (A) which amount (except in the case of
the Japanese Term Loan) shall not be less than
Fifteen Million Dollars ($15,000,000), or the
equivalent thereof in an Alternative Currency; and
(v) subject to the terms and conditions hereof, the
proposed Term Loan Maturity Date and the Term Loan
Permitted Amortization Schedule for such Term Loan;
(b) The Dollar Amount or the Current Dollar Equivalent, as the
case may be, of the principal amount of the Term Loan requested to be funded,
determined as of the date of funding such loan, shall not exceed the lesser of
(i) the then remaining Term Loan Aggregate Commitment, reduced by the Dollar
Amount or the Current Dollar Equivalent, as the case may be, of each Term Loan
funded prior thereto (determined with respect to each Term Loan on the date of
funding thereof) and (ii) the Revolving Credit Maximum Amount immediately
preceding the funding thereof;
(c) Whenever the borrower under such Term Loan is a Permitted
Borrower, the Dollar Amount or the Current Dollar Equivalent (as of the date of
funding) of such Term Loan and the aggregate principal amount of any other Term
Loans outstanding to such Permitted Borrower, plus the aggregate principal
amount of the Advances of the Revolving Credit then outstanding to such
Permitted Borrower hereunder (using the current Dollar Equivalent of any such
Advances outstanding in any Alternative Currency), plus the aggregate principal
amount of all Swing Line Advances then outstanding to such Permitted Borrower
hereunder (using the Current Dollar Equivalent of any such Advances outstanding
in any Alternative Currency), plus the aggregate undrawn portion of any Letters
of Credit which shall then be outstanding for the account of such Permitted
Borrower (based on the Dollar Amount of the undrawn portion of any Letters of
Credit denominated in Dollars and the Current Dollar Equivalent of the undrawn
portion of any Letters of Credit denominated in any Alternative Currency) shall
not exceed (in each case, as of the date of funding of such Term Loan) the
Sublimit applicable to such Permitted Borrower; and
(d) Each such Term Loan Initial Request shall be accompanied by
the Company's concurrent request for a reduction in the Revolving Credit
Maximum Amount in the Dollar Amount or the Current Dollar Equivalent, as the
case may be, of the amount of the Term Loan so requested, to be effective,
subject to the terms hereof, concurrently with the funding of such Term Loan,
and satisfying in every respect the terms and conditions of Section 2.15 hereof
(with respect to such reduction) as of the funding of such Term Loan, including
without limitation making those reductions of Indebtedness required to be made
under said Sections 2.14 and 2.15 hereof; and, if on the date of submission of
the Applicable Term Loan Initial Request, the principal amount of all Advances
of the Revolving Credit then outstanding hereunder, whether to Company or the
Permitted Borrowers (using the Current Dollar Equivalent of any
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such Advances outstanding in any Alternative Currency), plus the aggregate
principal amount of all Swing Line Advances hereunder (using the Current Dollar
Equivalent of any such Advances outstanding in any Alternative Currency), plus
the aggregate undrawn portion of all Letters of Credit which shall then be
outstanding (based on the Dollar Amount of the undrawn portion of any Letters
of Credit denominated in Dollars and the Current Dollar Equivalent of the
undrawn portion or any Letters of Credit denominated in any Alternative
Currency), plus the principal amount of the Term Loan requested to be made
(based on the Current Dollar Equivalent thereof if denominated in an
Alternative Currency) shall exceed the Revolving Credit Aggregate Commitment
then in effect, the Company shall pay to Agent for distribution to the Banks
based on their respective Percentages an activation fee in the amount of the
Applicable Fee Percentage times the amount of such excess;
(e) Within three (3) Business Days of receipt from the Company or
the applicable Permitted Borrower of a Term Loan Initial Request, Agent shall
furnish, or cause to be furnished, to the Company or the applicable Permitted
Borrower the proposed forms of Term Notes which have been completed to evidence
the applicable Term Loan, incorporating the information supplied by the Company
in its Term Loan Initial Request with respect to such Term Loan, including
without limitation, the amount and currency of such Term Loan, the applicable
Term Loan Maturity Date, and the Term Loan Permitted Amortization Schedule
selected by the Company or the applicable Permitted Borrower, provided that
neither the Agent nor any of the Banks shall suffer any liability whatsoever in
the event such Term Notes are not delivered for execution hereunder; and
(f) Not later than the close of business five (5) days prior to
the proposed date of funding of the Term Loan covered by the Initial Request
for Term Loan Funding, Company or the applicable Permitted Borrower shall
deliver to the Agent (which shall distribute such documents to the Banks
concurrently with the funding of such Term Loan) (i) the aforesaid Term Notes,
executed and delivered in compliance with this Agreement (dated as of the
proposed date of funding of such Term Loan) accompanied by such other Loan
Documents (including without limitation Collateral Documents), corporate
authority documentation, opinions of counsel and the like as required
hereunder, upon which delivery the Term Loan Initial Request shall no longer be
revocable by the Company or the applicable Permitted Borrower and (ii) a Term
Loan Rate Request for such Term Loan submitted in accordance with Section 4.9B
hereof.
4.9B Term Loan Rate Requests; Refundings and Conversions of
Advances. Company may, until the exercise of the Fixed Rate Option, refund any
Advance of a Term Loan as an Advance denominated in the same currency with a
like Interest Period (or if denominated in Dollars, at the Prime-based Rate) or
convert any Advance of a Term Loan to an Advance denominated in the same
currency with a different Interest Period, but only after delivery to Agent of
a Term Loan Rate Request executed by an authorized officer of Company
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or the applicable Permitted Borrower (with the countersignature of the Company)
and subject to the terms hereof and to the following:
(a) each such Term Loan Rate Request shall set forth the
information required on the Term Loan Rate Request form annexed hereto
as Exhibit "J" with respect to such Term Loan, including without
limitation:
(i) the Permitted Currency in which the
applicable Term Loan is denominated;
(ii) the proposed date of the refunding or
conversion of the Advance, which must
be a Business Day;
(iii) whether the Advance is a refunding or
conversion of an outstanding Advance,
provided that refundings and conversions of
Advances of any Term Loan may be made only in
the Permitted Currency in which the
applicable Term Loan was denominated on the
initial funding thereof; and
(iv) whether such Advance is to be a Prime-based
Advance (if the applicable Term Loan is
denominated in Dollars) or a
Eurocurrency-based Advance, and, except in
the case of a Prime-based Advance, the first
Interest Period applicable thereto.
(b) each such Term Loan Rate Request shall be delivered
to Agent by 12 Noon (Detroit time) four (4) Business Days prior to the
proposed date of Advance, except in the case of a Prime-based Advance,
for which the Request for Advance must be delivered by 11 a.m. on the
proposed date of Advance;
(c) the principal amount of such Advance of a Term Loan,
plus the amount of any other advance of such Term Loan to be then
combined therewith having the same Applicable Interest Rate and
Interest Period, if any, shall be (i) in the case of a Prime-based
Advance at least Three Million Dollars ($3,000,000), or the remaining
principal balance outstanding under such Term Loan, whichever is less
and (ii) in the case of a Eurocurrency-based Advance at least Five
Million Dollars ($5,000,000) or the remaining principal balance
outstanding under such Term Loan, whichever is less (or the equivalent
thereof in the applicable Alternative Currency), or in each case a
larger integral multiple of One Million Dollars ($1,000,000);
(d) no Advance shall have an Interest Period ending
after the Term Loan Maturity Date applicable to such Term Loan, and,
notwithstanding any provision hereof to the contrary, Company or the
applicable Permitted Borrower shall
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be required to select Interest Periods for sufficient portions of a
Term Loan (or, to the extent denominated in Dollars, maintain
sufficient portions thereof as a Prime-based Advance) such that the
Company or the applicable Permitted Borrower may make its required
principal payments hereunder on a timely basis and otherwise in
accordance with Sections 4.2 and 4.3, above;
(e) upon completion of the Advance there shall be no
more than two (2) Interest Periods and two (2) Applicable Interest
Rates (including the Prime-based Rate) with respect to each Term Loan;
and
(f) a Term Loan Rate Request, once delivered to Agent,
shall not be revocable by Company or the applicable Permitted Borrower;
Each selection of an Interest Period, and the amount and date of any repayment
shall be noted on Agent's records, which records will be rebuttably presumptive
evidence thereof, absent demonstrable error.
4.9C Term Loan Certifications. Each Term Loan Request shall
constitute and include a certification by the Company or the applicable
Permitted Borrower as of the date thereof that:
(a) both before and after the Advance so requested, the
obligations of the Company and its Subsidiaries set forth in this
Agreement and the Loan Documents to which such Persons are parties are
valid, binding and enforceable obligations of the Company, its
Subsidiaries and the Permitted Borrowers, as the case may be;
(b) all conditions to Advances of the applicable Term
Loan or Term Loans have been satisfied, and shall remain satisfied to
the date of Advance (both before and after giving effect to such
Advance);
(c) there is no Default or Event of Default in
existence, and none will exist upon the making of the applicable
Advance (both before and after giving effect to such Advance);
(d) the representations and warranties contained in this
Agreement and the Loan Documents are true and correct in all material
respect and shall be true and correct in all material respects as of
the making of the applicable Advance (both before and after giving
effect to such Advance); and
(e) the execution of the applicable Term Loan Request
will not violate the material terms and conditions of any material
contract, agreement or other borrowing of Company or any of its
Subsidiaries;
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Each Term Loan Request shall be accompanied by such documents, instruments and
other materials required hereunder or otherwise necessary to evidence
satisfaction of all conditions to the applicable Advance or Advances of a
specified Term Loan or Term Loans.
4.9D Failure to Refund or Convert. In the event the Company shall
fail with respect to any Advance of a Term Loan (other than a Prime-based
Advance) to timely exercise its option to refund or convert such Advance in
accordance with this Section 4.9D (and such Advance has not been paid in full
on the last day of the Interest Period applicable thereto according to the
terms hereof) the principal amount of such Advance which has not been prepaid
shall:
(a) in the case of any Advance denominated in Dollars,
be automatically converted to a Prime-based Advance; and
(b) in the case of any Advance denominated in an
Alternative Currency, the next Interest Period shall be fixed by the
Agent for an Interest Period of one month, or, if applicable, the
applicable Term Loan Maturity Date, whichever is the shorter period,
provided that Company or the applicable Permitted Borrower will
indemnify Agent and each of the Banks against any loss or expense
incurred by them (or any of them) pursuant to Section 12.8 hereof.
4.9E Limited Availability. Notwithstanding the selection of an
Interest Period under Section 4.9B hereof for an Advance of a Term Loan
hereunder, if prior to the last day of any Interest Period, Agent or any of the
Reference Banks (after consultation with Agent) shall determine that deposits
of the applicable Alternative Currency will not be available to Agent or any of
such Banks in the amounts and for the term(s) necessary to carry the
outstanding principal Indebtedness of the Advance subject to such Interest
Period for the next applicable Interest Period, then Agent shall so notify
Company or the applicable Permitted Borrower and, subject to the terms hereof,
Company or the applicable Permitted Borrower shall immediately select another
Interest Period to be applicable as the next Interest Period.
4.9F Unavailability. If, prior to the last day of any Interest
Period in respect of an Advance of a Term Loan hereunder, Agent or any of the
Reference Banks (after consultation with Agent) shall determine that by reason
of circumstances affecting the foreign exchange and interbank markets,
generally, or for any of the reasons set forth in Sections 12.3 or 12.4 hereof,
deposits of the applicable Alternative Currency will not be available to Agent
and any of such Banks as of the last day of an applicable Interest Period in
the amounts necessary to carry the outstanding principal of the Advances
subject to such ending Interest Period in such Alternative Currency for any
Interest Period, Agent shall notify the Company or the applicable Permitted
Borrower and such Advances shall then be automatically converted to and carried
in Dollars, in the Current Dollar Equivalent of the Indebtedness then
outstanding,
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and shall bear interest at the Prime-based Rate, until the first day of the
next Interest Period, if any, selected pursuant to Section 4.9G hereof.
4.9G Reconversion to Applicable Alternative Currency and
Eurocurrency-based Rate on Re-availability. In the event that, after a
conversion of Indebtedness to Dollars pursuant to Section 4.9F hereof, Agent
determines that deposits of the applicable Alternative Currency are again
available to Agent and the Banks in the amounts necessary to carry the
principal Indebtedness under the applicable Term Loan in such Alternative
Currency for any Interest Period, Agent shall notify Company of the Interest
Period(s) for which such deposits in such Alternative Currency are available
and Company or the applicable Permitted Borrower shall immediately select the
next Interest Period from among such available Interest Periods, in accordance
with Section 4.9B hereof, and the Indebtedness previously converted from such
Alternative Currency to Dollars under Section 4.9F hereof shall be reconverted
to such Alternative Currency (in the amount of the Current Dollar Equivalent of
such Indebtedness), all in accordance with and subject to Section 4.9H hereof,
below.
4.9H Repayment on Reconversion. In the event that the currency in
which any Term Loan is being carried is required to be changed from Dollars to
an applicable Alternative Currency under Section 4.9G hereof, as aforesaid, and
if the Current Dollar Equivalent of the principal amount of the Indebtedness
under the applicable Term Loan outstanding upon such reconversion shall exceed
the applicable Alternative Currency Principal Limit determined for such Term
Loan, then concurrently with such reconversion, Company shall pay to Agent in
immediately available funds, for the ratable benefit of the Banks, an amount in
such Alternative Currency sufficient to reduce the then outstanding principal
amount of such Term Loan to an amount not greater than the amount of applicable
Alternative Currency Principal Limit.
4.9I Interest Payments on Conversions and Reconversions.
Notwithstanding anything to the contrary in the preceding Sections, all accrued
and unpaid interest on any Indebtedness converted or reconverted pursuant to
the foregoing Sections or otherwise, shall be due and payable in full on the
date of such conversion or reconversion.
4.10 Disbursement of Advances.
(a) Upon receiving a Term Loan Request from Company or a
Permitted Borrower in compliance with Sections 4.9A and/or 4.9B hereof,
together with such other documents and instruments required thereunder,
Agent shall promptly notify each Bank by wire, telex or by telephone
(confirmed by wire, telecopy or telex) of the amount of such Advance to
be made and the date such Advance is to be made by said Bank pursuant
to its Percentage of the Advance. Unless such Bank's commitment to make
Advances hereunder shall have been
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suspended or terminated in accordance with this Agreement, each Bank
shall make available to Agent the amount of its Percentage of the
Advance in immediately available funds in the currency of such Advance,
as follows:
(i) for Prime-based Advances, at the office of
Agent located at One Detroit Center, 500
Woodward Avenue, Detroit, Michigan 48226, not
later than 2:00 p.m. (Detroit time) on the
date of such Advance; and
(ii) for Eurocurrency-based Advances or other
Advances in any Alternative Currency, at the
Agent's Correspondent for the account of the
Eurocurrency Lending Office of the Agent, not
later than 12 Noon (the time of the Agent's
Correspondent) on the date of such Advance.
(b) Subject to receipt of the Term Loan Requests, as
applicable, and such other documents and instruments referred to in
subparagraph 4.10(a) hereof (without exceptions noted in the compliance
certifications therein), Agent shall make available to Company or the
applicable Permitted Borrower, as the case may be, the aggregate of the
amounts so received by it from the Banks in like funds and currencies:
(i) for Prime-based Advances, not later
than 4:00 p.m. (Detroit time) on the
date of such Advance by deposit to an
account of the Company or the
applicable Permitted Borrower
maintained with Agent, or to such
other account or third party as
Company or the applicable Permitted
Borrower may reasonably direct;
(ii) for Eurocurrency-based Advances or
other Advances denominated in any
Alternative Currency, not later than
4:00 p.m. (the time of the Agent's
Correspondent) on the date of such
Advance, by deposit to an account of
the Company or the applicable
Permitted Borrower, as the case may
be, maintained with Agent's
Correspondent, or to such other
account or third party as Company or
the applicable Permitted Borrower, as
the case may be, may reasonably
direct.
(c) Agent shall deliver the documents and papers
received by it for the account of each Bank to such Bank or upon its
order. Unless Agent shall have been notified by any Bank prior to the
date of any proposed Advance that such Bank does not intend to make
available to Agent such Bank's Percentage of the Advance, Agent may
assume that such Bank has
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made such amount available to Agent on such date, as aforesaid and may,
in reliance upon such assumption, make available to Company or the
applicable Permitted Borrower a corresponding amount. If such amount is
not in fact made available to Agent by such Bank, as aforesaid, Agent
shall be entitled to recover such amount on demand from such Bank. If
such Bank does not pay such amount forthwith upon Agent's demand
therefor, the Agent shall promptly notify Company and Company or the
applicable Permitted Borrower shall pay such amount to Agent. Agent
shall also be entitled to recover from such Bank or Company (and the
applicable Permitted Borrower), as the case may be, interest on such
amount in respect of each day from the date such amount was made
available by Agent to Company or the applicable Permitted Borrower to
the date such amount is recovered by Agent, at a rate per annum equal
to:
(i) in the case of such Bank, with
respect to Prime-based Advances, the
Federal Funds Effective Rate, and
with respect to Eurocurrency-based
Advances or other Advances in any
alternative currency, Agent's
aggregate marginal cost (including
the cost of maintaining any required
reserves or deposit insurance and of
any fees, penalties, overdraft
charges or other costs or expenses
incurred by Agent as a result of such
failure to deliver funds hereunder)
of carrying such amount; and
(ii) in the case of Company, the rate of
interest then applicable to such
Term Loan.
The obligation of any Bank to make any Advance hereunder shall not be
affected by the failure of any other Bank to make any Advance
hereunder, and no Bank shall have any liability to the Company or its
Subsidiaries, the Agent, any other Bank, or any other party for another
Bank's failure to make any loan or Advance hereunder.
4.11 Fixed Rate Election. (a) The Fixed Rate Election shall set
forth the information required on the Fixed Rate Election form attached hereto
as Exhibit "K" and shall constitute Company's or the applicable Permitted
Borrower's certification that the conditions required under subparagraph (c),
below, have been satisfied and that Company or the applicable Permitted
Borrower is entitled, with respect to a specified Term Loan, to elect the Fixed
Rate hereunder;
(b) The Fixed Rate Election shall be delivered to Agent by
11:00 a.m. (Detroit time) not less than fourteen (14) nor greater than twenty
(20) Business Days prior to the proposed effective date of such election, and
once delivered to Agent by the
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Company or the applicable Permitted Borrower, shall not be revocable by Company
or the applicable Permitted Borrower;
(c) In order for the Fixed Rate to become effective, the
following conditions shall be satisfied by the Company or the applicable
Permitted Borrower (unless waived by the Banks) on or before the proposed
effective date of the Fixed Rate Election, and shall remain satisfied on the
actual effective date thereof:
(i) The Fixed Rate Election shall be made
only with respect to the entire
outstanding principal balance of a
specified Term Loan, and not with
respect to any particular Advance or
portion of such Term Loan;
(ii) Except with respect to a Term Loan
carried in its entirety at the
Prime-based Rate, the proposed
effective date of the Fixed Rate
Election (and the actual effective
date thereof) shall occur only on the
last day of a single Interest Period
in which the entire principal balance
of the applicable Term Loan
(excluding any portion thereof
carried at the Prime-based Rate) is
then being carried;
(iii) All accrued interest outstanding
under the specified Term Loan as of
the effective date of the Fixed Rate
Election has been paid and discharged
in full;
(iv) Both before and after the effective
date of such election, the
obligations of Company and the
Permitted Borrowers set forth in this
Agreement are valid, binding and
enforceable obligations of such
parties and the representations and
warranties contained in this
Agreement and the other Loan
Documents are true and correct in all
material respects; and
(v) There is no Default or Event of
Default in existence, and none will
exist upon the effective date of such
election (both before and after
giving effect to such Advance).
(d) Subject to the foregoing, the Fixed Rate Election shall
become effective (and the Fixed Rate shall become the Applicable Interest Rate
for the specified Term Loan) on the proposed effective date of the Fixed Rate
Election, as designated by the Company or the applicable Permitted Borrower
therein,
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whereupon Agent will notify Company and the Banks promptly of the Fixed Rate
thereby established hereunder.
(e) Once so elected, the Fixed Rate shall, subject to the
terms hereof, remain the Applicable Interest Rate for the specified Term Loan
so long as such Term Loan is outstanding hereunder.
(f) Interest on each Term Loan accruing at the Fixed Rate
shall be payable in immediately available funds quarterly commencing on the
last day of the calendar quarter in which the Fixed Rate Election shall have
been made by the Company or a Permitted Borrower hereunder, and continuing on
the last day of each calendar quarter thereafter until the applicable Term Loan
Maturity Date for such Term Loan, shall be computed on the basis of a 360-day
year and assessed for the actual number of days elapsed. In the event and so
long as any Event of Default shall have occurred and be continuing, interest
shall be payable daily on each Term Loan from time to time outstanding for
which the Applicable Interest Rate is the Fixed Rate at a per annum rate equal
to the Fixed Rate, plus three percent (3%).
4.12 Prepayment. (a) Company or the applicable Permitted Borrower
may prepay all or part of the outstanding balance of any Prime-based Advance(s)
of a Term Loan at any time (subject to not less than one (1) Business Day's
notice to Agent), provided that the amount of any partial prepayment by such
party shall be at least One Million Dollars ($1,000,000) and the aggregate
balance of Prime- based Advance(s) remaining outstanding on such Term Loan
shall be at least Three Million Dollars ($3,000,000). Company may prepay all or
part of any Eurocurrency-based Advance (subject to not less than three (3)
Business Days' notice to Agent) only on the last day of the Interest Period
applicable thereto, provided that the amount of any such partial prepayment by
such party shall be at least One Million Dollars ($1,000,000) (or the
equivalent thereof in the applicable Alternative Currency), and the unpaid
portion of such Advance which is refunded or converted by such party under
Section 4.9B hereof shall be at least Five Million Dollars ($5,000,000), or the
equivalent thereof in any Alternative Currency. Any prepayment made in
accordance with this Section shall be applied against principal installments
due hereunder in the inverse order of their maturities, and shall be without
premium or penalty (subject to Section 12 hereof), but there shall be no
readvance or reborrowing of any principal reductions of the applicable Term
Loan (whether or not such principal reductions constitute prepayments).
(b) Once the Fixed Rate becomes the applicable Interest Rate for a
Term Loan hereunder, at its option and upon not less than five (5) business
days prior written notice to Agent, Company or the applicable Permitted
Borrower may prepay the principal balance outstanding under such Term Loan in
whole or in part, provided that the amount of any partial prepayment by such
party shall be at least Five Million Dollars ($5,000,000) or the equivalent
thereof in the applicable Alternative Currency and the aggregate principal
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balance remaining outstanding under such Term Loan shall be at least Five
Million Dollars ($5,000,000) or the equivalent thereof in any Alternative
Currency, only upon payment to the Agent, for distribution to the Banks pro
rata, of a Yield Maintenance Payment in an amount calculated by Agent to make
the Banks whole (to the extent of the interest which would have been earned by
the Banks but for the occurrence of such prepayment) on the basis of the
discounted net present values of the interest payments that would otherwise be
payable on the principal amount of the Term Loan being prepaid, after taking
into account the amount of interest which would be payable on each interest
payment due date if the principal amount being repaid were reinvested at the
Current Market Rate (defined below).
As used herein, "Current Market Rate" shall mean a per annum interest
rate equal to one-half percentage point (.5%) above the rate reasonably
determined by Agent (based on quotations from established dealers) to be in
effect two (2) days prior to the repayment date in the secondary market for
United States Treasury Securities of a comparable amount and with a comparable
term to maturity as the principal amount being prepaid hereunder. For purposes
of computation, the discount rate for each computation will be the Current
Market Rate for the relevant principal installment.
Upon any involuntary prepayment of any Term Loan for which the applicable
Interest Rate is the Fixed Rate, whether by acceleration, or otherwise, the
Company or the applicable Permitted Borrower shall pay to Agent, for
distribution to the Banks pro rata, a Yield Maintenance Payment in an amount
equal to the Yield Maintenance Payment which would have been due and payable
hereunder if the Company or the applicable Permitted Borrower had voluntarily
elected to prepay such Term Loan (in an amount equal to such involuntary
prepayment) on such date of involuntary prepayment. Any partial prepayments
hereunder shall be applied to payments due under the Term Loan in the inverse
order of their maturities, and there shall be no readvance or reborrowing of
any such principal reductions (whether or not such principal reductions
constitute prepayments).
4.13 Purpose. Term Loans shall be available, subject to the terms
hereof, to fund working capital needs or other general corporate purposes of
the Company and the Permitted Borrowers or to renew and replace Advances of the
Revolving Credit or Swing Line Advances refinanced thereby.
5. MARGIN ADJUSTMENTS; HLT DETERMINATION; SPECIAL LIMITATION
5.1 Margin Adjustments. Adjustments to the Applicable Margin,
based on Schedule 5.1, shall be implemented as follows:
(i) Such adjustments to the Applicable Margin
shall be given prospective effect only, effective (A) as to all Prime-based
Advances outstanding hereunder, immediately upon required
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date of delivery of the financial statements required to be delivered under
Section 8.3(b) and 8.3(c) hereof establishing applicability of the appropriate
adjustments, if any, and (B) as to each Eurocurrency-based Advance outstanding
hereunder, effective upon the expiration of the applicable Interest Period(s),
if any, in effect on the required date of delivery of the latest of such
financial statements required to be delivered hereunder during such Interest
Period(s), as applicable, in each case with no retroactivity or claw-back.
(ii) With respect to Eurocurrency-based Advances
outstanding hereunder, an adjustment hereunder, after becoming effective, shall
remain in effect only through the end of the applicable Interest Period(s) for
such Eurocurrency-based Advances if any; provided, however, that upon the
delivery of quarterly financial statements demonstrating any change in the
Funded Debt Ratio, as aforesaid, or the occurrence of any other event which
under the terms hereof causes such adjustment no longer to be applicable, then
any such subsequent adjustment or no adjustment, as the case may be, shall be
effective (and said pricing shall thereby be adjusted up or down, as
applicable) with the commencement of each Interest Period following such change
or event, all in accordance with the preceding subparagraph.
5.2 HLT Determination. In the event at any time of an HLT
Determination, the Agent, the Banks and the Company shall commence negotiations
in good faith to agree upon whether and, if so, the extent to which fees,
interest rates and/or margins hereunder should be increased so as to reflect
such HLT Determination and to compensate the Banks and Agent for additional
costs, expenses and/or fees which result from or are associated with any such
HLT Determination, including without limitation any costs resulting from any
requirement that additional capital be allocated to the Indebtedness, or any
portion thereof. If Company and the Majority Banks agree that fees, interest
rates and/or margins should be increased, and agree on the amount of such
increase or increases, this Agreement may be amended to give effect to such
increase or increases as provided in Section 14.11 hereof. If Company and
Majority Banks fail to agree on whether and, if so, the extent to which fees,
interest rates and/or margins hereunder should be increased within 60 days
after notice to Company of an HLT Determination as herein provided, then (i)
the Agent shall, if requested by the Majority Banks, by written notice to the
Company terminate the commitments of the Banks to fund and/or maintain Advances
of the Revolving Credit and Swing Line Advances, and if still outstanding, any
commitment to fund Term Loans, and such commitments shall thereupon terminate,
(ii) Company shall be obligated to repay all outstanding Indebtedness at the
end of the Interest Period applicable thereto and (iii) the Company may, at its
option, on at least ten Business Days' written notice to the Agent (which shall
promptly notify the Banks thereof) prepay all Indebtedness outstanding
hereunder and under the other Loan Agreements by paying the aggregate principal
amount thereof, together, with all accrued interest thereon to the date of
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prepayment; provided that, if the Company prepays any Fixed Rate Advance or
Advances carried at the Eurocurrency-based Rate, the Quoted Rate, or any
comparable rate, pursuant to this Section 5.2, Company shall compensate the
Banks for any resulting funding losses as provided in Section 12.1 hereof.
Subject to compliance by Company and the Permitted Borrowers with this Section
5.2, the Banks acknowledge that an HLT Determination shall not constitute a
Default or an Event of Default hereunder.
5.3 Special Limitation. In the event, as a result of increases in
the value of any of the Alternative Currencies against the Dollar or for any
other reason, the obligation of any of the Banks to advance additional funds
hereunder (taking into account any other Indebtedness required to be aggregated
under 12 USCA 84, as amended, the regulations promulgated thereunder, or other,
similar applicable law) is determined by such Bank to exceed its then
applicable legal lending limit under 12 USCA 84, as amended, and the
regulations promulgated thereunder, or other, similar applicable laws, the
amount of additional funds which such Bank shall be obligated to advance
hereunder shall immediately be reduced to the maximum amount which such Bank
may legally advance (as determined by such Bank), the obligation of each of the
remaining Banks hereunder shall be proportionately reduced, based on the
applicable Percentages, and, to the extent necessary under such laws and
regulations (as determined by each of the Banks, with respect to the
applicability of such laws and regulations to itself), the Company shall
reduce, or cause to be reduced, complying to the extent practicable with the
remaining provisions hereof, the Indebtedness outstanding hereunder by an
amount sufficient to comply with such maximum amounts. Upon any such reduction
in the obligations of the Banks under this Section 5.3, Company shall have the
right, subject to the terms and conditions of this Agreement (but subsequent to
Company's compliance with its obligation to reduce the Indebtedness outstanding
hereunder), to add to the Banks providing financing hereunder a bank or banks
reasonably acceptable to the Agent for the purpose of restoring the shortfall
created by the reduction in such obligations of the Banks.
6. CONDITIONS. The obligations of Banks to make Advances or loans
pursuant to this Agreement are subject to the following conditions, provided
however that Sections 6.1 through 6.14 below shall only apply to the initial
Advances or loans hereunder:
6.1 Execution of Notes, this Agreement and the other Loan
Documents. The Company (on or before the date hereof) and the Permitted
Borrowers (prior to requesting any Advance hereunder), as applicable, shall
have executed and delivered to the Agent for the account of each Bank, the
Revolving Credit Notes, the Term Notes (if applicable) for each Term Loan then
in effect, the Swing Line Notes (solely for the account of the Swing Line Bank)
and this Agreement (including all schedules, exhibits, certificates, opinions,
financial statements and other documents to be delivered pursuant hereto) and
the other Loan Documents, and, as applicable,
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such Revolving Credit Notes, Term Notes and Swing Line Notes so executed
hereunder, this Agreement and the other Loan Documents shall be in full force
and effect.
6.2 Corporate Authority. Agent shall have received, with a
counterpart thereof for each Bank: (i) certified copies of resolutions of the
Board of Directors of the Company and each of the Permitted Borrowers
evidencing approval of this Agreement, the Notes and the other Loan Documents
to which such Person is a party and authorizing the execution and delivery
thereof and the borrowing of Advances hereunder; (ii) (A) certified copies of
the Company's and each Guarantor's articles of incorporation and bylaws or
other constitutional documents certified as true and complete as of a recent
date by the appropriate official of the jurisdiction of incorporation of each
such entity (or, if unavailable in such jurisdiction, by a responsible officer
of such entity); and (B) a certificate of good standing from the state or other
jurisdictions of the Company's incorporation, and from the applicable states of
incorporation or other jurisdictions of each of the Permitted Borrowers and the
Guarantors and from every state or other jurisdiction in which the Company,
each of the Permitted Borrowers or any of the Significant Subsidiaries is
qualified to do business, if issued by such jurisdictions, subject to the
limitations (as to qualification and authorization to do business) contained in
Section 7.1, hereof.
6.3 Company Guaranty. As security for all Indebtedness of the
Permitted Borrowers to the Banks hereunder and under the other Loan Documents,
the Company shall have furnished, executed and delivered to Agent, prior to or
concurrently with the initial borrowing hereunder, in form and substance
satisfactory to Agent and the Banks and supported by appropriate resolutions in
certified form authorizing same, the Company Guaranty.
6.4 Domestic Guaranty. As security for all Indebtedness of the
Company and the Permitted Borrowers to the Banks hereunder and under the other
Loan Documents, each of the Significant Domestic Subsidiaries shall have
furnished, executed and delivered to Agent, prior to or concurrently with the
initial borrowing hereunder, in form and substance satisfactory to Agent and
the Banks and supported by appropriate resolutions in certified form
authorizing same, the Domestic Guaranty.
6.5 Foreign Permitted Borrower Guaranty. As security for all
Indebtedness of those Permitted Borrowers which are Foreign Subsidiaries to the
Banks hereunder and under the other Loan Documents, each of the Significant
Foreign Subsidiaries shall have furnished, executed and delivered to Agent, on
or before the applicable dates set forth on Schedule 8.17 hereto, in form and
substance satisfactory to Agent and the Banks and supported by appropriate
resolutions in certified form authorizing same, the Permitted Borrower
Guaranty.
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6.6 Company Collateral Documents. As security for all Indebtedness
of Company to the Banks hereunder, Company shall have furnished, executed and
delivered to the Collateral Agent, or caused to be furnished, executed and
delivered to the Collateral Agent, prior to or concurrently with the initial
borrowing hereunder, in form and substance satisfactory to the Collateral Agent
and the Banks and supported by appropriate resolutions in certified form
authorizing same, the Company Collateral Documents. In addition, if required or
advisable under applicable law to perfect the liens granted thereby, the
Collateral Agent shall have received, concurrently with or prior to the making
of Advances hereunder, proof that appropriate financing statements, collateral
and other documents covering such Collateral have been executed and delivered
by the appropriate parties and recorded or filed in such jurisdictions and such
other steps have been taken as necessary to perfect the security interests, or
other liens granted thereby.
6.7 Guarantor Collateral Documents. As security for all
Indebtedness of Company to the Banks hereunder, each of the Guarantors shall
have furnished, executed, and delivered to the Collateral Agent, or caused to
be furnished, executed and delivered to the Collateral Agent, on or before the
applicable dates set forth on Schedule 8.17 hereto, in form and substance
satisfactory to Collateral Agent and the Banks and supported by appropriate
resolutions in certified form authorizing same, the Guarantor Collateral
Documents. In addition, if required or advisable under applicable law to
perfect the liens granted thereby, the Collateral Agent shall have received,
concurrently with the making of Advances hereunder proof that appropriate
financing statements, collateral and other documents covering such Collateral
have been executed and delivered by the appropriate parties and recorded or
filed in such jurisdictions and such other steps have been taken as necessary
to perfect the security interests or other liens granted thereby.
6.8 Representations and Warranties -- All Parties. The
representations and warranties made by the Company, the Permitted Borrowers,
the Significant Subsidiaries and any other party to any of the Loan Documents
under this Agreement or any of the other Loan Documents (excluding the Banks),
and the representations and warranties of any of the foregoing which are
contained in any certificate, document or financial or other statement
furnished at any time hereunder or thereunder or in connection herewith or
therewith shall have been true and correct in all material respects when made
and shall be true and correct in all material respects on and as of the date of
the making of the initial Advance hereunder.
6.9 Compliance with Certain Documents and Agreements. The Company,
the Permitted Borrowers and the Guarantors (and any of their respective
Subsidiaries or Affiliates) shall have each performed and complied with all
agreements and conditions contained in this Agreement, the other Loan
Documents, or any agreement or other document executed hereunder or thereunder
and required to be performed or complied with by each of them (as of the
applicable date) and none of such parties shall be in default in the
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performance or compliance with any of the terms or provisions hereof or
thereof.
6.10 Opinion of Counsel. The Company, the Permitted Borrowers and
the Guarantors shall have furnished Agent prior to the on or before the
applicable dates set forth on Schedule 8.17 hereto with signed copies for each
Bank (and addressed to each of the Banks) opinions of counsel given upon the
express instructions of the Company, the Permitted Borrowers and the
Guarantors, dated the date as of the applicable dates of delivery thereof, and
covering such matters as required by and otherwise satisfactory in form and
substance to the Agent and each of the Banks.
6.11 Intercreditor Agreement and Existing Senior Debt. The
Intercreditor Agreement shall have been executed and delivered in form and
substance satisfactory to the Banks and Agent providing, among other things,
that the liens securing the Existing Senior Debt are in pari passu with the
liens securing the Indebtedness, and the Existing Senior Noteholders shall have
executed and delivered such acknowledgments, consent and approvals as required
to effectuate the transactions contemplated by this Agreement and the other
Loan Documents.
6.12 Company's Certificate. The Agent shall have received, with a
signed counterpart for each Bank, a certificate of a responsible senior officer
of Company, dated the date of the making of the initial Advances hereunder,
stating that the conditions of paragraphs 6.1, 6.8, 6.9 and 6.15(a) through (c)
hereof have been fully satisfied.
6.13 Payment of Agent's and Other Fees. Company shall have paid to
the Agent the Closing Fee (for distribution to the Banks hereunder), and to the
Agent, the Agent's Fees and all costs and expenses required hereunder.
6.14 Other Documents and Instruments. The Agent shall have
received, with a photocopy for each Bank, such other instruments and documents
as the Majority Banks may reasonably request in connection with the making of
Advances hereunder, and all such instruments and documents shall be
satisfactory in form and substance to the Majority Banks.
6.15 Continuing Conditions. Subject to the terms hereof, the
obligations of the Banks to make any of the Advances or loans under this
Agreement, including but not limited to the initial Advances of the Advances of
the Revolving Credit, Swing Line Advances or Term Loans hereunder, shall be
subject to the following continuing conditions:
(a) No Default or Event of Default shall have occurred
and be continuing as of the making of the proposed Advance (both before and
after giving effect thereto);
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(b) There shall have been no material adverse change in
the condition (financial or otherwise), properties, business, results or
operations of the Company and its Subsidiaries, taken as a whole, from December
31, 1994, except changes in the ordinary course of business (including without
limitation the information set forth in the Consolidated financial statements
of the Company and its Subsidiaries as of December 31, 1994), or any subsequent
December 31st, if the Agent determines, with the concurrence of the Majority
Banks, based on the Company's financial statements for such subsequent fiscal
year that no material adverse change has occurred during such year, such
determination being made solely for purposes of determining the applicable date
under this paragraph to the date of the proposed Advance hereunder;
(c) The representations and warranties contained in this
Agreement and the other Loan Documents are true and correct in all material
respects as of the making of the applicable Advance; and
(d) All documents executed or submitted pursuant hereto
shall be reasonably satisfactory in form and substance (consistent with the
terms hereof) to Agent and its counsel and to each of the Banks; Agent and its
counsel and each of the Banks and their respective counsel shall have received
all information, and such counterpart originals or such certified or other
copies of such materials, as Agent or its counsel and each of the Banks and
their respective counsel may reasonably request; and all other legal matters
relating to the transactions contemplated by this Agreement (including, without
limitation, matters arising from time to time as a result of changes occurring
with respect to any statutory, regulatory or decisional law applicable hereto)
shall be satisfactory to counsel to Agent and counsel to each of the Banks.
7. REPRESENTATIONS AND WARRANTIES
Each of the Company and the Permitted Borrowers represents and warrants
and such representations and warranties shall be deemed to be continuing
representations and warranties during the entire life of this Agreement:
7.1 Corporate Authority. Each of the Company, the Subsidiaries and
the Permitted Borrowers is a corporation duly organized and validly existing in
good standing under the laws of the applicable jurisdiction of organization,
charter or incorporation; each of the Company, the Subsidiaries and the
Permitted Borrower is duly qualified and authorized to do business as a
corporation or foreign corporation in each jurisdiction where the character of
its assets or the nature of its activities makes such qualification necessary,
except where such failure to qualify and be authorized to do business could not
reasonably be expected to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
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7.2 Due Authorization - Company. Execution, delivery and
performance of this Agreement, the other Loan Documents, and any other
documents and instruments required under or in connection with this Agreement,
and the issuance of the Notes by the Company are within its corporate powers,
have been duly authorized, are not in contravention of law or the terms of the
Company's articles of incorporation or bylaws, and, except as have been
previously obtained or as referred to in Section 7.15, below, do not require
the consent or approval, material to the transactions contemplated by this
Agreement, or the Loan Documents, of any governmental body, agency or
authority.
7.3 Due Authorization -- Subsidiaries. Execution, delivery and
performance of this Agreement, the other Loan Documents and any other documents
and instruments required under or in connection with this Agreement by each of
the Permitted Borrowers and the Guarantors, and the issuance of the Notes by
the Permitted Borrowers and the Guaranties by the Guarantors, are (or will be,
as of the applicable date(s) of delivery under Schedule 8.17 hereto) within its
corporate powers, have been duly authorized, are not in contravention of law or
the terms of its articles of incorporation or bylaws or other organic documents
of the parties thereto, as applicable, and, except as have been previously
obtained (or as referred to in Section 7.15, below), do not require the consent
or approval, material to the transactions contemplated by this Agreement, or
the other Loan Documents, of any governmental body, agency or authority.
7.4 Title to Property. Each of the Company, the Permitted
Borrowers and the Subsidiaries has good and valid title to the property owned
by it, which property (individually or in the aggregate) is material to the
business or operations of the Company and its Subsidiaries, taken as a whole,
excluding imperfections in title not material to the ownership, use and/or
enjoyment of any such property.
7.5 Liens. There are no security interests in, Liens, mortgages or
other encumbrances on and no financing statements on file with respect to any
property of Company, the Permitted Borrowers or any of the Subsidiaries, except
for those Liens permitted under Section 9.6 hereof.
7.6 Subsidiaries. As of the date of this Agreement, there are no
directly or indirectly owned Subsidiaries of the Company, except for those
Subsidiaries identified in Schedule 7.6, attached hereto (on which Schedule are
identified, as of the date hereof, the Domestic Subsidiaries and the Foreign
Subsidiaries, the Significant Domestic Subsidiaries and the Significant Foreign
Subsidiaries and the Guarantors).
7.7 Taxes. The Company and its Subsidiaries each has filed on or
before their respective due dates, all federal, state and foreign tax returns
which are required to be filed or has obtained extensions for filing such tax
returns and is not delinquent in
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filing such returns in accordance with such extensions and has paid all taxes
which have become due pursuant to those returns or pursuant to any assessments
received by any such party, as the case may be, to the extent such taxes have
become due, except to the extent such tax payments are being actively contested
in good faith by appropriate proceedings and with respect to which adequate
provision has been made on the books of the Company or its Subsidiaries, as
applicable, as may be required by GAAP.
7.8 No Defaults. There exists no default under the provisions of
any instrument evidencing any permitted Debt of the Company or its Subsidiaries
or connected with any of the permitted Liens, or of any agreement relating
thereto, except where such default could not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole
and would not constitute a Default or an Event of Default under this Agreement
or any of the other Loan Documents according to the terms thereof.
7.9 Enforceability of Agreement and Loan Documents -- Company.
This Agreement, the Notes, the Company Guaranty, each of the other Loan
Documents to which the Company is a party, and all other certificates,
agreements and documents executed and delivered by Company under or in
connection herewith or therewith have each been duly executed and delivered by
duly authorized officers of the Company and constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium, ERISA or similar laws affecting the
enforcement of creditor's rights generally and by general principles of equity
(whether enforcement is sought in a proceeding in equity or at law).
7.10 Enforceability of Loan Documents -- Significant Subsidiaries.
This Agreement, the Notes, the Guaranties, each of the other Loan Documents to
which any of the Permitted Borrowers or the Guarantors is a party, and all
certificates, documents and agreements executed in connection herewith or
therewith by any of the Permitted Borrowers or the Guarantors have each been
duly executed and delivered by duly authorized officers of such parties and
constitute the valid and binding obligations of the Permitted Borrowers and the
Guarantors, enforceable in accordance with their respective terms, except as
enforcement thereof may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium, ERISA or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
7.11 Non-contravention -- Company. The execution, delivery and
performance of this Agreement and the other Loan Documents and any other
documents and instruments required under or in connection with this Agreement
by the Company are not in contravention of the terms of any indenture, material
agreement or material undertaking to which the Company is a party or by which
it or its properties are bound or affected, except to the extent such terms
have been
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waived or are not material to the transactions contemplated by this Agreement
and the other Loan Documents.
7.12 Non-contravention -- Subsidiaries. The execution, delivery and
performance of this Agreement, those other Loan Documents signed by any of the
Permitted Borrowers or the Guarantors, and any other documents and instruments
required under or in connection with this Agreement by any of the Permitted
Borrowers or the Guarantors are not in contravention of the terms of any
indenture, material agreement or material undertaking to which any of the
Permitted Borrowers or the Guarantors is a party or by which it or its
properties are bound or affected, except to the extent such terms have been
waived or are not material to the transaction contemplated by this Agreement
and the other Loan Documents.
7.13 No Litigation -- Company. There is no suit, action,
proceeding, including, without limitation, any bankruptcy proceeding, or
governmental investigation pending against or, to the best knowledge of the
Company, threatened or otherwise affecting the Company (other than any suit,
action or proceeding in which the Company is the plaintiff and in which no
counterclaim or cross- claim against Company has been filed), nor has the
Company or any of its officers or directors been subject to any suit, action,
proceeding or governmental investigation as a result of which any such officer
or director is or may be entitled to indemnification by Company, except as
otherwise disclosed in Schedule 7.13 attached hereto and except for
miscellaneous suits, actions and proceedings which have a reasonable likelihood
of being adversely determined, and which suits, if resolved adversely to the
Company would not in the aggregate have a material adverse effect on the
Company and its Subsidiaries, taken as a whole. Except as so disclosed, there
is not outstanding against the Company any judgment, decree, injunction, rule,
or order of any court, government, department, commission, agency,
instrumentality or arbitrator, nor, to the best knowledge of the Company, is
the Company in violation of any applicable law, regulation, ordinance, order,
injunction, decree or requirement of any governmental body or court where such
violation would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
7.14 No Litigation -- Other Parties. There is no suit, action,
proceeding (other than any suit, action or proceeding in which any such party
is the plaintiff and in which no counterclaim or cross-claim against any such
party has been filed), including, without limitation, any bankruptcy
proceeding, or governmental investigation pending against or, to the best
knowledge of the Company, threatened or otherwise affecting any of the
Subsidiaries or the Permitted Borrowers, nor has any such party or any of its
officers or directors been subject to any suit, action, proceeding or
governmental investigation as a result of which any such officer or director is
or may be entitled to indemnification by such party, except as otherwise
disclosed in Schedule 7.14 attached hereto and except for miscellaneous suits,
actions and proceedings which have
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a reasonable likelihood of being adversely determined, which suits, if resolved
adversely to such party, would not in the aggregate have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. Except as so
disclosed, there is not outstanding against any such party any judgment,
decree, injunction, rule, or order of any court, government, department,
commission, agency, instrumentality or arbitrator nor, to the best knowledge of
the Company, is any such party in violation of any applicable law, regulation,
ordinance, order, injunction, decree or requirement of any governmental body or
court where such violation would have a material adverse effect on the Company
and its Subsidiaries, taken as a whole.
7.15 Consents, Approvals and Filings, Etc. Except as have been
previously obtained or as are required for the consummation of the Dyno
Acquisition, no authorization, consent, approval, license, qualification or
formal exemption from, nor any filing, declaration or registration with, any
court, governmental agency or regulatory authority or any securities exchange
or any other person or party (whether or not governmental) is required in
connection with the execution, delivery and performance: (i) by the Company, of
this Agreement, any of the other Loan Documents to which it is a party or any
other documents or instruments to be executed and/or delivered by the Company
in connection therewith or herewith; and (ii) by each of the Permitted
Borrowers and the Guarantors, of this Agreement, the other Loan Documents to
which it is a party or any other documents or instruments to be executed and/or
delivered by each of the Permitted Borrowers or the Guarantors in connection
therewith or herewith. All such authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations which have
previously been obtained or made, as the case may be, are in full force and
effect and are not the subject of any attack, or to the knowledge of the
Company and the Permitted Borrowers, threatened attack (in any material
respect) by appeal or direct proceeding or otherwise.
7.16 Agreements Affecting Financial Condition. Neither the Company
nor any of the Permitted Borrowers (nor any of their respective Subsidiaries)
is party to any agreement or instrument or subject to any charter or other
corporate restriction which materially adversely affects the financial
condition or operations of the Company and its Subsidiaries, taken as a whole.
7.17 No Investment Company; No Margin Stock. Neither the Company
nor any of its Subsidiaries is engaged principally, or as one of its important
activities, directly or indirectly, in the business of extending credit for the
purpose of purchasing or carrying margin stock. None of the proceeds of any of
the Advances will be used by the Company, the Permitted Borrowers or any of the
Subsidiaries to purchase or carry margin stock or will be made available by the
Company, the Permitted Borrowers or any of the Subsidiaries in any manner to
any other Person to enable or assist such Person in purchasing or carrying
margin stock. Terms for which meanings are provided in Regulation U of the
Board of Governors of
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the Federal Reserve System or any regulations substituted therefor, as from
time to time in effect, are used in this paragraph with such meanings. Neither
the Company nor any of the Permitted Borrowers (nor any of their respective
Subsidiaries) is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
7.18 ERISA. Except to the extent that an occurrence could not
reasonably be expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole: (a) neither a Reportable Event which is material
to the Company and its Subsidiaries taken as a whole nor an accumulated funding
deficiency (as defined in Section 412 of the Internal Revenue Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Pension
Plan; (b) each Pension Plan has complied in all material respects with the
applicable provisions of ERISA and the Internal Revenue Code and any applicable
regulations thereof (and, if applicable, any comparable foreign law
provisions), except to the extent that any noncompliance, individually or in
the aggregate, would not have a material adverse effect upon the Company and
its Subsidiaries, taken as a whole; (c) no termination of a Single Employer
Plan has occurred, and no lien in favor of the PBGC or a Pension Plan has
arisen, during such five-year period; (d) the present value of all accrued
benefits under each Single Employer Plan maintained by the Company or any ERISA
Affiliate did not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the value of the
assets of such Pension Plan allocable to such accrued benefits; (e) neither the
Company nor any ERISA Affiliate has had a complete or partial withdrawal from
any Multiemployer Plan within the five year period prior to the date of this
Agreement, nor does the Company or any ERISA Affiliate presently intend to
completely or partially withdraw from any Multiemployer Plan, and neither the
Company nor any ERISA Affiliate would become subject to fines, penalties or any
other liability under ERISA if the Company or any ERISA Affiliate were to
withdraw completely from all Multiemployer Plans as of the valuation date most
closely preceding the date of this Agreement; (f) to the best of Company's
knowledge, no such Multiemployer Plan is in bankruptcy or reorganization or
insolvent; and (g) there is no pending or, to the best of Company's knowledge,
threatened litigation or investigation questioning the form or operation of any
Pension Plan, nor is there any basis for any such litigation or investigation
which if adversely determined could have a material adverse effect upon the
Company and its Subsidiaries, taken as a whole, as of the valuation date most
closely preceding the date of this Agreement.
7.19 Environmental Matters and Safety Matters. (a) The Company and
each Subsidiary is in compliance in all material respects with all applicable
federal, state, provincial and local laws, ordinances and regulations relating
to safety and industrial hygiene or to the environmental condition, including
without limitation all applicable Hazardous Materials Laws in jurisdictions
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in which the Company or any such Subsidiary owns or operates a facility or
site, or arranges for disposal or treatment of hazardous substances, solid
waste, or other wastes, accepts for transport any hazardous substances, solid
wastes or other wastes or holds any interest in real property or otherwise,
except for De Minimis Matters or as otherwise disclosed on Schedule 7.19
hereto, and as to any matters disclosed on such Schedule, none of such matters
will, individually or in the aggregate, have a material adverse effect upon the
financial condition or business of the Company and its Subsidiaries, taken as a
whole.
(b) All federal, state, provincial, local and foreign
permits, licenses and authorizations required under the Hazardous Material Laws
for present or (to the best knowledge of the Company and the Permitted
Borrowers) past use of the facilities and other properties or activities of the
Company and each Subsidiary have been obtained and are presently in effect, and
there is and has been compliance in all material respects with all such
permits, licenses or authorizations, except for De Minimis Matters or as
otherwise disclosed on Schedule 7.19 hereto, and as to any matters disclosed on
such Schedule, none of such matters, individually or in the aggregate will have
a material adverse effect on the Company and its Subsidiaries taken as a whole.
(c) No demand, claim, notice, suit (in law or equity),
action, administrative action, investigation or inquiry (including, without
limitation, the listing of any property by any domestic or foreign governmental
entity which identifies sites for remedial, clean-up or investigatory action)
whether brought by any governmental authority, private person or entity or
otherwise, arising under or relating to or in connection with any applicable
Hazardous Material Laws is pending or, to the best knowledge of the Company and
the Permitted Borrowers, threatened against the Company or any of its
Subsidiaries, any real property in which the Company or any such Subsidiary
holds or, to the best of the Company's knowledge, has held an interest or any
present or, to the best knowledge of the Company and the Permitted Borrowers,
past operation of the Company or any such Subsidiary, except for De Minimis
Matters or as otherwise disclosed on Schedule 7.19 hereto, and as to any
matters disclosed on such Schedule, none of such matters, individually or in
the aggregate will have a material adverse effect on the financial condition or
business of the Company and its Subsidiaries, taken as a whole.
(d) Neither the Company nor any of its Subsidiaries,
whether with respect to present or, to the best knowledge of the Company and
the Permitted Borrowers, past operations or properties, (i) is, to the best
knowledge of the Company and the Permitted Borrowers, the subject of any
federal or state investigation evaluating whether any remedial action is needed
to respond to a release of any Hazardous Materials into the environment, (ii)
has received any notice of any Hazardous Materials in or upon any of its
properties in violation of any applicable Hazardous Material Laws, or (iii)
knows of any basis for any such investigation or
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notice, or for the existence of such a violation, except for De Minimis Matters
or as otherwise disclosed on Schedule 7.19 hereto, and as to any matters
disclosed on such Schedule, none of such matters, individually or in the
aggregate will have a material adverse effect on the financial condition or
business of the Company and its Subsidiaries, taken as a whole.
(e) No release, threatened release or disposal of any
Hazardous Materials is occurring or has occurred on, under or to any real
property in which the Company or any of its Subsidiaries holds any interest or
performs any of its operations, in violation of any applicable Hazardous
Material Laws, except for De Minimis Matters or as otherwise disclosed on
Schedule 7.19 hereto, and as to any matters disclosed on such Schedule, none of
such matters, individually or in the aggregate will have a material adverse
effect on the financial condition or business of the Company and its
Subsidiaries, taken as a whole.
7.20 Accuracy of Information. Each of the Company's audited or
unaudited financial statements previously furnished to Agent and the Banks by
the Company prior to the date of this Agreement, is complete and correct in all
material respects and fairly presents the financial condition of the Company
and its Subsidiaries, taken as a whole, and the results of their operations for
the periods covered thereby; any projections of operations for future years
previously furnished by Company to Agent or the Banks have been prepared as the
Company's good faith estimate of such future operations, taking into account
all relevant facts and matters known to Company; since December 31, 1994 there
has been no material adverse change in the financial condition of the Company
and its Subsidiaries, taken as a whole, except changes in the ordinary course
of business (including without limitation the information set forth in the
Consolidated financial statements of the Company and its Subsidiaries as of
December 31, 1994); neither the Company, nor any of its Subsidiaries has any
contingent obligations (including any liability for taxes) not disclosed by or
reserved against in the December 31, 1994 balance sheet which is likely to have
a material adverse effect on the Company and its Subsidiaries, taken as a
whole.
8. AFFIRMATIVE COVENANTS
Each of the Company and the Permitted Borrowers covenants and agrees
that it will, and, as applicable, it will cause its Subsidiaries to, so long as
any of the Banks are committed to make any Advances under this Agreement and
thereafter so long as any Indebtedness remains outstanding under this
Agreement:
8.1 Preservation of Existence, Etc. Subject to the terms of this
Agreement: (i) preserve and maintain its existence and such of its rights,
licenses, and privileges as are material to the business and operations
conducted by it; (ii) qualify and remain qualified to do business in each
jurisdiction in which such qualification is material to its business and
operations or
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ownership of its properties; (iii) continue to conduct and operate its
businesses substantially as conducted and operated during the present and
preceding fiscal years; (iv) at all times maintain, preserve and protect all of
its franchises and trade names and preserve all the remainder of its property
and keep the same in good repair, working order and condition; and (v) from
time to time make, or cause to be made, all necessary or appropriate repairs,
replacements, betterments and improvements thereto such that the businesses
carried on in connection therewith may be properly and advantageously conducted
at all times.
8.2 Keeping of Books. Keep proper books of record and account in
which full and correct entries shall be made of all of its financial
transactions and its assets and businesses so as to permit the presentation of
financial statements prepared in accordance with GAAP.
8.3 Reporting Requirements. Furnish Agent with copies for each
Bank:
(a) as soon as possible, and in any event within three
Business Days after becoming aware of the occurrence of each Default or
Event of Default, a written statement of the chief financial officer of
the Company (or in his or her absence, a responsible senior officer)
setting forth details of such Default or Event of Default and the
action which the Company or any Permitted Borrower has taken or has
caused to be taken or proposes to take or cause to be taken with
respect thereto;
(b) as soon as available, and in any event within one
hundred twenty (120) days after and as of the end of each of Company's
fiscal years, (i) a detailed Consolidated audit report of Company
certified to by independent certified public accountants satisfactory
to Banks, together with an unaudited Consolidating report of Company
and its Subsidiaries (or, in lieu of such Consolidating report, other
financial reports as to the financial condition, on an individual
basis, of each of the Permitted Borrowers and Guarantors, in form
reasonably acceptable to Agent and the Majority Banks) certified by an
authorized officer of Company as to consistency (with prior financial
reports and accounting periods), accuracy and fairness of presentation;
and (ii) a Covenant Compliance Report;
(c) as soon as available, and in any event within sixty
(60) days after and as of the end of each quarter, excluding the last
quarter of each fiscal year, (i) a Consolidated financial report
consisting of a balance sheet, income statement, statement of cash
flows and statement of shareholder's equity of Company and its
Subsidiaries certified by an authorized officer of Company as to
consistency (with prior financial reports and accounting periods),
accuracy and fairness of presentation and (ii) a Covenant Compliance
Report;
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(d) as soon as available, and in any event within thirty
(30) days after the end of each calendar month, excluding those months
ending on the last day of each fiscal quarter, a Consolidated and
Consolidating balance sheet, income statement and statement of
shareholder's equity of Company and its Subsidiaries certified by an
authorized officer of Company as to consistency (with prior financial
reports and accounting periods), accuracy and fairness of presentation;
(e) as soon as possible, and in any event within three
Business Days after becoming aware (i) of any material adverse change
in the financial condition of the Company, any of its Subsidiaries or
any of the Permitted Borrowers which could reasonably be expected to
have a material adverse effect upon the Company and its Subsidiaries,
taken as a whole, a certificate of the chief financial officer of
Company (or in his or her absence, a responsible senior officer)
setting forth the details of such change, and (ii) of the taking by the
Internal Revenue Service or any foreign taxing jurisdiction of a
written tax position which could reasonably be expected to have a
material adverse effect upon the Company and its Subsidiaries, taken as
a whole (or any such tax position taken by the Company or any of its
Subsidiaries or the Permitted Borrowers) setting forth the details of
such position and the financial impact thereof;
(f) as soon as available (and with copies for each of
the Banks), the Company's 8-K, 10-Q and 10-K Reports filed with the
federal Securities and Exchange Commission, and in any event, with
respect to the 10-Q Report, within sixty (60) days of the end of each
of the Company's fiscal quarters, and with respect to the 10-K Report,
within one hundred twenty (120) days after and as of the end of each of
Company's fiscal years; and as soon as available, copies of all
filings, reports or other documents filed by the Company or any of its
Subsidiaries with the federal Securities and Exchange Commission or
comparable agencies or authorities in foreign jurisdictions, or with
any stock exchanges;
(g) promptly as issued, all press releases and notices
to shareholders transmitted by the Company or any of its Subsidiaries;
and
(h) promptly, and in form to be satisfactory to Agent
and the requesting Bank or Banks, such other information as Agent or
any of the Banks (acting through Agent) or the Collateral Agent may
reasonably request from time to time.
8.4 Consolidated Tangible Net Worth. Maintain, and cause its
Subsidiaries to maintain, at all times Consolidated Tangible Net Worth which on
a Consolidated basis will at no time be less than Ninety-Five Million Dollars
($95,000,000), plus the sum of the Net Income Adjustment and the Equity
Offering Adjustment.
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8.5 Funded Debt Ratio. On a Consolidated basis, have and cause
its Subsidiaries to have, as of the end of each fiscal quarter, a Funded Debt
Ratio which will at no time exceed:
(a) from the date hereof through December 30, 1995, 6.0 to 1.0;
(b) from December 31, 1995 through March 30, 1996, 5.5 to 1.0;
(c) from March 31, 1996 through June 29, 1996, 5.0 to 1.0;
(d) from June 30, 1996 through September 29, 1996, 4.25 to 1.0;
(e) from September 30, 1996 to December 30, 1996, 3.75 to 1.0;
(f) from December 31, 1996 to December 30, 1997, 3.3 to 1.0;
(g) from December 31, 1997 to December 30, 1998, 2.9 to 1.0; and
(h) from and after December 31, 1998, 2.5 to 1.0.
8.6 Maintain Fixed Charge Coverage Ratio. On a Consolidated
basis, have and cause its Subsidiaries to have, as of the end of each fiscal
quarter, a Fixed Charge Coverage Ratio of not less than:
(a) from the date hereof through March 30, 1996, 1.25 to 1.0;
(b) from March 31, 1996 through September 29, 1996, 1.4 to 1.0;
(c) from September 30, 1996 to December 30, 1996, 1.25 to 1.0;
(d) from December 31, 1996 to December 30, 1997, 1.35 to 1.0;
(e) from December 31, 1997 to December 30, 1998, 2.35 to 1.0; and
(f) from and after December 31, 1998, 2.5 to 1.0.
8.7 Inspections. Permit Agent and each Bank, through their
authorized attorneys, accountants and representatives to examine Company's and
each of the Subsidiaries' books, accounts, records, ledgers and assets and
properties of every kind and description wherever located, including without
limitation the Collateral, at all reasonable times during normal business
hours, upon oral or written request of Agent or such Bank; and permit Agent and
each Bank or their authorized representatives, at reasonable times and
intervals, to visit all of its offices, discuss its financial
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matters with its officers and independent certified public accountants, and by
this provision Company authorizes such accountants to discuss the finances and
affairs of Company and its Subsidiaries (provided that Company is given an
opportunity to participate in such discussions) and examine any of its or their
books and other corporate records. An examination of the records or properties
of Company or any of its Subsidiaries may require revealment of proprietary
and/or confidential data and information, and the Agent and each of the Banks
agrees upon request of the inspected party to execute a confidentiality
agreement (reasonably satisfactory to Agent or the inspecting Bank, as the case
may be, and such party) on behalf of the Agent or such inspecting Bank and all
parties making such inspections or examinations under its authorization;
provided however that such confidentiality agreement shall not prohibit Agent
from revealing such information to Banks or prohibit the inspecting Bank from
revealing such information to Agent or another Bank. Notwithstanding the
foregoing, all information furnished to the Banks hereunder shall be subject to
the undertakings of the Banks set forth in Section 14.13 hereof.
8.8 Taxes. Pay and discharge all taxes and other governmental
charges, and all material contractual obligations calling for the payment of
money, before the same shall become overdue, unless and to the extent only that
such payment is being contested in good faith by appropriate proceedings and is
reserved for, as required by GAAP on its balance sheet, or where the failure to
pay any such matter could not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
8.9 Further Assurances; Financing Statements. Furnish to the
Collateral Agent, at Company's sole expense, upon Majority Banks' (or
Collateral Agent's) request, in form reasonably satisfactory to the Majority
Banks, assignments, lien instruments or other security instruments, consents,
acknowledgments, subordinations and financing statements covering any or all of
the Collateral pledged, assigned, or encumbered pursuant to the Company
Collateral Documents or the Guarantor Collateral Documents, of every nature and
description, whether now owned or hereafter acquired (by Company or any
Guarantor), to the extent that the Collateral Agent may reasonably require, and
execute and deliver or cause to be executed and delivered such other documents
or instruments as the Agent may reasonably require to effectuate more fully the
purposes of this Agreement or the other Loan Documents.
8.10 Insurance. Maintain, with financially sound and reputable
insurers, insurance with respect to its Material Property and business against
such casualties and contingencies, of such types (including, without
limitation, insurance with respect to losses arising out of such property loss
or damage, public liability, business interruption, larceny, workers'
compensation, embezzlement or other criminal misappropriation) and in such
amounts as is customary in the case of corporations of established reputations
engaged in the same or similar business and similarly situated.
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8.11 Indemnification. With respect to the Company, indemnify and
save Agent and each of the Banks (and their respective officers, directors,
agents, employees and other representatives) harmless from all reasonable loss,
cost, damage, liability or expenses, including reasonable attorneys' fees and
disbursements, incurred by Agent and each of the Banks (and their respective
officers, directors, agents, employees and other representatives) by reason of
an Event of Default or enforcing the obligations of the Company, the Permitted
Borrowers or any of the Significant Subsidiaries under this Agreement or the
other Loan Documents, or in the prosecution or defense of any action or
proceeding concerning any matter growing out of or connected with this
Agreement or any of the other Loan Documents (including, without limitation,
the Agent's confidential information memorandum dated May 24, 1995, the New
Senior Debt Documents and any Offering Memorandum distributed in connection
therewith, the Existing Senior Debt Documents and the Dyno Acquisition
Agreement) other than resulting from the gross negligence or willful misconduct
of Agent or such Bank or Banks, as the case may be; and, with respect to each
of the Permitted Borrowers and the Significant Subsidiaries, indemnify and save
Agent and each of the Banks (and their respective officers, directors, agents,
employees and other representatives) harmless from all reasonable loss, cost,
damage, liability or expenses, including reasonable attorneys' fees and
disbursements, incurred by Agent and each of the Banks (and their respective
officers, directors, agents, employees and other representatives) with respect
to such parties by reason of an Event of Default or enforcing the obligations
of such parties under this Agreement or the other Loan Documents or in the
prosecution or defense of any action or proceeding concerning any matter
growing out of or connected with this Agreement or any of the other Loan
Documents (including, without limitation, the Agent's confidential information
memorandum dated May 24, 1995, the New Senior Debt Documents and any Offering
Memorandum distributed in connection therewith, the Existing Senior Debt
Documents and the Dyno Acquisition Agreement), other than resulting from the
gross negligence or willful misconduct of Agent or such Bank or Banks, as the
case may be.
8.12 Governmental and Other Approvals. Apply for, obtain and/or
maintain in effect, as applicable, all material authorizations, consents,
approvals, licenses, qualifications, exemptions, filings, declarations and
registrations (whether with any court, governmental agency, regulatory
authority, securities exchange or otherwise) which are necessary in connection
with the execution, delivery and performance of this Agreement, the other Loan
Documents, or any other documents or instruments to be executed and/or
delivered by the Company or the Permitted Borrower, as the case may be, in
connection therewith or herewith, and, upon and after the consummation thereof,
in connection with the Dyno Acquisition.
8.13 Compliance with Contractual Obligations and Laws. Comply in
all material respects with all Contractual Obligations and with
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all applicable laws, rules, regulations and orders of any governmental
authority, whether federal, state, local or foreign (including without
limitation Hazardous Material Laws and any consumer protection, truth in
lending, disclosure and other similar laws and regulations governing the
provision of financing to consumers), in effect from time to time, except to
the extent that failure to comply therewith could not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
business, operations, property or financial or other condition of the Company,
the Permitted Borrowers and their respective Subsidiaries, taken as a whole,
and could not reasonably be expected to materially adversely affect the ability
of any of the Company, the Permitted Borrowers or the Significant Subsidiaries
to perform their respective obligations under any of the Loan Documents to
which they are a party.
8.14 ERISA. Comply in all material respects with all requirements
imposed by ERISA as presently in effect or hereafter promulgated or the
Internal Revenue Code (or comparable laws in applicable jurisdictions outside
the United States of America relating to foreign Pension Plans) and promptly
notify Banks upon the occurrence of any of the following events:
(a) the termination of any Pension Plan pursuant to
Subtitle C of Title IV of ERISA or otherwise (other than any defined
contribution plan not subject to Section 412 of the Internal Revenue Code and
any Multiemployer Plan);
(b) the appointment of a trustee by a United States
District Court to administer any Pension Plan pursuant to ERISA;
(c) the commencement by the PBGC, or any successor
thereto, of any proceeding to terminate any Pension Plan;
(d) the failure of the Company or any ERISA Affiliate to
make any payment in respect of any Pension Plan required under Section 412 of
the Internal Revenue Code;
(e) the withdrawal of the Company or any ERISA Affiliate
from any Multiemployer Plan;
(f) the occurrence of an accumulated funding deficiency
(defined in Section 7.18 hereof) or a Reportable Event; or
(g) the occurrence of a Prohibited Transaction which
could reasonably be expected to have a material adverse effect upon the Company
and its Subsidiaries, taken as a whole.
8.15 Environmental Matters.
(a) Promptly notify the Agent and the Banks in writing of: (i) any
and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted or completed pursuant to any applicable Hazardous Material
Laws; (ii) any and all claims made by
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any Person against the Company, any of its Subsidiaries, the Permitted
Borrowers or Dyno, or any of its other property (whether real or personal, or
any portion thereof) relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Material (provided
that, until the Dyno Acquisition, notification to Agent of claims against Dyno
shall not be required except for claims of which Company has actual knowledge)
which could reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole; and (iii) Company's discovery
of any occurrence or condition on any real property or fixtures constituting a
part of, adjoining or in the vicinity of any of its property that could cause
any such property (or any part thereof) to be subject to any material
restrictions on the ownership, occupancy, transferability or use thereof under
any Hazardous Material Laws, it being understood and agreed that the Agent, on
behalf of the Banks, shall have the right to join and participate in, as a
party if it or they so elect, any legal proceedings or actions initiated in
connection with any of the matters described in subparagraphs (a) (i) or (a)
(ii), above, and the Company agrees, provided that an Event of Default has
occurred and is continuing, to pay the Agent's reasonable attorneys fees in
connection therewith.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions necessary to clean-up and
remove all Hazardous Materials on or affecting any premises owned or occupied
by Company or any of its Subsidiaries, whether resulting from conduct of
Company or any of its Subsidiaries or any other Person, if required by
Hazardous Material Laws, all such actions to be taken in accordance with such
laws;
(c) From and after the Dyno Acquisition, with respect to the
properties and operations of Dyno, commence and diligently proceed to
completion, in accordance with applicable Hazardous Material Laws, with the
necessary remedial, corrective or other actions identified in any Schedule or
other written disclosure delivered to Agent and the Banks in connection with
the consummation of the Dyno Acquisition, as applicable, or as required under
the Dyno Acquisition Agreement, and cause Dyno, or its Subsidiaries, (to the
extent of its obligations under the Dyno Acquisition Agreement) to do so,
according to the time periods specified therein, or if no time periods are so
specified, as soon as reasonably practicable; provided that Company's
obligations under this subparagraph (c) shall not reduce or otherwise affect
Company's other obligations hereunder.
(d) Defend, indemnify and hold harmless Agent and each of the
Banks, and their respective employees, agents, officers and directors from and
against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses of whatever kind or nature arising out
of or related to (i) the presence, disposal, release or threatened release of
any Hazardous Materials in violation of any applicable Hazardous Material Laws
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on, from or affecting any premises owned or occupied by Company or any of its
Subsidiaries, (ii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to such Hazardous
Materials, (iii) any lawsuit or other proceeding brought or threatened,
settlement reached or governmental order or decree relating to such Hazardous
Materials, (iv) the cost of removal of all Hazardous Materials from all or any
portion of any premises owned by Company or its Subsidiaries, (v) the taking of
necessary precautions to protect against the release of Hazardous Materials in
violation of any applicable Hazardous Material Laws on or affecting any
premises owned by Company or any of its Subsidiaries, (vi) complying with all
Hazardous Material Laws and/or (vii) any material violation by Company or any
of its Subsidiaries of Hazardous Material Laws, including without limitation,
reasonable attorneys and consultants fees, investigation and laboratory fees,
environmental studies required by Agent or any Bank (whether before or after
the occurrence of any Default or Event of Default hereunder), court costs and
litigation expenses; and, if so requested by Agent or any Bank, Company shall
execute, and shall cause each of the Permitted Borrowers to execute, separate
indemnities covering the foregoing matters. The obligations of Company and
Permitted Borrowers under this Section 8.15 shall be in addition to any and all
other obligations and liabilities the Company or the Permitted Borrowers may
have to Agent or any of the Banks at common law or pursuant to any other
agreement.
(e) Following the occurrence and during the continuance of a
Default or Event of Default, Agent may retain (on its own behalf and on behalf
of the Banks, but at Company's sole expense) such environmental auditors as
reasonably necessary to evaluate and/or confirm Company's environmental
responses, reports or other matters, including Company's compliance with
Hazardous Material Laws generally, under this Section 8.15, or elsewhere
herein.
8.16 Power of Attorney. Subject to the Intercreditor Agreement (and
the rights and powers of Collateral Agent thereunder), Company does hereby
make, constitute and appoint any officer or agent of Agent as its true and
lawful attorney-in-fact, with power, upon the occurrence of any Event of
Default (exercisable so long as such Event of Default is continuing and with
full power of substitution), to endorse its name, or the names of any of its
officers or agents, upon any notes, checks, drafts, money orders, or other
instruments of payment (including payments payable under any policy of
insurance) or Collateral that may come into possession of the Agent in full or
part payment of any amounts owing to the Banks; to sign and endorse the name of
Company, and/or any of its officers or agents, upon any invoice, freight or
express bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with Accounts of
the Company, and any instrument or document relating thereto or to Company's
rights therein; to execute on behalf of Company any financing statements,
amendments, subordinations or other filings pursuant to this Agreement or any
of the Loan
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Documents, granting unto Agent, as the attorney-in-fact of Company, full power
to do any and all things necessary to be done in and about the Company's or any
Subsidiary's premises as fully and effectually as Company might or could do,
and hereby ratifying all that any said attorney shall lawfully do or cause to
be done by virtue hereof. The power of attorney described herein shall be
deemed coupled with an interest and shall be irrevocable until the payment in
full of all the Indebtedness, the expiration of any commitments to lend
hereunder (or otherwise) and the performance by Company, the Permitted
Borrowers and the Guarantors of all other obligations under this Agreement and
the Loan Documents; Agent may, at any time after the occurrence of an Event of
Default, but before the expiration of any applicable cure period or delivery of
any required notice, notify Account Debtors that Collateral has been assigned
to Agent on behalf of the Banks and that payments shall be made directly to
Agent. Upon request of the Agent, Company will so notify such Account Debtors
and will indicate on all billings to such Account Debtors that their accounts
must be paid to or as directed by Agent. Upon the occurrence and during the
continuance of any Event of Default, the Agent acting on behalf of the Banks
shall have full power to collect, compromise, endorse, sell or otherwise deal
with the Collateral or proceeds thereof in the name of the Agent or in the name
of Company, provided only that Agent shall act in a commercially reasonable
manner.
8.17 Significant Subsidiaries; Joinder Agreements. (a) With respect
to Walbro Netherlands, Walbro England, Walbro France, Walbro Belgium and Walbro
Spain (collectively, the "Specified Guarantors"), as soon as practicable under
local law (as determined by Agent, in its reasonable discretion), but in any
event prior to the applicable date(s) set forth on Schedule 8.17 hereto, and
with respect to each Subsidiary which becomes a Significant Subsidiary
subsequent to the date of this Agreement, within thirty days of the date a
Subsidiary becomes a Significant Subsidiary or a new Subsidiary is created or
acquired which is a Significant Subsidiary, as the case may be, cause such
Subsidiary to execute and deliver to Agent, for and on behalf of each of the
Banks, a Joinder Agreement whereby such Subsidiary becomes obligated as a
Guarantor under the Domestic Guaranty or the Permitted Borrowers Guaranty, as
applicable, and with respect to each Significant Domestic Subsidiary a joinder
agreement whereby such Subsidiary becomes obligated under the Collateral
Documents as then in effect, or, to the extent necessary or appropriate (as
determined by the Majority Banks or Collateral Agent), executes and delivers
new Collateral Documents, in each and all such cases accompanied by such
supporting documentation, including without limitation corporate authority
items, certificates and opinions of counsel, as reasonably required by Agent
and the Majority Banks. Until the Joinder Agreements (and supporting documents)
required from the Specified Guarantors under this Section 8.17(a) have been
received by Agent, no Advances shall be requested by or made to any of the
Foreign Subsidiaries, other than Walbro Japan.
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(b) With respect to the share capital of Walbro
Netherlands, Company shall cause Walbro Automotive to execute and deliver to
Collateral Agent (on or before the applicable date set forth on Schedule 8.17
hereto) a stock pledge encumbering 65% of the share capital of Walbro
Netherlands, in form and substance satisfactory to Collateral Agent and the
Majority Banks. Furthermore, with respect to each Subsidiary which becomes a
Significant Subsidiary subsequent to the date hereof and the capital stock or
share capital of which is owned by Company or a Significant Domestic
Subsidiary, Company or such Significant Domestic Subsidiary, as the case may
be, shall promptly execute and deliver to Collateral Agent such Collateral
Documents as necessary to encumber (i) 100% of the capital stock or share
capital thereof (in the case of the pledge of share capital or capital stock of
any Significant Domestic Subsidiary) and (ii) 65% of the capital stock or share
capital thereof (in the case of the pledge of share capital or capital stock of
any Significant Foreign Subsidiary). Such Collateral Documents shall in each
case be accompanied by such supporting documentation, including without
limitation corporate authority items, certificates and opinions of counsel, as
reasonably required by Agent and the Majority Banks.
8.18 Financial Covenant Amendments. In the event that, at any time
while this Agreement is in effect, the Company shall issue any indebtedness for
borrowed money which is not by its terms subordinate and junior to other
indebtedness of Company and its Subsidiaries for borrowed money and such
indebtedness shall include, or be issued pursuant to a trust indenture or other
agreement which includes, financial covenants which are not substantially
identical to the financial covenants set forth in this Agreement, the Company
shall so advise the Agent in writing. Such notice shall be accompanied by a
copy of the applicable agreement containing such financial covenants. The
Agent shall promptly furnish a copy of such notice and the applicable agreement
to each of the Banks. If the Majority Banks determine in their sole discretion
that some or all of the financial covenants set forth in such agreement are
more favorable to the lender thereunder than the financial covenants set forth
in this Agreement ("More Favorable Terms") and that the Majority Banks desire
that this Agreement be amended to incorporate the More Favorable Terms, then
the Agent shall give written notice of such determination to the Company.
Thereupon, and in any event within thirty (30) days following the date of
notice by Agent to the Company, Company, the Permitted Borrowers and the Banks
shall enter into an amendment to this Agreement incorporating, on terms and
conditions acceptable to the Majority Banks, the More Favorable Terms.
9. NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Banks are
committed to make any Advances under this Agreement and thereafter so long as
any Indebtedness remains outstanding, it will not, and it will not allow its
Subsidiaries, without the prior written consent of the Majority Banks, to:
9.1 Capital Structure and Redemptions. Purchase, acquire or redeem
any of its capital stock or make any material change in its capital structure,
provided however that the issuance of additional voting common stock shall not
be deemed to constitute a material change in capital structure; and provided
further that, with
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respect to the Significant Subsidiaries owned by Company or any of its Domestic
Subsidiaries, any increase in the share capital (or the creation of any new
share capital) of any of such Significant Subsidiaries shall be permitted only
if, at the time of any such increase or the creation of any new shares, as the
case may be, such shares are immediately subjected to a pledge and security
interest in favor of the Collateral Agent, for and on behalf of the Lenders,
pursuant to the applicable Collateral Documents (to the extent required
thereunder), and all steps are taken as necessary under applicable law to
perfect each such pledge and security interest.
9.2 Business Purposes. Make any material change in its general
business objects or purposes from those existing as of the date hereof or enter
into any business, directly or through any Subsidiary, except for those
businesses in which the Company and its Subsidiaries are engaged on the date of
this Agreement or other businesses which are directly related thereto.
9.3 Mergers or Dispositions. Enter into any merger or
consolidation, except for any Permitted Merger, or sell, lease, transfer,
relocate or dispose of all, substantially all, or any material part of its
assets, except for Permitted Transfers.
9.4 Guaranties. Guarantee, endorse, or otherwise become liable for
or upon the obligations of others, except by endorsement of cash items for
deposit in the ordinary course of business and except for the Guaranties and
the Permitted Guaranties.
9.5 Debt. Become or remain obligated for any indebtedness for
borrowed money, or for any indebtedness incurred in connection with the
acquisition of any property, real or personal, tangible or intangible, or for
any other Debt, except for:
(a) Indebtedness to Banks hereunder;
(b) current unsecured trade, utility or
non-extraordinary accounts payable arising in the ordinary course of Company's
or any Subsidiary's businesses;
(c) purchase money debt for fixed assets (including
capitalized leases or other non-cancelable leases having a term of twelve
months or longer) not to exceed an aggregate amount, for the Company and its
Subsidiaries incurred while no Default or Event of Default exists under this
Agreement or the other Loan Documents, of Twenty Million Dollars ($20,000,000)
(or the equivalent thereof in any other currency, as applicable) at any one
time outstanding;
(d) the Existing Senior Debt, the New Senior Debt, the
Subordinated Debt and such other debt set forth in Schedule 9.5 attached
hereto, if any (in addition to any other matters set forth in this Section
9.5), and any renewals or refinancing of such indebtedness in amounts not
exceeding the scheduled amounts (less any required amortization according to
the terms thereof) on
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substantially the same terms and otherwise in compliance with this Agreement;
(e) other Debt for borrowed money in an amount not to
exceed in the aggregate for the Company and its Subsidiaries at any time
outstanding, the sum of Five Million Dollars ($5,000,000) (or the equivalent
thereof in any other currency, as applicable), which Debt shall be neither
secured nor subject to any guaranty; and
(f) Intercompany Loans, but only to the extent permitted
under the other applicable terms and limitations of this Agreement, including
but not limited to Section 9.8 hereof.
9.6 Liens. Permit or suffer any Lien to exist on any of its
properties, real, personal or mixed, tangible or intangible, whether now owned
or hereafter acquired, except:
(a) in favor of Collateral Agent, as security in pari
passu for the Indebtedness and the Lender Debt, in accordance with the
Intercreditor Agreement;
(b) purchase money security interests in fixed assets to
secure the purchase money indebtedness permitted in Section 9.5(c) hereof,
provided that each such security interest is created substantially
contemporaneously with the acquisition of such fixed assets and does not extend
to any property other than the fixed asset so financed and provided further
that the sum of all such purchase money indebtedness outstanding at any time
shall not exceed the aggregate amount set forth in Section 9.5(c), hereof; and
(c) any lien securing Debt assumed pursuant to a
Permitted Acquisition, provided that such Lien is limited to the property so
acquired, and was not entered into, extended or renewed in contemplation of
such acquisition; and
(d) Permitted Liens.
9.7 Acquisitions. Other than any Permitted Acquisition, purchase
or otherwise acquire or become obligated for the purchase of all or
substantially all or any material portion of the assets or business interests
of any Person, firm or corporation, or any shares of stock (or other ownership
interests) of any corporation, trusteeship or association, or any business or
going concern, or in any other manner effectuate or attempt to effectuate an
expansion of present business by acquisition.
9.8 Investments. Make or allow to remain outstanding any
Investment in, or any loans or advances to, any Person, firm, corporation or
other entity or association, other than:
(a) any loan or other advance by Company or a
Subsidiary, as the case may be, to any and all of its officers or employees, as
the case may be, in the normal course of business, so
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long as the aggregate of all such loans or advances by the Company and its
Subsidiaries does not exceed One Million Dollars ($1,000,000) (or the
equivalent thereof in any Alternative Currency) at any time outstanding, plus
reasonable, reimbursable business and travel expenses;
(b) Permitted Investments at any time outstanding or in
effect;
(c) Investments in Company's Subsidiaries existing as of
the date of this Agreement;
(d) The existing investments, loans and/or advances set
forth on Schedule 9.8 hereto, in addition to any other matters set forth in
this Section 9.8);
(e) Intercompany Loans, Advances, or Investments to
Company's Significant Domestic Subsidiaries;
(f) Intercompany Loans, Advances, or Investments to
Company's Significant Foreign Subsidiaries without regard to any repayment of
such loans, advances, or investments (other than the repayment or recovery of
capital or principal), in an aggregate amount at any time outstanding not to
exceed (absent the consent of the Majority Banks), exclusive of the investments
permitted under subsections (a) through (c) and (l) of this Section 9.8, but
including any such loans, advances or investments permitted under any other
provision of this Agreement, the difference between (i) Sixty Million Dollars
($60,000,000) (or the equivalent thereof in any other currency, as applicable)
and (ii) the aggregate amount of Advances outstanding to the Significant
Foreign Subsidiaries at such time, determined as aforesaid;
(g) Intercompany Loans, Advances, or Investments to
Company's Subsidiaries which are not Significant Subsidiaries without regard to
any repayment of such loans, advances, or investments (other than the repayment
or recovery of capital or principal), in an aggregate amount at any time
outstanding not to exceed (absent the consent of the Majority Banks), exclusive
of the investments permitted under subsections (a) through (c) and (l) of this
Section 9.8, but including any such loans, advances or investments permitted
under any other provision of this Agreement, Five Million Dollars ($5,000,000)
(or the equivalent thereof in any Alternative Currency);
(h) loans, advances or investments (without regard to
any repayment of such loans, advances or investments, other than the repayment
of capital or principal) to any Joint Venture or Subsidiary which does not
constitute a 100% Subsidiary, including without limitation (i) loans, advances
or investments permitted under any other provision of this Agreement and (ii)
guaranties by the Company or any Subsidiary (valued on the basis of the
aggregate amount of such indebtedness covered by a guaranty) of third-party
indebtedness of any such Joint Venture or non-100% Subsidiary, in
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an aggregate amount, for all such loans, advances and investments under this
subsection (h), at any time not to exceed twenty percent (20%) of Consolidated
Tangible Net Worth;
(i) subject to the terms and conditions of this
Agreement, including without limitation Sections 8.4 through 8.6 hereof,
foreign currency investments and other hedging instruments intended solely to
protect the Company from foreign currency fluctuations directly related to any
Permitted Acquisition, or otherwise in the ordinary course of its business
operations;
(j) other short term investments (excluding investments
in Subsidiaries, Affiliates or Joint Ventures) made or maintained by any
Foreign Subsidiary outside of the United States of America in the ordinary
course of its business, consistent with the present investment practices of the
Company and its Subsidiaries as of the date hereof (generally, and as to the
individual and aggregate amounts and other terms thereof);
(k) investments, whether by acquisition of shares of
Capital Stock, indebtedness or other obligations or security of, any Person
(other than a Subsidiary or an Affiliate) which is a customer of the Company or
any Subsidiary, which investment was made in exchange for amounts owed by such
customer to the Company or any Subsidiary (and incurred in the ordinary course
of business) or as an advance on the provision of goods and services in the
ordinary course of business; and
(l) the Dyno Acquisition, to the extent such acquisition
shall be deemed to constitute an Investment.
In valuing any Investments for the purpose of applying the limitations set
forth in this Section 9.8 (except as otherwise expressly provided herein), such
Investment shall be taken at the original cost thereof, without allowance for
any subsequent write-offs or appreciation or depreciation, but less any amount
repaid or recovered on account of capital or principal.
9.9 Accounts Receivable. Sell or assign any account, note or trade
acceptance receivable, except to Agent on behalf of the Banks.
9.10 Transactions with Affiliates. Enter into any transaction with
any of its or their stockholders or officers or its or their Affiliates, except
in the ordinary course of business and on terms not less favorable than would
be usual and customary in similar transactions between Persons dealing at arm's
length.
9.11 Dyno Capital Expenditures. Incur or make Dyno Capital
Expenditures (determined on a Consolidated basis) in aggregate amounts greater
than (a) from the date of the Dyno Acquisition, if the same shall occur,
through December 31, 1995, the sum of Fifteen Million Dollars ($15,000,000) (or
the equivalent thereof in any other currency, as applicable) and (b) from
January 1, 1996 through
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(and including) June 30, 1996, the sum of Ten Million Dollars ($10,000,000) (or
the equivalent thereof in any other currency, as applicable), in each case on a
non-cumulative basis.
9.12 No Further Negative Pledges. Enter into or become subject to
any agreement (other than loan documents evidencing or otherwise related to the
Existing Senior Debt, the New Senior Debt, or any purchase money Debt permitted
under this Agreement or the other Loan Documents, but only to the extent of the
property acquired with the proceeds of such purchase money Debt) (i)
prohibiting the guaranteeing by the Company or any Subsidiary of any
obligations, (ii) prohibiting the creation or assumption of any lien or
encumbrance upon the properties or assets of the Company or any Subsidiary,
whether now owned or hereafter acquired, or (iii) requiring an obligation to
become secured (or further secured) if another obligation is secured or further
secured.
9.13 Prepayment of Debts. Prepay, purchase, redeem or defease any
Debt for money borrowed or any capital leases (including without limitation the
Existing Senior Debt, the New Senior Debt and the Subordinated Debt),
excluding, subject to the terms hereof, the Indebtedness, and excluding
paydowns from time to time of permitted working capital facilities or other
revolving debt.
9.14 Amendment of Existing Senior Debt Documents and New Senior
Debt Documents and Subordinated Debt. Amend, modify or otherwise alter (or
suffer to be amended, modified or altered) any of the material terms and
conditions of those documents or instruments evidencing or otherwise related to
the New Senior Debt or any Subordinated Debt or waive (or permit to be waived)
any provision thereof in any material respect, without the prior written
approval of Agent and the Majority Banks, and amend, modify or otherwise alter
(or suffer to be amended, modified or altered) any of the terms of the Existing
Senior Debt Documents, the amendment, modification or alteration of which are
restricted by Section 2.1(a) of the Intercreditor Agreement, except in
compliance therewith. For purposes of those documents or instruments
evidencing or otherwise related to such Debt (other than the Existing Senior
Debt), any increase in the original interest rate or principal amount, any
shortening of the original amortization, any change in any default, remedial or
other repayment terms and any change in or waiver of conditions contained
therein which are required under or necessary for compliance with this
Agreement or the other Loan Documents or, with respect to the Subordinated
Debt, any change in the subordination provisions contained therein, shall
(without reducing the scope of this Section 9.14) be deemed to be material.
10. DEFAULTS
10.1 Events of Default. Any of the following events is an "Event of
Default":
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(a) non-payment when due of the principal or interest
under any of the Notes issued hereunder in accordance with the terms
thereof or of any reimbursement obligation under Section 3.6 hereof,
and in the case of interest payments, continuance thereof for three (3)
Business Days;
(b) default in the payment of any money by Company or
any of the Permitted Borrowers under this Agreement (other than as set
forth in subsection (a), above), within three (3) days of the date the
same is due and payable;
(c) default in the observance or performance of any of
the other conditions, covenants or agreements set forth in this
Agreement or any of the other Loan Documents by any party thereto
(provided that, with respect to the covenants set forth in Sections
8.8, 8.10, 8.13, 8.14 and 8.15(b) hereof, such event has continued for
thirty (30) consecutive days) or the occurrence of any other default or
event of default, as the case may be, hereunder or thereunder;
(d) any representation or warranty made by Company or
any of the Permitted Borrowers herein or in any instrument submitted
pursuant hereto or by any other party to the Loan Documents proves
untrue in any material adverse respect when made or deemed made;
(e) default in the observance or performance of or
failure to comply with any of the conditions, covenants or agreements
of Company or any Guarantor set forth in any of the other Loan
Documents (including without limitations any of the Collateral
Documents), and the continuance thereof beyond any period of grace or
cure specified in any such document;
(f) any provision of the Company Guaranty, the Domestic
Guaranty or the Permitted Borrower Guaranty shall at any time for any
reason cease to be valid and binding and enforceable against the
Company or any of the Guarantors, as applicable, or the validity,
binding effect or enforceability thereof shall be contested by any
Person, or the Company or any of the Guarantors shall deny that it has
any or further liability or obligation under the Company Guaranty, the
Domestic Guaranty or the Permitted Borrower Guaranty, as applicable, or
the Company Guaranty, the Domestic Guaranty or the Permitted Borrower
Guaranty shall be terminated, invalidated, revoked or set aside or in
any way cease to give or provide to the Banks and the Agent the
benefits purported to be created thereby;
(g) any default in the observance, payment or
performance of or failure to comply with any of the conditions,
covenants or agreements of Company or any of its Subsidiaries under the
Existing Senior Debt Documents, the New Senior Debt Documents or any
Subordinated Debt Documents, and the continuance thereof beyond any
period of grace or cure specified in any such document;
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(h) any default in the payment of any other obligation
of Company or any of its Subsidiaries for borrowed money or under a
capital lease in an amount, individually or in the aggregate in excess
of Five Million Dollars ($5,000,000), or the equivalent thereof in any
other currency, as applicable, and the continuance thereof beyond any
applicable period of grace or cure; or any default in the observance or
performance of any conditions, covenants or agreements related or given
with respect to any other obligations for borrowed money or under a
capital lease in an amount, individually or in the aggregate, in excess
of Five Million Dollars ($5,000,000), or the equivalent thereof in any
other currency, as applicable, sufficient to permit the holder thereof
to accelerate the maturity of such obligation;
(i) a final judgment or final judgments for the payment
of money aggregating in excess of Five Million Dollars ($5,000,000), or
the equivalent thereof in any other currency, as applicable, shall be
outstanding against any one or more of the Company and its Subsidiaries
and any one of such judgments shall have been outstanding for more than
thirty (30) days from the date of its entry, except to the extent that
any such judgment is being contested in good faith by appropriate
proceedings which provide for a stay of any enforcement action against
the Company or such Subsidiary during the pendency of such proceedings
and for which adequate reserves have been established and where
nonpayment of such judgment could not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a
whole;
(j) (i) any Person shall engage in any Prohibited
Transaction involving any Pension Plan, (ii) any accumulated funding
deficiency (as defined in Section 7.18 hereof), whether or not waived,
shall exist with respect to any Pension Plan or any Lien in favor of
the PBGC or a Pension Plan shall arise on the assets of the Company or
any ERISA Affiliate, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single
Employer Plan, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA or (v) the Company or any ERISA Affiliate
shall, or in the reasonable opinion of the Majority Banks is likely to,
incur any liability in connection with a withdrawal from, or the
insolvency, bankruptcy or reorganization of, a Multiemployer Plan and
in each case in clauses (i) through (v) above, (x) a period of sixty
(60) days, or more, has elapsed from the occurrence of such event or
condition and (y) such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
material adverse effect upon the Company and its Subsidiaries, taken as
a whole;
(k) (i) any Person or "group" (within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
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as amended), other than the Current Shareholder and Management Group,
shall either (i) acquire beneficial ownership of more than fifty
percent (50%) of any outstanding class of common stock of the Company
having ordinary voting power in the election of the directors of the
Company or (ii) obtain the power (whether or not exercised) to elect a
majority of the Company's board of directors; or (ii) the board of
directors of the Company shall not consist of a majority of Continuing
Directors; or (iii) a "Change in Control" shall occur under the
Existing Senior Debt Documents or the New Senior Debt Documents, as the
case may be, or the Company has issued any "Change of Control Notice"
or "Control Change" Notice hereunder; and
(l) if a receiver, liquidator, custodian or trustee of
the Company, any Guarantor, any Permitted Borrower or any Significant
Subsidiary, or of all or any part of the property of the Company, any
Guarantor, any Permitted Borrower or any Significant Subsidiary, shall
be appointed by court order and such order shall remain in effect for
more than sixty (60) days, or an order for relief shall be entered with
respect to the Company, any Guarantor, any Permitted Borrower or any
Significant Subsidiary, or the Company or any Subsidiary shall be
adjudicated a bankrupt or insolvent; or any of the property of the
Company, any Guarantor, any Permitted Borrower or any Significant
Subsidiary shall be sequestered by court order and such order shall
remain in effect for more than sixty (60) days; or a petition shall be
filed against the Company, any Guarantor, any Permitted Borrower or any
Significant Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, and shall not be dismissed within sixty (60) days after such
filing; or if the Company, any Guarantor, any Permitted Borrower or any
Significant Subsidiary shall file a petition in voluntary bankruptcy or
seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, or shall consent to the filing of any petition against it under
any such law; or if the Company, any Guarantor, any Permitted Borrower
or any Significant Subsidiary shall make an assignment for the benefit
of its creditors, or shall admit in writing its inability, or shall
fail, to pay its debts generally as they become due, or shall consent
to the appointment of a receiver, liquidator or trustee of the Company,
any Guarantor, any Permitted Borrower or any Significant Subsidiary or
of all or any part of the property of the Company, any Guarantor, any
Permitted Borrower or any Significant Subsidiary.
10.2 Exercise of Remedies. If an Event of Default has occurred and
is continuing hereunder: (a) the Agent shall, if directed to do so by the
Majority Banks, declare any commitment of the Banks
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(including the Swing Line Bank) to lend hereunder immediately terminated; (b)
the Agent shall, if directed to do so by the Majority Banks, declare the entire
unpaid principal Indebtedness, including the Notes, immediately due and
payable, without presentment, notice or demand, all of which are hereby
expressly waived by Company and each of the Permitted Borrowers; (c) upon the
occurrence of any Event of Default specified in subsection 10.1 (l), above, and
notwithstanding the lack of any declaration by Agent under preceding clause
(b), the entire unpaid principal Indebtedness, including the Notes, shall
become automatically due and payable; (d) the Agent shall, upon being directed
to do so by the Majority Banks, demand immediate delivery of cash collateral,
and the Company and each Account Party agrees to deliver such cash collateral
upon demand, in an amount equal to the maximum amount that may be available to
be drawn at any time prior to the stated expiry of all outstanding Letters of
Credit, and (e) the Agent shall, if directed to do so by the Majority Banks or
the Banks, as applicable (subject to the terms hereof), exercise any remedy
permitted by this Agreement, the other Loan Documents or law.
10.3 Rights Cumulative. No delay or failure of Agent and/or Banks
in exercising any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof, or the exercise of any other power,
right or privilege. The rights of Banks under this Agreement are cumulative and
not exclusive of any right or remedies which Banks would otherwise have.
10.4 Waiver by Company and the Permitted Borrowers of Certain Laws.
To the extent permitted by applicable law, Company and the Permitted Borrowers
hereby agree to waive, and do hereby absolutely and irrevocably waive and
relinquish the benefit and advantage of any valuation, stay, appraisement,
extension or redemption laws now existing or which may hereafter exist, which,
but for this provision, might be applicable to any sale made under the
judgment, order or decree of any court, on any claim for interest on the Notes,
AND FURTHER HEREBY IRREVOCABLY AGREE TO WAIVE THE RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY AND ALL ACTIONS OR PROCEEDINGS IN WHICH AGENT OR THE BANKS (OR
ANY OF THEM), ON ONE HAND, AND THE COMPANY OR THE PERMITTED BORROWER, ON THE
OTHER HAND, ARE PARTIES, WHETHER OR NOT SUCH ACTIONS OR PROCEEDINGS ARISE OUT
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR OTHERWISE. These waivers have
been voluntarily given, with full knowledge of the consequences thereof.
10.5 Waiver of Defaults. No Event of Default shall be waived by the
Banks except in a writing signed by an officer of the Agent in accordance with
Section 13.14 hereof. No single or partial exercise of any right, power or
privilege hereunder, nor any delay in the exercise thereof, shall preclude
other or further exercise of the Banks' rights by Agent. No waiver of any Event
of Default shall extend to any other or further Event of Default. No
forbearance on the part of the Agent in enforcing any of the Banks'
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rights shall constitute a waiver of any of their rights. Company and each of
the Permitted Borrowers expressly agree that this Section may not be waived or
modified by the Banks or Agent by course of performance, estoppel or otherwise.
11. PAYMENTS, RECOVERIES AND COLLECTIONS.
11.1 Payment Procedure.
(a) All payments by Company and/or by the Permitted
Borrowers of principal of, or interest on, the Revolving Credit Notes,
the Swing Line Note, any Term Notes or of Fees shall be made without
setoff or counterclaim on the date specified for payment under this
Agreement not later than 12:00 noon (Detroit time) in Dollars in
immediately available funds to Agent, for the ratable account of the
Banks, at Agent's office located at One Detroit Center, Detroit,
Michigan 48226, in respect of Domestic Advances. Payments made in
respect of any Advance in any Alternative Currency shall be made in
such Alternative Currency in immediately available funds for the
account of Agent's Eurocurrency Lending Office, at the Agent's
Correspondent, for the ratable account of the Banks, not later than
12:00 noon (the time of Agent's Correspondent). Upon receipt of each
such payment, the Agent shall make prompt payment to each Bank, or, in
respect of Eurocurrency-based Advances, such Bank's Eurocurrency
Lending Office, in like funds and currencies, of all amounts received
by it for the account of such Bank.
(b) Unless the Agent shall have been notified by the
Company prior to the date on which any payment to be made by the
Company or a Permitted Borrower is due that the Company or such
Permitted Borrower does not intend to remit such payment, the Agent
may, in its discretion, assume that the Company or the applicable
Permitted Borrower has remitted such payment when so due and the Agent
may, in reliance upon such assumption, make available to each Bank on
such payment date an amount equal to such Bank's share of such assumed
payment. If the Company or such Permitted Borrower has not in fact
remitted such payment to the Agent, each Bank shall forthwith on demand
repay to the Agent in the applicable currency the amount of such
assumed payment made available to such Bank, together with the interest
thereon, in respect of each day from and including the date such amount
was made available by the Agent to such Bank to the date such amount is
repaid to the Agent at a rate per annum equal to (i) for Domestic
Advances, the Federal Funds Effective Rate, as the same may vary from
time to time, and (ii) with respect to Eurocurrency-based Advances or
Advances in any Alternative Currency, Agent's aggregate marginal cost
(including the cost of maintaining any required reserves or deposit
insurance and of any fees, penalties, overdraft charges or other costs
or expenses incurred by Agent) of carrying such amount.
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(c) Whenever any payment to be made hereunder (other
than payments in respect of any Eurocurrency-based Advance) shall
otherwise be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of
time shall be included in computing interest, if any, in connection
with such payment. Whenever any payment of principal of, or interest
on, a Eurocurrency-based Advance shall be due on a day which is not a
Business Day the date of payment thereof shall be extended to the next
succeeding Business Day unless as a result thereof it would fall in the
next calendar month, in which case it shall be shortened to the next
preceding Business Day and, in the case of a payment of principal,
interest thereon shall be payable for such extended or shortened time,
if any.
(d) All payments to be made by the Company or any of the
Permitted Borrowers under this Agreement or any of the Notes (including
without limitation payments under the Swing Line Note) shall be made
without set-off or counterclaim, as aforesaid, and without deduction
for or on account of any present or future withholding or other taxes
of any nature imposed by any governmental authority or of any political
subdivision thereof or any federation or organization of which such
governmental authority may at the time of payment be a member, unless
Company or the applicable Permitted Borrower, as the case may be, is
compelled by law to make payment subject to such tax. In such event,
Company and the applicable Permitted Borrower shall:
(i) pay to the Agent for Agent's own account
and/or, as the case may be, for the account
of the Banks (and, in the case of any Swing
Line Advances, pay to the Swing Line Bank
which funded such Advances) such additional
amounts as may be necessary to ensure that
the Agent and/or such Bank or Banks receive a
net amount in the applicable Permitted
Currency equal to the full amount which would
have been receivable had payment not been
made subject to such tax; and
(ii) remit such tax to the relevant taxing
authorities according to applicable law, and
send to the Agent or the applicable Bank
(including the Swing Line Bank) or Banks, as
the case may be, such certificates or
certified copy receipts as the Agent or such
Bank or Banks shall reasonably require as
proof of the payment by the Company or the
applicable Permitted Borrower of any such
taxes payable by the Company or the
applicable Permitted Borrower.
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As used herein, the terms "tax", "taxes" and "taxation" include all
existing taxes, levies, imposts, duties, charges, fees, deductions and
withholdings and any restrictions or conditions resulting in a charge together
with interest thereon and fines and penalties with respect thereto which may be
imposed by reason of any violation or default with respect to the law regarding
such tax, assessed as a result of or in connection with the transactions in any
Alternative Currency hereunder, or the payment and or receipt of funds in any
Alternative Currency hereunder, or the payment or delivery of funds into or out
of any jurisdiction other than the United States (whether assessed against
Company, any of the Permitted Borrowers, Agent or any of the Banks).
11.2 Application of Proceeds. Notwithstanding anything to the
contrary in this Agreement, after an Event of Default, the proceeds of any
offsets, voluntary payments by the Company or any of the Permitted Borrowers or
others and any other sums received or collected in respect of the Indebtedness,
shall be applied, first, to the Notes in such order and manner as determined by
the Majority Banks (subject, however, to the applicable Percentages of the
Indebtedness held by each of the Banks), next, to any other Indebtedness on a
pro rata basis, and then, if there is any excess, to the Company or the
Permitted Borrowers, as the case may be. The application of such proceeds and
other sums to the Notes shall be based on each Bank's Percentage of the
aggregate Indebtedness.
11.3 Pro-rata Recovery. If any Bank shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of offset or
otherwise) on account of principal of, or interest on, any of the Notes in
excess of its pro rata share of payments then or thereafter obtained by all
Banks upon principal of and interest on all Notes, such Bank shall purchase
from the other Banks such participations in the Notes held by them as shall be
necessary to cause such purchasing Bank to share the excess payment or other
recovery ratably in accordance with the Percentages with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing holder, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, but without interest.
11.4 Deposits and Accounts. In addition to and not in limitation of
any rights of any Bank or other holder of any of the Notes under applicable
law, each Bank and each other such holder shall, upon acceleration of the
indebtedness under the Notes and without notice or demand of any kind, have the
right to set-off, appropriate and apply to the payment of the Notes owing to it
(whether or not then due) any and all balances, credits, deposits, accounts or
moneys of Company or any of the Permitted Borrowers then or thereafter with
such Bank or other holder; provided, however, that any such amount so applied
by any Bank or other holder on any of the Notes owing to it shall be subject to
the provisions of Section 11.3 hereof.
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12. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.
12.1 Reimbursement of Prepayment Costs. If Company or any of the
Permitted Borrowers makes any payment of principal with respect to any
Eurocurrency-based Advance or Quoted Rate Advance on any day other than the
last day of the Interest Period applicable thereto (whether voluntarily, by
acceleration, or otherwise) or converts or refunds, (or attempt to convert or
refund) any such Advance, or if Company or any of the Permitted Borrowers fails
to borrow, refund or convert any Eurocurrency-based Advance or Quoted Rate
Advance after notice has been given by Company or such Permitted Borrower to
Agent in accordance with the terms hereof requesting such Advance, or if
Company or any of the Permitted Borrowers fails to make any payment of
principal or interest in respect of a Eurocurrency-based Advance or Quoted Rate
Advance when due, Company and the applicable Permitted Borrower shall reimburse
Agent and Banks, as the case may be on demand for any resulting loss, cost or
expense incurred by Agent or any of the Banks, as the case may be as a result
thereof, including, without limitation, any such loss, cost or expense incurred
in obtaining, liquidating, employing or redeploying deposits from third
parties, whether or not Agent and such Banks, as the case may be, shall have
funded or committed to fund such Advance, but excluding loss of the Applicable
Margin. Such amount payable by Company and the applicable Permitted Borrower to
Agent and Banks, as the case may be, may include, without limitation, an amount
equal to the excess, if any, of (a) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, refunded or converted,
for the period from the date of such prepayment or of such failure to borrow,
refund or convert, through the last day of the relevant Interest Period, at the
applicable rate of interest for said Advance(s) provided under this Agreement
(excluding the Applicable Margin, if any), over (b) the amount of interest (as
reasonably determined by Agent and or any of the Banks, as the case may be)
which would have accrued to Agent or such Bank(s), as the case may be, on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurocurrency market. Calculation of any amounts payable
to any Bank under this paragraph shall be made as though each such Bank shall
have actually funded or committed to fund the relevant Advance through the
purchase of an underlying deposit in an amount equal to the amount of such
Advance and having a maturity comparable to the relevant Interest Period;
provided, however, that any Bank may fund any Eurocurrency-based Advance or
Quoted Rate Advance in any manner it deems fit and the foregoing assumptions
shall be utilized only for the purpose of the calculation of amounts payable
under this paragraph. Upon the written request of Company, Agent and the
applicable Bank(s) shall deliver to Company a certificate setting forth in
reasonable detail the basis for determining such losses, costs and expenses,
which certificate shall be rebuttably presumptive evidence thereof, absent
demonstrable error.
12.2 Eurocurrency Lending Office. For any Advance in any
Alternative Currency or to which the Eurocurrency-based Rate is
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applicable, if Agent or a Bank, as applicable, shall designate a Eurocurrency
Lending Office which maintains books separate from those of the rest of Agent
or such Bank, Agent or such Bank, as the case may be, shall have the option of
maintaining and carrying the relevant Advance on the books of such Eurocurrency
Lending Office.
12.3 Availability of Alternative Currency. The Agent and the Banks
shall not be required to make any Advance requested to be made in an
Alternative Currency if, at any time prior to making such Advance, the Agent or
any of the Reference Banks (after consultation with Agent) shall determine, in
its or their sole discretion, that (i) deposits in the applicable Alternative
Currency in the amounts and maturities required to fund such Advance will not
be available to the Agent and the Banks; (ii) a fundamental change has occurred
in the foreign exchange or interbank markets with respect to the applicable
Alternative Currency (including, without limitation, changes in national or
international financial, political or economic conditions or currency exchange
rates or exchange controls); or (iii) it has become otherwise materially
impracticable for the Agent or the Banks, as applicable, to make such Advance
in the applicable Alternative Currency. The Agent or the applicable Bank, as
the case may be, shall promptly notify the Company and Banks of any such
determination.
12.4 Refunding Advances in Same Currency. If pursuant to any
provisions of this Agreement, the Company or any of the Permitted Borrowers
repays one or more Advances and on the same day borrows an amount in the same
currency, the Agent (or the Swing Line Bank, in the case of a Swing Line
Advance) shall apply the proceeds of such new borrowing to repay the principal
of the Advance or Advances being repaid and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be remitted by the Agent to the Company or the applicable
Permitted Borrower, or by the Company or the applicable Permitted Borrower to
the Agent, as the case may be.
12.5 Circumstances Affecting Eurocurrency-based Rate or Alternative
Currency Availability. If with respect to any Interest Period Agent or any of
the Reference Banks (after consultation with Agent) shall determine that, by
reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in eurodollars or in any applicable Alternative Currency,
as the case may be, in the applicable amounts are not being offered to the
Agent or such Bank for such Interest Period, then Agent shall forthwith give
notice thereof to the Company and the applicable Permitted Borrower.
Thereafter, until Agent notifies Company and the applicable Permitted Borrower
that such circumstances no longer exist, (i) the obligation of Banks to make
Eurocurrency-based Advances (other than in any applicable Alternative Currency
with respect to which deposits are available, as required hereunder), and the
right of Company or any Permitted Borrower to convert an Advance to or refund
an Advance as a Eurocurrency-based Advance, as the case may be (other than in
any applicable Alternative Currency
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with respect to which deposits are available, as required hereunder), shall be
suspended, and (ii) the Company and the applicable Permitted Borrower shall
repay in full (or cause to be repaid in full) the then outstanding principal
amount of each such Eurocurrency-based Advance covered hereby in the
applicable Permitted Currency, together with accrued interest thereon, any
amounts payable under Sections 12.1 and 12.6, hereof, and all other amounts
payable hereunder on the last day of the then current Interest Period
applicable to such Advance. Upon the date for repayment as aforesaid and unless
Company or the applicable Permitted Borrower notifies Agent to the contrary
within two (2) Business Days after receiving a notice from Agent pursuant to
this Section, such outstanding principal amount shall be converted to a
Prime-based Advance (based on the Current Dollar Equivalent of any Advance
denominated in an Alternative Currency) as of the last day of such Interest
Period.
12.6 Laws Affecting Eurocurrency-based or Alternative Currency
Advance Availability. If, after the date hereof, the introduction of, or any
change in, any applicable law, rule or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any of the Banks (or
any of their respective Eurocurrency Lending Offices) with any request or
directive (whether or not having the force of law) of any such authority, shall
make it unlawful or impossible for any of the Banks (or any of their respective
Eurocurrency Lending Offices) to honor its obligations hereunder to make or
maintain any Advance with interest at the Eurocurrency-based Rate or in an
Alternative Currency, such Bank shall forthwith give notice thereof to Company
and to Agent. Thereafter, (a) the obligations of Banks to make
Eurocurrency-based Advances or Advances in any such Alternative Currency and
the right of Company to convert an Advance into or refund an Advance as a
Eurocurrency-based Advance or as an Advance in any such Alternative Currency
shall be suspended and thereafter Company may select as Applicable Interest
Rates or as Alternative Currencies only those which remain available and which
are permitted to be selected hereunder, and (b) if any of the Banks may not
lawfully continue to maintain an Advance to the end of the then current
Interest Period applicable thereto as a Eurocurrency-based Advance or in such
Alternative Currency, the applicable Advance shall immediately be converted to
a Prime-based Advance (based on the Current Dollar Equivalent of any Advances
denominated in any Alternative Currency) and the Prime-based Rate shall be
applicable thereto for the remainder of such Interest Period. For purposes of
this Section, a change in law, rule, regulation, interpretation or
administration shall include, without limitation, any change made or which
becomes effective on the basis of a law, rule, regulation, interpretation or
administration presently in force, the effective date of which change is
delayed by the terms of such law, rule, regulation, interpretation or
administration.
12.7 Increased Cost of Eurocurrency-based or Alternative Currency
Advances. If the adoption after the date hereof, or any
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change after the date hereof in, any applicable law, rule or regulation of or
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Agent or any of the Banks (or any of
their respective Eurocurrency Lending Offices) with any request or directive
(whether or not having the force of law) made by any such authority, central
bank or comparable agency after the date hereof:
(a) shall subject any of the Banks (or any of their
respective Eurocurrency Lending Offices) to any tax, duty or other
charge with respect to any Advance or any Note or shall change the
basis of taxation of payments to any of the Banks (or any of their
respective Eurocurrency Lending Offices) of the principal of or
interest on any Advance or any Note or any other amounts due under this
Agreement in respect thereof (except for changes in the rate of tax on
the overall net income of any of the Banks or any of their respective
Eurocurrency Lending Offices imposed by the jurisdiction in which such
Bank's principal executive office or Eurocurrency Lending Office is
located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by any of the Banks (or any of their respective Eurocurrency
Lending Offices) or shall impose on any of the Banks (or any of their
respective Eurocurrency Lending Offices) or the foreign exchange and
interbank markets any other condition affecting any Advance or any of
the Notes;
and the result of any of the foregoing is to increase the costs to any of the
Banks of maintaining any part of the Indebtedness hereunder as a
Eurocurrency-based Advance or as an Advance in any Alternative Currency or to
reduce the amount of any sum received or receivable by any of the Banks under
this Agreement or under the Notes in respect of a Eurocurrency-based Advance or
any Advance in an Alternative Currency, whether with respect to Advances to
Company or to any of the Permitted Borrowers, then such Bank shall promptly
notify Agent (or, in the case of a Swing Line Advance, shall notify Company and
the applicable Permitted Borrower directly, with a copy of such notice to
Agent), and Agent (or such Bank, as aforesaid) shall promptly notify Company
and the applicable Permitted Borrower of such fact and demand compensation
therefor and, within thirty (30) days after such notice, Company and the
applicable Permitted Borrowers agree to pay to such Bank such additional amount
or amounts as will compensate such Bank or Banks for such increased cost or
reduction. Agent will promptly notify Company and the applicable Permitted
Borrower of any event of which it has knowledge which will entitle Banks to
compensation pursuant to this Section, or which will cause Company or Permitted
Borrower to incur additional liability under Sections 12.1 and 12.8
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hereof, provided that Agent shall incur no liability whatsoever to the Banks,
Company or any of the Permitted Borrowers in the event it fails to do so. A
certificate of Agent (or such Bank, if applicable) setting forth in reasonable
detail the basis for determining such additional amount or amounts necessary to
compensate such Bank or Banks shall be presumed to be correct, save for
demonstrable error. For purposes of this Section, a change in law, rule,
regulation, interpretation, administration, request or directive shall include,
without limitation, any change made or which becomes effective on the basis of
a law, rule, regulation, interpretation, administration, request or directive
presently in force, the effective date of which change is delayed by the terms
of such law, rule, regulation, interpretation, administration, request or
directive.
12.8 Indemnity. The Company and each of the Permitted Borrowers
will indemnify Agent and each of the Banks against any loss or expense which
may arise or be attributable to the Agent's and each Bank's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain the Advances (a) as a consequence of any failure by the Company or the
applicable Permitted Borrower to make any payment when due of any amount due
hereunder in connection with a Eurocurrency-based Advance or Advance in any
Alternative Currency, (b) due to any failure of the Company or the applicable
Permitted Borrower to borrow, refund or convert on a date specified therefor in
a Request for Advance or request for Swing Line Advance or (c) due to any
payment, prepayment or conversion of any Eurocurrency-based Advance or Advance
in any Alternative Currency on a date other than the last day of the Interest
Period for such Advance. Such loss or expense shall be calculated based upon
the present value, as applicable, of payments due from the Company or the
applicable Permitted Borrower with respect to a deposit obtained by the Agent
or any of the Banks in order to fund such Advance to the Company or to the
applicable Permitted Borrower. The Agent's and each Bank's, as applicable,
calculations of any such loss or expense shall be furnished to the Company in
reasonable detail and shall be presumed correct, absent demonstrable error.
12.9 Judgment Currency. The obligation of the Company and Permitted
Borrowers to make payments of the principal of and interest on the Notes and
any other amounts payable hereunder in the currency specified for such payment
herein or in the Notes shall not be discharged or satisfied by any tender, or
any recovery pursuant to any judgment, which is expressed in or converted into
any other currency, except to the extent that such tender or recovery shall
result in the actual receipt by each of the Banks of the full amount of the
particular Permitted Currency expressed to be payable herein or in the Notes.
The Agent (or the Swing Line Bank, as applicable) shall, using all amounts
obtained or received from the Company and from the Permitted Borrowers pursuant
to any such tender or recovery in payment of principal of and interest on the
Notes, promptly purchase the applicable Permitted Currency at the most
favorable spot exchange rate determined by the Agent (or
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the Swing Line Bank, as applicable) to be available to it. The obligation of
the Company and the Permitted Borrowers to make payments in the applicable
Permitted Currency shall be enforceable as an alternative or additional cause
of action solely for the purpose of recovering in the applicable Permitted
Currency the amount, if any, by which such actual receipt shall fall short of
the full amount of the Permitted Currency expressed to be payable herein or in
the Notes.
12.10 Other Increased Costs. In the event that at any time after
the date of this Agreement any change in law such as described in Section 12.7
hereof, shall require that the Revolving Credit, the Swing Line, the Banks'
commitments to fund Term Loans hereunder or any other Indebtedness or
commitment under this Agreement or any of the other Loan Documents be treated
as an asset or otherwise be included for purposes of calculating the
appropriate amount of capital to be maintained by each of the Banks or any
corporation controlling such Banks, as the case may be (or shall increase the
amount of capital required under such law, as of the date hereof, to be so
maintained), the Agent, in consultation with the Banks, shall notify the
Company. The Company and the Agent shall thereafter negotiate in good faith an
agreement to increase the Revolving Credit Commitment Fee or other fees payable
to the Agent, for the benefit of the Banks under this Agreement, which in the
opinion of the Agent (in consultation with the Banks), will adequately
compensate the Banks for the costs associated with such change in law. If such
increase is approved in writing by the Company within thirty (30) days from the
date of the notice to the Company from the Agent, the Revolving Credit
Commitment Fee or other fees (if applicable) payable by the Company under this
Agreement shall, effective from the date of such agreement, include the amount
of such agreed increase. If the Company and the Agent are unable to agree on
such an increase within thirty (30) days from the date of the notice to the
Company, the Company shall have the option, exercised by written notice to the
Agent within forty-five (45) days from the date of the aforesaid notice to the
Company from the Agent, to terminate the Revolving Credit, the Swing Line or
any commitments to fund Term Loans hereunder, as the case may be, or other
commitments if applicable, in which event, all sums then outstanding to Banks
and to Agent hereunder shall be due and payable in full. If (a) the Company and
the Agent (in consultation with the Banks) fail to agree on an increase in the
Revolving Credit Commitment Fee or other fees (if applicable) and (b) the
Company fails to give timely notice that it has elected to exercise its option
to terminate the Revolving Credit, the Swing Line or any commitments to fund
Term Loans hereunder or other commitments, if applicable, as set forth above,
then the Revolving Credit, the Swing Line or any commitments to fund Term Loans
hereunder and/or such other commitments shall automatically terminate as of the
last day of the aforesaid forty-five (45) day period, in which event all sums
then outstanding to Banks and to Agent hereunder shall be due and payable in
full.
13. AGENT
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13.1 Appointment of Agent. Each Bank and the holder of each Note
appoints and authorizes Agent to act on behalf of such Bank or holder under the
Loan Documents and to exercise such powers hereunder and thereunder as are
specifically delegated to or required of Agent by the terms hereof and thereof,
together with such powers as may be reasonably incidental thereto. Each Bank
agrees (which agreement shall survive any termination of this Agreement) to
reimburse Agent for all reasonable out-of-pocket expenses (including in-house
and outside attorneys' fees) incurred by Agent hereunder or in connection
herewith or with an Event of Default or in enforcing the obligations of Company
or any of the Permitted Borrowers under this Agreement or the other Loan
Documents or any other instrument executed pursuant hereto, and for which Agent
is not reimbursed by Company or any of Permitted Borrowers, pro rata according
to such Bank's Percentage, but excluding any such expenses resulting from
Agent's gross negligence or willful misconduct. Agent shall not be required to
take any action under the Loan Documents, or to prosecute or defend any suit in
respect of the Loan Documents, unless indemnified to its satisfaction by the
Banks against loss, costs, liability and expense (excluding liability resulting
from its gross negligence or willful misconduct). If any indemnity furnished to
Agent shall become impaired, it may call for additional indemnity and cease to
do the acts indemnified against until such additional indemnity is given.
13.2 Deposit Account with Agent. Company and each of the Permitted
Borrowers may, by written notice to Agent, authorize Agent to charge their
respective general deposit accounts, if any, maintained with Agent for the
amount of any principal, interest, or other amounts or costs due under this
Agreement when the same shall become due and payable under the terms of this
Agreement or the Notes.
13.3 Exculpatory Provisions. Agent agrees to exercise its rights
and powers, and to perform its duties, as Agent hereunder and under the other
Loan Documents in accordance with its usual customs and practices in
bank-agency transactions, but only upon and subject to the express terms and
conditions of this Section 13 (and no implied covenants or other obligations
shall be read into this Agreement against the Agent); neither Agent nor any of
its directors, officers, employees or agents shall be liable to any Bank for
any action taken or omitted to be taken by it or them under this Agreement or
any document executed pursuant hereto, or in connection herewith or therewith,
except for its or their own willful misconduct or gross negligence, nor be
responsible for any recitals or warranties herein or therein, or for the
effectiveness, enforceability, validity or due execution of this Agreement or
any document executed pursuant hereto, or any security thereunder, or to make
any inquiry respecting the performance by Company, any of its Subsidiaries or
the Permitted Borrowers of their respective obligations hereunder or
thereunder. Nor shall Agent have, or be deemed to have, a fiduciary
relationship with any Bank by reason of this Agreement. Agent shall be entitled
to rely upon advice of
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counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which it believes to be genuine and to have been presented
by a proper person.
13.4 Successor Agents. Agent may resign as such at any time upon
at least 30 days prior notice to Company and all Banks. If Agent at any time
shall resign or if the office of Agent shall become vacant for any other
reason, Majority Banks shall, by written instrument, appoint a successor Agent
(consisting of Co-Agent, or of any other Bank or financial institution
satisfactory to such Majority Banks and, provided that no Default or Event of
Default has occurred and is continuing, to Company, such approval of Company
not to be unreasonably withheld or delayed) which shall thereupon become Agent
hereunder and shall be entitled to receive from the prior Agent such documents
of transfer and assignment as such successor Agent may reasonably request. Such
successor Agent shall succeed to all of the rights and obligations of the
retiring Agent as if originally named. The retiring Agent shall duly assign,
transfer and deliver to such successor Agent all moneys at the time held by the
retiring or removed Agent hereunder after deducting therefrom its expenses for
which it is entitled to be reimbursed. Upon such succession of any such
successor Agent, the retiring agent shall be discharged from its duties and
obligations hereunder, except for its gross negligence or willful misconduct
arising prior to its retirement hereunder, and the provisions of this Section
13 shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
13.5 Loans by Agent. Agent shall have the same rights and powers
with respect to the credit extended by it and the Notes held by it as any Bank
and may exercise the same as if it were not Agent, and the term "Bank" and,
when appropriate, "holder" shall include Agent in its individual capacity.
13.6 Credit Decisions. Each Bank acknowledges that it has,
independently of Agent and each other Bank and based on the financial
statements of Company, the Permitted Borrowers and their respective
Subsidiaries and such other documents, information and investigations as it has
deemed appropriate, made its own credit decision to extend credit hereunder
from time to time. Each Bank also acknowledges that it will, independently of
Agent and each other Bank and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any document
executed pursuant hereto.
13.7 Notices by Agent. Agent shall give prompt notice to each Bank
of its receipt of each notice or request required or permitted to be given to
Agent by Company or any of the Permitted Borrowers pursuant to the terms of
this Agreement and shall promptly distribute to the Banks any reports received
from the Company or any of its Subsidiaries or the Permitted Borrowers under
the terms
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hereof, or other material information or documents received by Agent, in its
capacity as Agent, from the Company, its Subsidiaries or the Permitted
Borrowers.
13.8 Agent's Fees. Commencing on August 1, 1996 and on each
succeeding anniversary date thereof until the Indebtedness has been repaid and
no commitment to fund any loan hereunder is outstanding, the Company and the
Permitted Borrowers, jointly and severally, shall pay to Agent an annual agency
fee set forth (or to be set forth from time to time) in a letter agreement
between or among Company, Permitted Borrowers and Agent. The Agent's Fees
described in this Section 13.8 shall not be refundable under any circumstances.
13.9 Nature of Agency. The appointment of Agent as agent hereunder
is for the convenience of Banks, Company and the Permitted Borrowers in making
Advances of the Revolving Credit, the Swing Line, Term Loans and any other
Indebtedness of Company or the Permitted Borrowers hereunder, and collecting
fees and principal and interest on the Indebtedness. No Bank is purchasing any
Indebtedness from Agent and this Agreement is not intended to be, and shall not
constitute, a purchase or participation agreement.
13.10 Actions; Confirmation of Agent's Authority to Act in Event of
Default. Subject to the terms and conditions of this Agreement (including
without limitation any required approval or direction of the Majority Banks or
Banks, as applicable, to be obtained by or given to Agent hereunder) Agent (in
its capacity as Agent, but not in its capacity as issuing bank under any Letter
of Credit) is hereby expressly authorized to act in all litigation by or
against Agent and in all other respects as the representative of the Banks to
the full extent of any approval or direction of the Majority Banks or the
Banks, as applicable, obtained by or given to Agent hereunder. Without
necessarily accepting service of process or designating Agent to do so in its
stead, each Bank hereby agrees with each other Bank and with Agent, but without
intending to confer or conferring any rights on any other party, (a) that it
shall be bound by any litigation brought by or against Agent by the Company,
any Subsidiary, any of the Permitted Borrowers or any other party in connection
with the Indebtedness or any other rights, duties or obligations arising
hereunder or under this Agreement or the other Loan Documents and (b) that it
now irrevocably waives the defense of procedural impediment or failure to name
or join such Bank as an indispensable party. In conducting such litigation
hereunder on behalf of the Banks, Agent shall at all times be indemnified by
the Banks as provided in Sections 13.1 and 13.12 hereof. Agent shall undertake
to give each Bank prompt written notice of any litigation commenced against
Agent and/or the Banks with respect to this Agreement or the other Loan
Documents or any matter referred to herein or therein.
13.11 Authority of Agent to Enforce Notes and This Agreement. Each
Bank, subject to the terms and conditions of this Agreement (including without
limitation any required approval or
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direction of the Majority Banks or the Banks, as applicable, to be obtained by
or given to the Agent hereunder), authorizes the Agent with full power and
authority as attorney-in-fact to institute and maintain actions, suits or
proceedings for the collection and enforcement of the Notes, this Agreement and
the other Loan Documents and to file such proofs of debt or other documents as
may be necessary to have the claims of the Banks allowed in any proceeding
relative to the Company, any of its Subsidiaries, any of the Permitted
Borrowers or each such party's creditors or affecting each such party's
properties, and to take such other actions which Agent considers to be
necessary or desirable for the protection, collection and enforcement of the
Notes, this Agreement or the other Loan Documents, but in each case only to the
extent of any required approval or direction of the Majority Banks or the
Banks, as applicable, obtained by or given to the Agent hereunder.
13.12 Indemnification. The Banks agree to indemnify the Agent in
its capacity as such, to the extent not reimbursed by the Company or the
Permitted Borrowers, pro rata according to their respective Percentages, from
and against any and all claims, liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this Agreement or
any of the other Loan Documents or any action taken or omitted to be taken or
suffered in good faith by the Agent hereunder, provided that no Bank shall be
liable for any portion of any of the foregoing items resulting from the gross
negligence or willful misconduct of the Agent or any of its officers,
employees, directors or agents.
13.13 Knowledge of Default. It is expressly understood and agreed
that the Agent shall be entitled to assume that no Default or Event of Default
has occurred and is continuing, unless the officers of the Agent immediately
responsible for matters concerning this Agreement shall have actual (rather
than constructive) knowledge of such occurrence or shall have been notified in
writing by a Bank that such Bank considers that a Default or an Event of
Default has occurred and is continuing, and specifying the nature thereof. Upon
obtaining actual knowledge of any Default or Event of Default as described
above, the Agent shall promptly, but in any event within three (3) Business
Days after obtaining knowledge thereof, notify each Bank of such Default or
Event of Default and the action, if any, the Agent proposes be taken with
respect thereto.
13.14 Agent's Authorization; Action by Banks. Except as otherwise
expressly provided herein, whenever the Agent is authorized and empowered
hereunder on behalf of the Banks to give any approval or consent, or to make
any request, or to take any other action on behalf of the Banks (including
without limitation the exercise of any right or remedy hereunder or under the
other Loan Documents), the Agent shall be required to give such approval or
consent, or to make such request or to take such other action
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only when so requested in writing by the Majority Banks or the Banks, as
applicable hereunder. Action that may be taken by Majority Banks or all of the
Banks, as the case may be (as provided for hereunder), may be taken (i)
pursuant to a vote at a meeting (which may be held by telephone conference
call) as to which all of the Banks have been given reasonable advance notice
(subject to the requirement that amendments, waivers or consents under Section
14.11 hereof be made in writing by the Majority Banks or all of the Banks, as
applicable), or (ii) pursuant to the written consent of the requisite
Percentages of the Banks as required hereunder, provided that all of the Banks
are given reasonable advance notice of the requests for such consent.
13.15 Enforcement Actions by the Agent. Except as otherwise
expressly provided under this Agreement or in any of the other Loan Documents
and subject to the terms hereof, Agent will take such action, assert such
rights and pursue such remedies under this Agreement and the other Loan
Documents as the Majority Banks or all of the Banks, as the case may be (as
provided for hereunder), shall direct. Except as otherwise expressly provided
in any of the Loan Documents, Agent will not (and will not be obligated to)
take any action, assert any rights or pursue any remedies under this Agreement
or any of the other Loan Documents in violation or contravention of any express
direction or instruction of the Majority Banks or all of the Banks, as the case
may be (as provided for hereunder). Agent may refuse (and will not be
obligated) to take any action, assert any rights or pursue any remedies under
this Agreement or any of the other Loan Documents in the absence of the express
written direction and instruction of the Majority Banks or all of the Banks, as
the case may be (as provided for hereunder). In the event Agent fails, within
a commercially reasonable time, to take such action, assert such rights, or
pursue such remedies as the Majority Banks or all of the Banks, as the case may
be (as provided for hereunder), shall direct in conformity with this Agreement,
the Majority Banks or all of the Banks, as the case may be (as provided for
hereunder), shall have the right to take such action, to assert such rights, or
pursue such remedies on behalf of all of the Banks unless the terms hereof
otherwise require the consent of all the Banks to the taking of such actions
(in which event all of the Banks must join in such action).
13.16 Co-Agent. Harris Bank has been designated by the Company as
"Co-Agent" under this Agreement. Other than its rights and remedies as a Bank
hereunder, Co-Agent shall have no administrative, collateral or other rights or
responsibilities, provided, however, that Co-Agent shall be entitled to the
benefits afforded to Agent under Sections 13.5 and 13.6 hereof.
14. MISCELLANEOUS
14.1 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation
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is required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP.
14.2 Consent to Jurisdiction. The Company and each of the
Permitted Borrowers hereby irrevocably submit to the non-exclusive
jurisdiction of any United States Federal or Michigan state court sitting in
Detroit in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents and the Company and each of the
Permitted Borrowers hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in any such United States
Federal or Michigan state court. Each of the Permitted Borrowers irrevocably
appoints the Company as its agent for service of process. The Company and each
of the Permitted Borrowers irrevocably consent to the service of any and all
process in any such action or proceeding brought in any court in or of the
State of Michigan by the delivery of copies of such process to the Company at
its address specified on the signature page hereto or by certified mail
directed to such address. Nothing in this Section shall affect the right of the
Banks and the Agent to serve process in any other manner permitted by law or
limit the right of the Banks or the Agent (or any of them) to bring any such
action or proceeding against the Company or any of the Permitted Borrowers or
any of its or their property in the courts of any other jurisdiction. The
Company and each of the Permitted Borrowers hereby irrevocably waive any
objection to the laying of venue of any such suit or proceeding in the above
described courts.
14.3 Law of Michigan. This Agreement, the Notes and the other Loan
Documents have been delivered at Detroit, Michigan, and shall be governed by
and construed and enforced in accordance with the laws of the State of
Michigan, except to the extent that the Uniform Commercial Code, other personal
property law or real property law of a jurisdiction where Collateral is located
is applicable and except as and to the extent expressed to the contrary in any
of the Loan Documents. Whenever possible each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
14.4 Interest. In the event the obligation of the Company or the
Permitted Borrowers to pay interest on the principal balance of any of the
Notes is or becomes in excess of the maximum interest rate which the Company or
any of the Permitted Borrowers is permitted by law to contract or agree to pay,
giving due consideration to the execution date of this Agreement, then, in that
event, the rate of interest applicable with respect to such Bank's Percentage
shall be deemed to be immediately reduced to such maximum rate and all previous
payments in excess of the maximum
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rate shall be deemed to have been payments in reduction of principal and not of
interest.
14.5 Closing Costs; Other Costs. Each of the Company and the
Permitted Borrowers, jointly and severally, shall pay or reimburse (a) Agent
for payment of, on demand, all reasonable closing costs and expenses,
including, by way of description and not limitation, reasonable in-house and
outside attorney fees and advances, appraisal and accounting fees, lien search
fees, and required travel costs, incurred by Agent in connection with the
commitment, consummation and closing of the loans or advances contemplated
hereby, or in connection with any refinancing or restructuring of the loans or
Advances provided under this Agreement or the other Loan Documents, or any
amendment thereof requested by Company or any of the Permitted Borrowers, and
(b) Agent and each of the Banks, as the case may be, for all stamp and other
taxes and duties payable or determined to be payable in connection with the
execution, delivery, filing or recording of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby, and any
and all liabilities with respect to or resulting from any delay in paying or
omitting to pay such taxes or duties. Furthermore, all reasonable costs and
expenses, including without limitation attorney fees, incurred by Agent and,
after the occurrence and during the continuance of an Event of Default, by the
Banks, in revising, preserving, protecting, exercising or enforcing any of its
or any of the Banks' rights against Company or any of the Permitted Borrowers,
or otherwise incurred by Agent and the Banks in connection with any Event of
Default or the enforcement of the loans (whether incurred through negotiations,
legal proceedings or otherwise), including by way of description and not
limitation, such charges in any court or bankruptcy proceedings or arising out
of any claim or action by any person against Agent or any Bank which would not
have been asserted were it not for Agent's or such Bank's relationship with
Company and the Permitted Borrowers hereunder or otherwise, shall also be paid
by Company and each of the Permitted Borrowers. All of the amounts required to
be paid by Company and Permitted Borrowers hereunder and not paid forthwith
upon demand, as aforesaid, shall bear interest, from the date incurred to the
date payment is received by Agent, at the Prime-based Rate, plus two percent
(2%).
14.6 Notices. Except as otherwise provided herein, all notices or
demand hereunder to the parties hereto shall be sufficient if made in writing
and delivered by messenger or deposited in the mail, postage prepaid, certified
mail, and addressed to the parties as set forth on the signature pages of this
Agreement and to each of the Permitted Borrowers at the Company's address. Any
notice or demand given to the Company hereunder shall be deemed given to each
of the Permitted Borrowers, whether or not said notice or demand is addressed
to or received by such Permitted Borrowers.
14.7 Further Action. Company and each of the Permitted Borrowers,
from time to time, upon written request of Agent, will
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<PAGE> 135
make, execute, acknowledge and deliver or cause to be made, executed,
acknowledged and delivered, all such further and additional instruments, and
take all such further action, as may be reasonably required to carry out the
intent and purpose of this Agreement, and to provide for Advances under and
payment of the Notes, according to the intent and purpose herein and therein
expressed.
14.8 Successors and Assigns; Assignments and Participations.
(a) This Agreement shall be binding upon and shall inure
to the benefit of Company and the Permitted Borrowers and the Banks and their
respective successors and assigns.
(b) The foregoing shall not authorize any assignment by
Company or any of the Permitted Borrowers, of its rights or duties hereunder,
and no such assignment shall be made (or effective) without the prior written
approval of the Banks.
(c) The Company, the Permitted Borrowers and Agent
acknowledge that each of the Banks may at any time and from time to time,
subject to the terms and conditions hereof, assign or grant participations in
such Bank's rights and obligations hereunder and under the other Loan Documents
to any commercial bank, the identity of which institution is approved by
Company and Agent, such approval not to be unreasonably withheld or delayed;
provided, however, that (i) the approval of Company shall not be required upon
the occurrence and during the continuance of a Default or Event of Default and
(ii) the approval of Company and Agent shall not be required for any such sale,
transfer, assignment or participation to the Affiliate of an assigning Bank,
any other Bank or any such sale, transfer, assignment, participation or pledge
to any Federal Reserve Bank ("Federal Reserve Transfer"); and provided further
that, absent the prior written approval of Company (which shall not be required
upon the occurrence and during the continuance of a Default or Event of
Default) and Agent, the aggregate assignments and participation interests sold
by a Bank (other than pursuant to subparagraph (ii) of this Section 14.8(c)) do
not exceed fifty percent (50%) of its original interest therein. The Company
and each of the Permitted Borrowers authorize each Bank to disclose to any
prospective assignee or participant, once approved by Company and Agent, any
and all financial information in such Bank's possession concerning the Company
and the Permitted Borrowers which has been delivered to such Bank pursuant to
this Agreement; provided that each such prospective participant shall execute a
confidentiality agreement consistent with the terms of Section 14.13 hereof.
(d) Each assignment by a Bank of any portion of its rights
and obligations hereunder and under the other Loan Documents (other than any
Federal Reserve Transfer) shall be made pursuant to an Assignment Agreement
substantially (as determined by Agent) in the form attached hereto as Exhibit
"N" (with appropriate
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<PAGE> 136
insertions acceptable to Agent) and shall be subject to the terms and
conditions hereof, and to the following restrictions:
(i) each assignment shall cover all of the Notes
issued by Company and the Permitted Borrowers
hereunder to the assigning Bank (and not any
particular note or notes), and shall be for a
fixed and not varying percentage thereof,
with the same percentage applicable to each
such Note;
(ii) each assignment shall be in a minimum amount
of Ten Million Dollars ($10,000,000) or, as
applicable, the Alternative Currency
equivalent thereof;
(iii) no assignment shall violate any "blue sky" or
other securities law of any jurisdiction or
shall require the Company, the Permitted
Borrowers or any other Person to file a
registration statement or similar application
with the United States Securities and
Exchange Commission (or similar state
regulatory body) or to qualify under the
"blue sky" or other securities laws of any
jurisdiction; and
(iv) no assignment shall be effective unless Agent
has received from the assignee (or from the
assigning Bank) an assignment fee of $3,500
for each such assignment, and the assignee
has executed and delivered an Assumption
Agreement as required under the Intercreditor
Agreement (as defined therein).
In connection with any such assignment, Company, the Permitted Borrowers and
Agent shall be entitled to continue to deal solely and directly with the
assigning Bank in connection with the interest so assigned until (x) the Agent
shall have received a notice of assignment duly executed by the assigning Bank
and an Assignment Agreement (with respect thereto) duly executed by the
assigning Bank and each assignee; and (y) the assigning Bank shall have
delivered to the Agent the original of each Note held by the assigning Bank
under this Agreement. From and after the date on which the Agent shall notify
Company and the assigning Bank that the foregoing conditions shall have been
satisfied and all consents (if any) required shall have been given, the
assignee thereunder shall be deemed to be a party to this Agreement. To the
extent that rights and obligations hereunder shall have been assigned to such
assignee as provided in such notice of assignment (and Assignment Agreement),
such assignee shall have the rights and obligations of a Bank under this
Agreement and the other Loan Documents(including without limitation the right
to receive fees payable hereunder in respect of the period following such
assignment). In addition, the assigning Bank, to the extent that rights and
obligations hereunder
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<PAGE> 137
shall have been assigned by it as provided in such notice of assignment and the
Assignment Agreement, but not otherwise, shall relinquish its rights and be
released from its obligations under this Agreement and the other Loan
Documents. It is acknowledged and agreed by the parties hereto that any Bank
which makes a Federal Reserve Transfer shall remain fully obligated hereunder.
Within five (5) Business Days following Company's receipt of notice from the
Agent that Agent has accepted and executed a notice of assignment and the duly
executed Assignment Agreement, Company and the Permitted Borrowers shall, to
the extent applicable, execute and deliver to the Agent in exchange for any
surrendered Note(s), new Note(s) payable to the order of the assignee in an
amount equal to the amount assigned to it pursuant to such notice of assignment
(and Assignment Agreement), and with respect to the portion of the Indebtedness
retained by the assigning Bank, to the extent applicable, new Note(s) payable
to the order of the assigning Bank in an amount equal to the amount retained by
such Bank hereunder shall be executed and delivered by the Company and each of
the Permitted Borrowers, and applicable Agent, the Banks and the Company and
the Permitted Borrowers acknowledge and agree that any such new Note(s) shall
be given in renewal and replacement of the surrendered Notes and shall not
effect or constitute a novation or discharge of the Indebtedness evidenced by
any surrendered Note, and each such new Note may contain a provision confirming
such agreement. In addition, promptly following receipt of such Notes, Agent
shall prepare and distribute to Company, the Permitted Borrowers and each of
the Banks a revised Exhibit C to this Agreement setting forth the applicable
new Percentages of the Banks (including the assignee Bank), taking into account
such assignment.
(e) Each Bank agrees that any participation agreement
permitted hereunder shall comply with all applicable laws and shall be subject
to the following restrictions (which shall be set forth in the applicable
participation agreement):
(i) such Bank shall remain the holder of its
Notes hereunder, notwithstanding any such
participation;
(ii) except as expressly set forth in this Section
14.8(e) with respect to rights of setoff and
the benefits of Section 12 hereof, a
participant shall have no direct rights or
remedies hereunder;
(iii) a participant shall not reassign or transfer,
or grant any sub-participations in its
participation interest hereunder or any part
thereof; and
(iv) such Bank shall retain the sole right and
responsibility to enforce the obligations of
the Company and Permitted Borrowers relating
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<PAGE> 138
to the Notes and the other Loan Documents,
including, without limitation, the right to
proceed against any Guaranties, or cause
Agent to do so (subject to the terms and
conditions hereof), and the right to approve
any amendment, modification or waiver of any
provision of this Agreement without the
consent of the participant, except for those
matters covered by Section 14.11(a) through
(e) and (h) hereof (provided that a
participant may exercise approval rights over
such matters only on an indirect basis,
acting through such Bank, and Company, the
Permitted Borrowers, Agent and the other
Banks may continue to deal directly with such
Bank in connection with such Bank's rights
and duties hereunder), and shall otherwise be
in form satisfactory to Agent.
Company and the Permitted Borrowers each agrees that each participant shall be
deemed to have the right of setoff under Section 11.4 hereof in respect of its
participation interest in amounts owing under this Agreement and the other Loan
Documents to the same extent as if the Indebtedness were owing directly to it
as a Bank under this Agreement, shall be subject to the pro rata recovery
provisions of Section 11.3 hereof and that each participant shall be entitled
to the benefits of Section 12 hereof. The amount, terms and conditions of any
participation shall be as set forth in the participation agreement between the
issuing Bank and the Person purchasing such participation, and none of the
Company, the Permitted Borrowers, the Agent and the other Banks shall have any
responsibility or obligation with respect thereto, or to any Person to whom any
such participation may be issued. No such participation shall relieve any
issuing Bank of any of its obligations under this Agreement or any of the other
Loan Documents, and all actions hereunder shall be conducted as if no such
participation had been granted.
(f) Nothing in this Agreement, the Notes or the other Loan
Documents expressed or implied, is intended to or shall confer on any Person
other than the respective parties hereto and thereto and their successors and
assignees permitted hereunder and thereunder any benefit or any legal or
equitable right, remedy or other claim under this Agreement, the Notes or the
other Loan Documents.
14.9 Indulgence. No delay or failure of Agent and the Banks in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof, or the exercise of any other right,
power or privilege. The rights of Agent and the Banks hereunder are cumulative
and are not exclusive of any rights or remedies which Agent and the Banks would
otherwise have.
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<PAGE> 139
14.10 Counterparts. This Agreement may be executed in several
counterparts, and each executed copy shall constitute an original instrument,
but such counterparts shall together constitute but one and the same
instrument.
14.11 Amendment and Waiver. No amendment or waiver of any provision
of this Agreement or any other Loan Document, or consent to any departure by
the Company or any of the Permitted Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) subject any of the Banks to any additional
obligations, (b) reduce the principal of, or interest on, the Notes or any
Letter of Credit Obligations or any Fees or other amounts payable hereunder,
(c) postpone any date fixed for any payment of principal of, or interest on,
the Notes or any Fees or other amounts payable hereunder, (d) waive any Event
of Default specified in or grace period provided under Sections 10.1(a) or (b)
hereof, (e) release or defer the granting or perfecting of a lien or security
interest in any Collateral or release any Guaranty, indemnity or similar
undertaking provided by any Person, except as shall be otherwise expressly
provided in this Agreement or any other Loan Document, (f) take any action
which requires the signing of all Banks pursuant to the terms of this Agreement
or any other Loan Document, (g) change the aggregate unpaid principal amount of
the Notes which shall be required for the Banks or any of them to take any
action under this Agreement or any other Loan Document, (h) change the
definitions of "Majority Banks", "Alternative Currency" or "Subordinated Debt"
or (i) change this Section 14.11, and provided further, however, that no
amendment, waiver, or consent shall, unless in writing and signed by the Agent
in addition to all the Banks, affect the rights or duties of the Agent under
this Agreement or any other Loan Document, whether in its capacity as Agent or
Issuing Bank, or as Collateral Agent under the Intercreditor Agreement. All
references in this Agreement to "Banks" or "the Banks" shall refer to all
Banks, unless expressly stated to refer to Majority Banks.
14.12 Taxes and Fees. Should any tax (other than a tax based upon
the net income of any Bank or Agent by any jurisdiction where a Bank or Agent
is located), recording or filing fee become payable in respect of this
Agreement or any of the other Loan Documents or any amendment or modification
hereto or thereto, or supplement hereof or thereof, the Company and each of the
Permitted Borrowers, jointly and severally, agrees to pay the same, together
with any interest or penalties thereon (unless the failure to pay such tax on a
timely basis is not due to the action or inaction of the Company or any of its
Subsidiaries) and agrees to hold the Agent and the Banks harmless with respect
thereto.
14.13 Confidentiality. Each Bank agrees that without the prior
consent of Company, it will not disclose (other than to its
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<PAGE> 140
employees, to another Bank or to its auditors or counsel) any information with
respect to the Company or any of its Subsidiaries or any of the Permitted
Borrowers which is furnished pursuant to the terms and conditions of this
Agreement or any of the other Loan Documents or which is designated (in
writing) by Company or any of the Permitted Borrowers to be confidential;
provided that any Bank may disclose any such information (a) as has become
generally available to the public or has been lawfully obtained by such Bank
from any third party under no duty of confidentiality to the Company, (b) as
may be required in any report, statement or testimony submitted to, or in
respect of any inquiry, by, any municipal, state or federal regulatory body
having or claiming to have jurisdiction over such Bank, including the Board of
Governors of the Federal Reserve System of the United States or the Federal
Deposit Insurance Corporation or similar organizations (whether in the United
States or elsewhere) or their successors, (c) as may be required in respect of
any summons or subpoena or in connection with any litigation, (d) in order to
comply with any law, order, regulation or ruling applicable to such Bank, and
(e) to any permitted transferee or assignee or to any approved participant of,
or with respect to, the Notes, as aforesaid.
14.14 Withholding Taxes. If any Bank is not incorporated under the
laws of the United States or a state thereof, such Bank shall promptly deliver
to the Agent two executed copies of (i) Internal Revenue Service Form 1001
specifying the applicable tax treaty between the United States and the
jurisdiction of such Bank's domicile which provides for the exemption from
withholding on interest payments to such Bank, (ii) Internal Revenue Service
Form 4224 evidencing that the income to be received by such Bank hereunder is
effectively connected with the conduct of a trade or business in the United
States or (iii) other evidence satisfactory to the Agent that such Bank is
exempt from United States income tax withholding with respect to such income.
Such Bank shall amend or supplement any such form or evidence as required to
insure that it is accurate, complete and non-misleading at all times. Promptly
upon notice from the Agent of any determination by the Internal Revenue Service
that any payments previously made to such Bank hereunder were subject to United
States income tax withholding when made, such Bank shall pay to the Agent the
excess of the aggregate amount required to be withheld from such payments over
the aggregate amount actually withheld by the Agent. In addition, from time to
time upon the reasonable request and at the sole expense of the Company or any
of the Permitted Borrowers, each Bank and the Agent shall (to the extent it is
able to do so based upon applicable facts and circumstances), complete and
provide the Company or any of the Permitted Borrowers with such forms,
certificates or other documents as may be reasonably necessary to allow the
Company or the Permitted Borrower, as applicable, to make any payment under
this Agreement or the other Loan Documents without any withholding for or on
the account of any tax under Section 11.1(d) hereof (or with such withholding
at a reduced rate), provided that the execution and delivery of such forms,
certificates or other documents does not adversely affect or
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<PAGE> 141
otherwise restrict the right and benefits (including without limitation
economic benefits) available to such Bank or the Agent, as the case may be,
whether under this Agreement or any of the other Loan Documents or otherwise,
or whether under or in connection with any transactions not related to the
transactions contemplated hereby.
14.15 Effective Upon Execution. This Agreement shall become
effective upon the execution hereof by Banks, Agent and the Company and the
issuance by the Company of the Revolving Credit Notes and the Swing Line Note
hereunder, and shall remain effective until the Indebtedness has been repaid
and discharged in full and no commitment to extend any credit hereunder remains
outstanding. By execution of the aforesaid Notes, together with any applicable
Term Notes, the Permitted Borrowers shall become obligated hereunder.
14.16 Severability. In case any one or more of the obligations of
the Company or any of the Permitted Borrowers under this Agreement, the Notes
or any of the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Company or the Permitted Borrowers shall not in any way be
affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Company or the Permitted Borrowers
under this Agreement, the Notes or any of the other Loan Documents in any other
jurisdiction.
14.17 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for convenience of reference
only and shall in no way modify or affect any of the terms or provisions
hereof.
14.18 Construction of Certain Provisions. If any provision of this
Agreement or any of the other Loan Documents refers to any action to be taken
by any Person, or which such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by such
Person, whether or not expressly specified in such provision.
14.19 Independence of Covenants. Each covenant hereunder shall be
given independent effect (subject to any exceptions stated in such covenant) so
that if a particular action or condition is not permitted by any such covenant
(taking into account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or such condition exists.
14.20 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Company or any
party to any of the Loan Documents made herein or in any of the other Loan
Documents or in any certificate, report,
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<PAGE> 142
financial statement or other document furnished by or on behalf of the Company,
any such party in connection with this Agreement or any of the other Loan
Documents shall be deemed to have been relied upon by the Banks,
notwithstanding any investigation heretofore or hereafter made by any Bank or
on such Bank's behalf, and those covenants and agreements of the Company and
the Permitted Borrowers set forth in Section 12.8 hereof (together with any
other indemnities of the Company or the Permitted Borrowers contained elsewhere
in this Agreement or in any of the other Loan Documents) and of Banks set forth
in Section 14.13 hereof shall, notwithstanding anything to the contrary
contained in this Agreement, survive the repayment in full of the Indebtedness
and the termination of any commitments to make Advances hereunder.
14.21 Complete Agreement; Amendment and Restatement. This
Agreement, the Notes, any requests for Advances or Letters of Credit hereunder,
the other Loan Documents and any agreements, certificates, or other documents
given to secure the Indebtedness, contain the entire agreement of the parties
hereto with respect to the transactions contemplated hereby, and none of the
parties hereto shall be bound by anything not expressed in writing. This
Agreement constitutes an amendment and restatement of the Prior Credit
Agreement, which Prior Credit Agreement is fully superseded and amended and
restated in its entirety hereby; provided, however, that the Indebtedness
governed by the Prior Credit Agreement and the liens and security interests
created pursuant to the Prior Credit Agreement remain outstanding and in full
force and effect and provided further that this Agreement does not constitute a
novation of such Indebtedness or such liens and security interests.
WITNESS the due execution hereof as of the day and year first above
written.
COMPANY: AGENT:
WALBRO CORPORATION COMERICA BANK, As Agent
By: By:
--------------------------- ----------------------------
Its: Its:
-------------------------- ---------------------------
6242 Garfield Street One Detroit Center
Cass City, MI 48726 500 Woodward Avenue
Attention: Detroit, Michigan 48226
-------------------
Attention: Renee D. Weinman
131
<PAGE> 143
BANKS:
COMERICA BANK
By:
-----------------------
Its:
----------------------
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Renee D. Weinman
Fax No.: (313)
-----------
HARRIS TRUST & SAVINGS BANK
By:
---------------------------
Its:
--------------------------
2 West
111 W. Monroe
Chicago, Illinois 60690
Attn: Peter Dancy
Fax No.: (312) 461-2591
NATIONAL CITY BANK
By:
---------------------------
Its:
--------------------------
1900 East 9th Street
Cleveland, Ohio 44114
Attn: Andrew Walshaw
Fax No.: (216) 575-9396
132
<PAGE> 144
THE MITSUBISHI BANK, LIMITED,
CHICAGO BRANCH
By:
---------------------------
Its:
--------------------------
Suite 2100
115 South LaSalle Street
Chicago, Illinois 60603
Attn: Diane Tkach
Fax No.: (312) 263-2555
THE BANK OF NEW YORK
By:
---------------------------
Its:
--------------------------
22nd Floor
One Wall Street
New York, New York 10286
Attn: William M. Barnum
Fax No.: (212) 635-6434
SOCIETE GENERALE
By:
---------------------------
Its:
--------------------------
181 West Madison Street
Chicago, Illinois 60602
Attn: Joseph A. Philbin
Fax No.: (312) 578-5099
133
<PAGE> 145
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By:
---------------------------
Its:
--------------------------
And By:
------------------------
Its:
--------------------------
245 Park Avenue
New York, New York 10167
Attn: Corporate Services
Department
Fax No.: (212) 818-0233
134
<PAGE> 146
EXHIBIT C
<TABLE>
<CAPTION>
BANKS PERCENTAGES
<S> <C>
Comerica Bank 33.32%
Harris Trust & Savings Bank 14.81%
National City Bank 11.11%
Societe Generale 10.19%
The Mitsubishi Bank 10.19%
Rabobank Nederland 10.19%
The Bank of New York 10.19%
Total 100%
</TABLE>
135
<PAGE> 1
EXHIBIT 4.3
$110,000,000
WALBRO CORPORATION
9-7/8% SENIOR NOTES DUE 2005
PURCHASE AGREEMENT
July 21, 1995
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
McDONALD & COMPANY SECURITIES, INC.
STIFEL, NICOLAUS AND COMPANY, INCORPORATED
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Walbro Corporation, a Delaware corporation (the "Company"),
proposes, upon the terms and conditions set forth herein, to issue and sell to
the initial purchasers listed on Schedule I hereto (the "Initial Purchasers"),
$110,000,000 aggregate principal amount of its 9-7/8% Senior Notes due 2005
(the "Senior Notes"). The Senior Notes will be issued pursuant to the
provisions of an indenture, to be dated as of July 27, 1995 (the "Indenture"),
among the Company, the Guarantors (as defined herein) and Bankers Trust
Company, as trustee (the "Trustee").
Initially, the Senior Notes will be guaranteed (the
"Guarantees" and, together with the Senior Notes, the "Securities") on a senior
unsecured basis by each of Walbro Automotive Corporation, Walbro Engine
Management Corporation, Sharon Manufacturing Co. and Whitehead Engineering
Products, Inc. (collectively, the "Guarantors" and, together with the Company,
the "Issuers").
The Company has entered into a Purchase and Sale Agreement
dated as of April 7, 1995 by and between the Company and Dyno Industrier A.S
(as the same may be supplemented and amended until the Closing Date (as defined
herein), the "Acquisition Agreement") pursuant to which the Company has agreed
to acquire (the "Acquisition") from Dyno Industrier A.S and certain of its
subsidiaries (collectively, "Dyno"), either directly or as part of the
Purchased Subsidiaries (as defined in the Acquisition Agreement), all of the
assets, properties, rights and business and certain related liabilities (the
"Dyno Assets") of Dyno relating to developing, manufacturing,
<PAGE> 2
-2-
distributing and selling plastic fuel tank systems and other blow-molded
technical parts supplied to the automotive industry and certain other
nonautomotive blow-molded fuel tank systems and blow-molded technical parts
supplied to the automotive industry by Dyno (other than products produced by
Dynoplast OY or at the Moss plants referred to in Sections 4.24 and 4.25 of the
Acquisition Agreement) at production facilities in Norway, Great Britain,
Germany, France, Belgium, and Spain. This Agreement, the Indenture, the
Securities, the Registration Rights Agreement (as defined herein), the
Acquisition Agreement and the Credit Agreement (as defined in the Indenture)
are herein collectively referred to as the "Transaction Documents."
The Issuers wish to confirm as follows their agreement with
the Initial Purchasers in connection with the purchase and resale of the
Securities.
1. Preliminary Offering Memorandum and Offering
Memorandum. The Securities will be offered and sold to the Initial Purchasers
without registration under the Securities Act of 1933, as amended (the "Act"),
in reliance on an exemption pursuant to Section 4(2) under the Act. The
Company has prepared a preliminary offering memorandum, dated July 5, 1995 (the
"Preliminary Offering Memorandum"), and an offering memorandum, dated July 21,
1995 (the "Offering Memorandum"), setting forth information regarding the
Issuers and the Securities. Unless stated herein to the contrary, all
references herein to the Offering Memorandum are to the Offering Memorandum at
the date hereof and are not meant to include any supplement or amendment
subsequent thereto. The Company hereby confirms that it has authorized the use
of the Preliminary Offering Memorandum and the Offering Memorandum in
connection with the offering and resale of the Securities by the Initial
Purchasers.
The Issuers understand that the Initial Purchasers propose to
make offers and sales (the "Exempt Resales") of the Securities purchased by the
Initial Purchasers hereunder only on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and delivered, (i) to
persons in the United States whom the Initial Purchasers reasonably believe to
be qualified institutional buyers ("Qualified Institutional Buyers") as
defined in Rule 144A under the Act, as such rule may be amended from time to
time ("Rule 144A"), in transactions under Rule 144A, (ii) to a limited number
of other institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) and (7) under Regulation D of the Act) ("Accredited Investors") in
private sales exempt from registration under the Act and (iii) outside the
United States to persons other than U.S. persons in reliance upon Regulation S
("Regulation S") under the Act (such persons specified in clauses (i), (ii) and
(iii) being referred to herein as the "Eligible Purchasers"). As used herein
the terms "United States" and "U.S. persons" have the meaning given them in
Regulation S.
<PAGE> 3
-3-
It is understood and acknowledged that upon original issuance
thereof, and until such time as the same is no longer required under the
applicable requirements of the Act, each of the Securities (and each security
issued in exchange therefor or in substitution thereof) shall bear the
following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED
STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS
MEETING THE REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Securities will have the registration
<PAGE> 4
-4-
rights set forth in the registration rights agreement (the "Registration Rights
Agreement") substantially in the form attached hereto as Exhibit A, to be dated
the date hereof by and among the Issuers and the Initial Purchasers.
2. Agreements to Sell, Purchase and Resell.
(a) The Issuers hereby agree, subject to all the terms and
conditions set forth herein, to issue and sell to the Initial Purchasers and,
upon the basis of the representations, warranties and agreements of the Issuers
herein contained and subject to all the terms and conditions set forth herein,
each Initial Purchaser agrees to purchase from the Issuers, severally and not
jointly, at a purchase price of 97.15% of the principal amount thereof, the
principal amount of Senior Notes (together with the Guarantees) set forth
opposite such Initial Purchaser's name in Schedule I hereto.
(b) The Initial Purchasers represent and warrant to the
Issuers that they are Qualified Institutional Buyers and have advised the
Issuers that they propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and in the Offering Memorandum. The
Initial Purchasers hereby represent and warrant to, and agree with, the Issuers
that the Initial Purchasers (i) will not solicit offers for, or offer to sell,
the Securities by means of any form of general solicitation or general
advertising or in any manner involving a public offering within the meaning of
Section 4(2) of the Act (including, but not limited to, (A) any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or (B) any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising; provided, however, that such limitation shall not preclude
the Initial Purchasers from placing any tombstone announcement with respect to
the resale by the Initial Purchasers of the Securities, provided that such
announcement is not prohibited by Regulation S), and (ii) will solicit offers
for the Securities only from, and will offer, sell or deliver the Securities as
part of their initial offering, only to (A) persons in the United States whom
the Initial Purchasers reasonably believe to be Qualified Institutional Buyers,
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 Purchasers that each such account is a Qualified
Institutional Buyer, to whom notice has been given that such sale or delivery
is being made in reliance on Rule 144A, in each case, in transactions under
Rule 144A, (B) to a limited number of Accredited Investors that make the
representations to and agreements with the Initial Purchasers specified in
Annex A to the Offering Memorandum in private sales exempt from registration
under the Act and (C) outside the United States to persons other than U.S.
persons in reliance on Regulation S. The Initial Purchasers have advised the
Issuers that they will offer the Securities to Eligible
<PAGE> 5
-5-
Purchasers at a price initially equal to 99.65% of the principal amount
thereof, plus accrued interest, if any, from the date of issuance of the
Securities.
(c) The Initial Purchasers represent and warrant that (i)
they have not offered or sold, and will not offer or sell, directly or
indirectly, any of the Securities in the United Kingdom by means of any
document, other than to persons whose ordinary business it is to buy or sell
shares or debentures whether as principal or agent (except in circumstances
which do not constitute an offer to the public within the meaning of the
Companies Act of 1985), (ii) they have complied with and will comply with all
applicable provisions of the Financial Services Act of 1986 with respect to
anything done by the Initial Purchasers in relation to the Securities in, from
or otherwise involving the United Kingdom and (iii) they have only issued or
passed on and will only issue or pass on in or from the United Kingdom to any
persons any document received by the Initial Purchasers in connection with the
issue of the Securities if the recipient is of a kind described in Article 9(3)
of the Financial Services Act of 1986 (Investment Advertisements) (Exemptions)
Order 1988, as amended.
(d) The Initial Purchasers represent and warrant that with
respect to Securities offered and sold or to be offered and sold pursuant to
Regulation S they have offered and sold the Securities and agree that they will
offer and sell the Securities (i) as part of their initial distribution at any
time and (ii) otherwise until 40 days after the later of the commencement of
the offering of the Securities and the Closing Date (as defined herein), only
in accordance with Rule 903 of Regulation S or as otherwise permitted pursuant
to paragraph (c) above. Accordingly, the Initial Purchasers represent and
agree that with respect to Securities offered and sold or to be offered and
sold pursuant to Regulation S none of the Initial Purchasers, their affiliates
or any persons acting on their behalf or on behalf of their affiliates have
engaged or will engage in any directed selling efforts in the United States
with respect to the Securities, and they and their affiliates have complied and
will comply with the offering restrictions requirements of Regulation S. The
Initial Purchasers agree that, at or prior to confirmation of any sale of
Securities pursuant to Regulation S, they will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases such Securities from the Initial Purchasers during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Act"), and may not be offered
and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of their initial distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the Closing Date, except in either case in accordance
with Regulation S or
<PAGE> 6
-6-
Rule 144A under the Act. Terms used above have the respective
meanings given to them in Regulation S under the Act."
The Initial Purchasers understand that the Issuers and, for
the purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 7(d)(xvi) and 7(e) hereof, counsel to the Issuers and counsel to the
Initial Purchasers, will rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchasers hereby consent to
such reliance.
3. Delivery of the Securities and Payment Therefor.
Delivery to the Initial Purchasers of and payment for the Securities shall be
made at the office of Cahill Gordon & Reindel, at 7:30 A.M., New York City
time, on July 27, 1995 (the "Closing Date"). The place of closing for the
Securities and the Closing Date may be varied by agreement between the Initial
Purchasers and the Issuers.
The Securities will be delivered to the Initial Purchasers
against payment of the purchase price therefor by federal funds certified check
of immediately available funds payable in accordance with written instructions
from the Company. The Issuers agree to reimburse the Initial Purchasers for
their cost of obtaining such immediately available funds. The Securities will
be evidenced by a single global security (the "Global Security") and/or by
additional certificated securities, and will be registered, in the case of a
Global Security, in the name of Cede & Co. as nominee of The Depository Trust
Company ("DTC"), and in the other cases, in such names and in such
denominations as the Initial Purchasers shall request prior to 1:00 p.m., New
York City time, on the third business day preceding the Closing Date. The
Securities to be delivered to the Initial Purchasers shall be made available to
the Initial Purchasers in New York City for inspection and packaging not later
than 9:30 a.m., New York City time, on the business day next preceding the
Closing Date.
4. Agreements of the Issuers. The Issuers agree with the
Initial Purchasers as follows:
(a) Until the completion of the distribution of the
Securities by the Initial Purchaser to Eligible Purchasers, the Issuers will
advise each of the Initial Purchasers promptly and, if requested by any of
them, will confirm such advice in writing, of any change in the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the Company, the Subsidiaries (as defined herein) and the Dyno
Assets, taken as a whole, or of the happening of any event or the existence of
any condition which requires any amendment or supplement to the Offering
Memorandum (as then amended or supplemented) so that the Offering Memorandum
(x) will not contain any untrue statement of a material fact or omit to state a
material fact required
<PAGE> 7
-7-
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or (y) will
comply with applicable law.
(b) The Issuers will furnish to the Initial Purchasers,
without charge, such number of copies of the Offering Memorandum, as may then
be amended or supplemented, as they may reasonably request.
(c) The Issuers will not make any amendment or supplement
to the Preliminary Offering Memorandum or to the Offering Memorandum of which
each of the Initial Purchasers shall not previously have been advised or to
which any of them shall object after being so advised.
(d) Prior to the execution and delivery of this Agreement,
the Issuers have delivered or will deliver to the Initial Purchasers, without
charge, in such reasonable quantities as the Initial Purchasers shall have
requested or may hereafter request, copies of the Preliminary Offering
Memorandum. The Issuers consent to the use, in accordance with the securities
or Blue Sky laws of the jurisdictions in which the Securities are offered by
the Initial Purchasers and by dealers, prior to the date of the Offering
Memorandum, of each Preliminary Offering Memorandum so furnished by the
Issuers. The Issuers consent to the use of the Offering Memorandum (and of any
amendment or supplement thereto prepared in accordance with Section 4(c)) in
accordance with the securities or Blue Sky laws of the jurisdictions in which
the Securities are offered by the Initial Purchasers and by all dealers to whom
Securities may be sold, in connection with the offering and sale of the
Securities.
(e) If, at any time prior to completion of the distribution
of the Securities by the Initial Purchasers to Eligible Purchasers, any event
shall occur or condition shall exist that in the judgment of the Issuers or in
the opinion of the Initial Purchasers requires any amendment or supplement to
the Offering Memorandum (as then amended or supplemented) so that the Offering
Memorandum (x) will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (y) will comply with applicable law, the Issuers will,
in each such case subject to Section 4(c), forthwith prepare an appropriate
supplement or amendment thereto, and will expeditiously furnish to the Initial
Purchasers and dealers that number of copies thereof as they shall reasonably
request.
(f) The Issuers will cooperate with the Initial Purchasers
and with their counsel in connection with the qualification of the Securities
for offering and sale by the Initial Purchasers and by dealers under the
securities or Blue Sky laws of such
<PAGE> 8
-8-
jurisdictions as the Initial Purchasers may designate and will file such
consents to service of process or other documents necessary or appropriate in
order to effect such qualification; provided that in no event shall any of the
Issuers be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
(g) So long as any of the Securities are outstanding, the
Issuers will furnish to the Initial Purchasers (i) as soon as available, a copy
of each report of the Issuers mailed to stockholders or filed with the
Securities and Exchange Commission (the "Commission"), and (ii) from time to
time such other information concerning the Issuers as the Initial Purchasers
may reasonably request.
(h) The Issuers will apply the net proceeds from the sale
of the Securities to be sold by them hereunder and amounts borrowed under the
Credit Agreement on the Closing Date in accordance with the description set
forth under "Use of Proceeds" in the Offering Memorandum.
(i) Except as stated in this Agreement and in the Offering
Memorandum, the Issuers have not taken, nor will they take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Securities
to facilitate the sale or resale of the Securities. Except as permitted by the
Act, the Issuers will not distribute any offering material in connection with
the Exempt Resales. The Issuers will not solicit any offers to buy and will
not offer to sell the Securities by means of any form of general solicitation
or general advertising (within the meaning of Regulation D) or by means of any
directed selling efforts (as defined under Regulation S and the Commission's
releases related thereto).
(j) The Issuers will use their best efforts to cause the
Securities to be eligible for trading on The PORTAL Market.
(k) From and after the Closing Date, so long as any of the
Securities are outstanding and are "restricted securities" within the meaning
of Rule 144(a)(3) under the Act or, if earlier, until three years after the
Closing Date, and during any period in which the Company is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company will furnish to holders of the Securities and
prospective purchasers of Securities designated by such holders, upon request
of such holders or such prospective purchasers, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Act to permit compliance with
Rule 144A in connection with resales of the Securities.
<PAGE> 9
-9-
(l) The Issuers agree not to sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Act) that would be integrated with the sale of the Securities in
a manner that would require the registration under the Act of the sale by the
Issuers to the Initial Purchasers or by the Initial Purchasers to the Eligible
Purchasers of the Securities.
(m) The Issuers agree to comply with all of the terms and
conditions of the Registration Rights Agreement, and all agreements set forth
in the representation letters of the Issuers to DTC relating to the approval of
the Securities by DTC for "book entry" transfer.
(n) The Issuers agree that prior to any registration of the
Securities pursuant to the Registration Rights Agreement, or at such earlier
time as may be so required, the Indenture shall be qualified under the Trust
Indenture Act of 1939 (the "1939 Act") and will cause to be entered into any
necessary supplemental indentures in connection therewith.
(o) The Issuers shall not, and shall not permit any of
their respective affiliates to, resell any Securities that have been acquired
by any of them.
(p) Prior to the Closing Date, the Issuers will furnish to
the Initial Purchasers, as soon as they have been prepared by the Company and
Dyno, a copy of any unaudited interim consolidated financial statements of the
Company and unaudited interim combined financial statements of the Dyno Assets
for any period subsequent to the period covered by the most recent consolidated
financial statements of the Company and combined financial statements of the
Dyno Assets appearing in the Offering Memorandum.
(q) The Company shall not amend, supplement or grant any
waiver with respect to any material provision of the Acquisition Agreement
without the prior written consent of each of the Initial Purchasers, which
consents shall not be unreasonably withheld.
5. Representations and Warranties of the Issuers. The
Issuers, jointly and severally, represent and warrant to the Initial Purchasers
that:
(a) No order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum or any amendment or
supplement thereto, or any order asserting that the transactions contemplated
by this Agreement are subject to the registration requirements of the Act has
been issued and no proceeding for that
<PAGE> 10
-10-
purpose has commenced or is pending or, to the knowledge of the Issuers, is
contemplated.
(b) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates and the Offering Memorandum as of the
Closing Date, did not or will not at any time 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 not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the Preliminary Offering Memorandum and Offering Memorandum made in reliance
upon and in conformity with information relating to any Initial Purchaser
furnished to the Issuers in writing by or on behalf of an Initial Purchaser
expressly for use therein.
(c) The Company has the requisite power and authority to
execute, deliver and perform its obligations under the Acquisition Agreement;
the execution and delivery of, and the performance by the Company of its
obligations under, the Acquisition Agreement have been duly and validly
authorized by the Company, and the Acquisition Agreement has been duly executed
and delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of equity.
(d) The Indenture has been duly and validly authorized by
each of the Issuers and, upon its execution, delivery and performance by each
of the Issuers and assuming due authorization, execution, delivery and
performance by the Trustee, will be a valid and binding agreement of each of
the Issuers, enforceable in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity; the Indenture conforms in all
material respects to the description thereof in the Offering Memorandum; and no
qualification of the Indenture under the 1939 Act is required in connection
with the offer and sale of the Securities contemplated hereby or in connection
with the Exempt Resales.
(e) The Senior Notes and the Guarantees have been duly
authorized by the Company and each of the Guarantors, respectively, and, when
executed by the Company and each of the Guarantors, respectively, and, in the
case of the Senior Notes, authenticated by the Trustee in accordance with the
Indenture and delivered to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company and each of
the Guarantors, respectively, entitled to the benefits of the
<PAGE> 11
-11-
Indenture and enforceable in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and the Securities conform in
all material respects to the description thereof in the Offering Memorandum.
(f) All the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights.
(g) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum, and is duly
registered and qualified to conduct its business and is in good standing in
each jurisdiction where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify would not have a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth or
results of operations of the Company, the Subsidiaries and the Dyno Assets,
taken as a whole (a "Material Adverse Effect").
(h) All of the Company's "significant subsidiaries" (as
defined in the Act) are referred to herein individually as a "Subsidiary" and
collectively as the "Subsidiaries." Each Subsidiary is a corporation or
partnership duly organized, validly existing and in good standing in the
jurisdiction of its incorporation or formation, with full corporate or
partnership power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum, and is duly
registered and qualified to conduct its business and is in good standing in
each jurisdiction where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify or be in good standing could not have a Material
Adverse Effect. All of the outstanding shares of capital stock or partnership
interests of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are wholly owned by the Company
directly or indirectly through one of the other Subsidiaries, free and clear of
any lien, adverse claim, security interest, equity or other encumbrance, except
as described in the Offering Memorandum.
(i) There are no legal or governmental proceedings pending
or, to the knowledge of the Issuers, threatened, against the Company, any of
the Subsidiaries or, to the knowledge of the Issuers, Dyno, with respect
<PAGE> 12
-12-
to the Dyno Assets, or to which the Company, any of the Subsidiaries or, to the
knowledge of the Issuers, Dyno, with respect to the Dyno Assets, or to which
any of the respective properties of the Company or any of the Subsidiaries, is
subject, that are not disclosed in the Offering Memorandum and which, if
adversely decided, could cause a Material Adverse Effect or materially affect
the issuance of the Securities or the consummation of any of the transactions
contemplated by the Transaction Documents. There are no agreements, contracts,
indentures, leases or other instruments of the Company, any of the Subsidiaries
or, to the knowledge of the Issuers, Dyno, with respect to the Dyno Assets,
that are material to the Company, the Subsidiaries and Dyno, taken as a whole,
which are not described in the Offering Memorandum. Neither the Company, any
Subsidiary nor, to the Company's knowledge, Dyno, with respect to the Dyno
Assets, is involved in any strike, job action or labor dispute with any group
of employees, and, to the knowledge of the Issuers, no such action or dispute
is threatened.
(j) Neither the Company nor any of the Subsidiaries nor, to
the knowledge of the Issuers, Dyno is (i) in violation of its certificate or
articles of incorporation or by laws or other organizational documents, or of
any law, ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Subsidiaries or, to the knowledge of
the Issuers, Dyno, with respect to the Dyno Assets, or of any decree of any
court or governmental agency or body having jurisdiction over the Company, any
of the Subsidiaries or, to the knowledge of the Issuers, Dyno, with respect to
the Dyno Assets, except where any such violation or violations in the aggregate
could not have a Material Adverse Effect or (ii) in default in any material
respect in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the Company
or any of the Subsidiaries is a party or by which any of the Company and the
Subsidiaries or any of their respective properties or the Dyno Assets may be
bound, except as may be disclosed in the Offering Memorandum and except where
any such default or defaults in the aggregate would not have a Material Adverse
Effect.
(k) Neither the issuance, offer, sale or delivery of the
Securities, the execution, delivery or performance of the Transaction Documents
by the Company or the Subsidiaries a party thereto nor the consummation by the
Company and such Subsidiaries of the transactions contemplated hereby or
thereby (i) requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency or official (except such as may have been
obtained or may be required in connection with the registration under the Act
of the Securities in accordance with the Registration Rights Agreement, the
qualification of the Indenture under the 1939 Act and except for compliance
with the securities or Blue Sky laws of various jurisdictions) or conflicts or
will conflict with or constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation
<PAGE> 13
-13-
or bylaws, or other organizational documents, of the Company, any of the
Subsidiaries or, to the knowledge of the Issuers, Dyno, except any such
conflicts and breaches that in the aggregate would not have a Material Adverse
Effect, or (ii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, in any material respect, any
material agreement, indenture, lease or other instrument to which the Company
or any of the Subsidiaries is a party or by which any of them or any of the
respective properties of the Company or any of the Subsidiaries or the Dyno
Assets may be bound, except any such conflict or conflicts that in the
aggregate could not have a Material Adverse Effect, or (iii) violates or will
violate in any material respect any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company, any of the
Subsidiaries or, to the knowledge of the Issuers, Dyno, with respect to the
Dyno Assets, or any of the respective properties of the Company or any of the
Subsidiaries, except any such violation or violations that in the aggregate
could not have a Material Adverse Effect, or (iv) will result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of the Subsidiaries or, to the knowledge of the Issuers,
Dyno, with respect to the Dyno Assets, pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them may be
bound or to which any of the property or assets of any of them is subject.
(l) Each of Arthur Andersen LLP, who has certified or shall
certify the consolidated financial statements of the Company included as part
of the Offering Memorandum and each of Deloitte & Touche, LLP and Arthur
Andersen & Co. GmbH, each of whom has certified or shall certify the financial
statements of the Dyno Assets included as part of the Offering Memorandum, are
independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretation and rulings.
(m) The consolidated financial statements of the Company
and the combined financial statements of the Dyno Assets included in the
Offering Memorandum, together with the related notes thereto, present fairly
the financial position, results of operations and cash flows of the Company and
the Dyno Assets, 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 ("GAAP"). The pro forma financial statements and
other pro forma financial information (including the notes thereto) included in
the Offering Memorandum (A) present fairly in all material respects the
information shown therein, (B) have been prepared in all material respects in
accordance with applicable requirements of Rule 11-02 of Regulation S-X
promulgated under the Act, and (C) have been properly computed on the basis
described therein, and (ii) the assumptions used in the preparation of the pro
forma financial statements and other pro forma financial information included
in the Offering Memorandum are
<PAGE> 14
-14-
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein.
(n) Each of the Company and the Guarantors has all the
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and the Registration Rights Agreement; the execution and
delivery of, and the performance by each of the Company and the Guarantors of
its obligations under, this Agreement and the Registration Rights Agreement
have been duly and validly authorized by each of the Company and the
Guarantors, and each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by each of the Company and the Guarantors
and constitutes the valid and legally binding agreement of each of the Company
and the Guarantors, enforceable against each of the Company and the Guarantors
in accordance with its terms, except as the enforcement hereof and thereof may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to the applicability of
general principles of equity, and except as rights to indemnity and
contribution hereunder and thereunder may be limited by Federal or state
securities laws or principles of public policy.
(o) Each of the Company and the Subsidiaries party to the
Credit Agreement has all the requisite power and authority to execute, deliver
and perform its obligations under the Credit Agreement; the execution and
delivery of, and performance by the Company and such Subsidiaries of their
respective obligations under, the Credit Agreement have been duly and validly
authorized by each of the Company and such Subsidiaries and, assuming due
authorization, execution, delivery and performance by the other parties
thereto, the Credit Agreement, when executed and delivered by the Company and
such Subsidiaries, will constitute the valid and legally binding agreement of
each of the Company and such Subsidiaries, enforceable against each of the
Company and such Subsidiaries in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and subject to
the applicability of general principles of equity.
(p) Except as disclosed in the Offering Memorandum,
subsequent to the date as of which such information is given in the Offering
Memorandum, none of the Company, any of the Subsidiaries or, to the knowledge
of the Issuers, Dyno, with respect to the Dyno Assets, has incurred any
liability or obligation, direct or contingent, or entered into any transaction,
not in the ordinary course of business, that is material to the Company, the
Subsidiaries and the Dyno Assets taken as a whole, and there has not been any
material change in the capital stock, or material increase in the short-term or
long-term debt, of the Company or any of the Subsidiaries, or any material
adverse change, or any development involving or which could reasonably be
expected to involve a prospective material adverse change, in the condition
(financial or other), business,
<PAGE> 15
-15-
properties, net worth or results of operations of the Company, the Subsidiaries
and the Dyno Assets, taken as a whole.
(q) The Company, the Subsidiaries and, to the knowledge of
the Issuers, Dyno, with respect to the Dyno Assets, have and, after giving
effect to the Acquisition, the Company and the Subsidiaries will have good and
marketable title to all property (real and personal) described in the Offering
Memorandum as being owned by them, free and clear of all material liens,
claims, security interests or other encumbrances except such as are described
in the Offering Memorandum, and all the property described in the Offering
Memorandum as being held under lease by each of the Company, the Subsidiaries
and, to the knowledge of the Issuers, Dyno, with respect to the Dyno Assets, is
held by it under valid, subsisting and enforceable leases, with only such
exceptions as in the aggregate are not materially burdensome and do not
interfere in any material respect with the conduct of the business of the
Company, the Subsidiaries and the Dyno Assets taken as a whole.
(r) Except as permitted by the Act, the Issuers have not
distributed and, prior to the later to occur of the Closing Date and completion
of the distribution of the Securities, will not distribute any offering
material in connection with the offering and sale of the Securities other than
the Preliminary Offering Memorandum and Offering Memorandum (and any amendment
or supplement thereto in accordance with Section 4(c) hereof).
(s) The Company and the Subsidiaries and, to the knowledge
of the Issuers, Dyno, with respect to the Dyno Assets, have and, after giving
effect to the Acquisition, the Company and the Subsidiaries will have such
permits, licenses, franchises, certificates of need and other approvals or
authorizations of governmental or regulatory authorities ("Permits") as are
necessary under applicable law to own their respective properties and to
conduct their respective businesses in the manner described in the Offering
Memorandum except to the extent that the failure to have such Permits could not
have a Material Adverse Effect; the Company, each of the Subsidiaries and, to
the knowledge of the Issuers, Dyno, with respect to the Dyno Assets, have
fulfilled and performed in all material respects, all their respective material
obligations with respect to the Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the holder
of any such Permit, subject in each case to such qualification as may be set
forth in the Offering Memorandum and except to the extent that any such
revocation or termination would not have a Material Adverse Effect; and, except
as described in the Offering Memorandum, none of the Permits contains any
restriction that is materially burdensome to the Company, any of the
Subsidiaries or, to the knowledge of the Issuers, Dyno, with respect to the
Dyno Assets.
<PAGE> 16
-16-
(t) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions of
the Company and the Subsidiaries are executed in accordance with management's
general or specific authorization; (ii) transactions of the Company and the
Subsidiaries are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets of the Company and
the Subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets of the
Company and the Subsidiaries is compared with existing assets of the Company
and the Subsidiaries at reasonable intervals and appropriate action is taken
with respect to any differences.
(u) Neither the Company nor any of the Subsidiaries, nor to
the knowledge of the Issuers, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation,
which violation could have a Material Adverse Effect.
(v) Except as disclosed in the Offering Memorandum, the
Company and each of the Subsidiaries have filed all tax returns required to be
filed, which returns are true and correct in all material respects, and neither
the Company nor any Subsidiary is in default in the payment of any taxes which
were payable pursuant to said returns or any assessments with respect thereto,
except where the failure to file such returns and make such payments could not
have a Material Adverse Effect.
(w) No holder of any security of the Issuers (other than
holders of the Securities) has any right to request or demand registration of
any security of the Issuers because of the consummation of the transactions
contemplated by the Transaction Documents. Except as described in the Offering
Memorandum, there are no outstanding options, warrants or other rights calling
for the issuance of, and there are no commitments, plans or arrangements to
issue, any shares of capital stock of the Company or any of the Subsidiaries or
any security convertible into or exchangeable or exercisable for capital stock
of the Company or any of the Subsidiaries.
(x) The Company, the Subsidiaries and, to the knowledge of
the Issuers, Dyno, with respect to the Dyno Assets, own or possess and, after
giving effect to the Acquisition, the Company and the Subsidiaries will own,
possess or possess adequate rights to use all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Offering Memorandum as being owned by any of them or necessary for the conduct
of their respective businesses, and the Issuers are not aware of any claim to
<PAGE> 17
-17-
the contrary or any challenge by any other person to the rights of the Company,
the Subsidiaries or Dyno with respect to the foregoing.
(y) The Issuers are not and, upon sale of the Securities to
be issued and sold thereby in accordance herewith and the application of the
net proceeds to the Issuers of such sale as described in the Offering
Memorandum under the caption "Use of Proceeds," will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(z) When the Securities are issued and delivered pursuant
to this Agreement, such Securities will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Issuers that
is listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated interdealer
quotation system.
(aa) None of the Issuers nor any of their respective
affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent (provided that no representation is made as to
the Initial Purchasers or any person acting on any of their behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Act) which is or will be integrated with
the offering and sale of the Securities in a manner that would require the
registration of the Securities under the Act or (ii) engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the Act) in connection with the offering of the Securities.
(ab) The Issuers are not required to deliver the information
specified in Rule 144A(d)(4) in connection with the offering and resale of the
Securities by the Initial Purchasers.
(ac) Assuming (i) that the representations and warranties of
the Initial Purchasers in Section 2 hereof are true and correct in all material
respects, (ii) the Initial Purchasers comply with the covenants set forth in
Section 2 hereof (iii) compliance by the Initial Purchasers with the offering
and transfer procedures and restrictions described in the Offering Memorandum,
(iv) the accuracy of the representations and warranties made in accordance with
this Agreement and the Offering Memorandum by purchasers to whom the Initial
Purchasers initially resells Securities and (v) purchasers to whom the Initial
Purchasers initially resells Securities receive a copy of the Offering
Memorandum prior to such sale, the purchase and sale of the Securities pursuant
hereto (including the Initial Purchasers' proposed offering of the Securities
on the terms and in the manner set forth in the Offering Memorandum and Section
2 hereof) do not require registration under the Act.
<PAGE> 18
-18-
(ad) The execution and delivery of this Agreement and the
other Transaction Documents and the sale of the Securities to the Initial
Purchasers by the Issuers or by the Initial Purchasers to Eligible Purchasers
will not involve any prohibited transaction within the meaning of Section 406
of ERISA or Section 4975 of the Internal Revenue Code. The representations
made by the Issuers in the preceding sentence is made in reliance upon and
subject to the accuracy of, and compliance with, the representations and
covenants made or deemed made by the Eligible Purchasers as set forth in the
Offering Memorandum under the section entitled "Notice to Investors."
(ae) The Company, the Subsidiaries and, to the knowledge of
the Issuers, Dyno, with respect to the Dyno Assets, are and, after giving
effect to the Acquisition, the Company and the Subsidiaries will be in
compliance with, and not subject to any liability under, the common law and all
applicable federal, state, local and foreign laws, regulations, rules, codes,
ordinances, directives, and orders relating to pollution or to protection of
public or employee health or safety or to the environment, including, without
limitation, those that relate to any Hazardous Material (as defined herein)
("Environmental Laws"), except, in each case, where noncompliance or liability,
individually or in the aggregate, could not be have a Material Adverse Effect.
The term "Hazardous Material" means any pollutant, contaminant or waste, or any
hazardous, dangerous, or toxic chemical, material, waste, substance or
constituent subject to regulation under any Environmental Law.
(af) The Issuers have delivered to the Initial Purchasers
true, correct and complete execution copies of the Acquisition Agreement and,
to the knowledge of the Issuers, each of the representations and warranties of
Dyno Industrier A.S contained in the Acquisition Agreement are not untrue or
incorrect in any true and correct material respect.
6. Indemnification and Contribution. (a) Each of the
Issuers, jointly and severally, agrees to indemnify and hold harmless the
Initial Purchasers and each person, if any, who controls any of the Initial
Purchasers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or Offering Memorandum or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except, with respect
to any Initial Purchaser, insofar as such losses, claims, damages, liabilities
or expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been
<PAGE> 19
-19-
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Initial Purchaser furnished in writing to the
Issuers by or on behalf of such Initial Purchaser expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to the Preliminary Offering Memorandum shall
not inure to the benefit of an Initial Purchaser (or to the benefit of person
controlling such Initial Purchaser) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Securities by such Initial
Purchaser to any person if the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in the Preliminary
Offering Memorandum was corrected in the Offering Memorandum and such Initial
Purchaser sold Securities to that person without sending or giving at or prior
to the written confirmation of such sale, a copy of the Offering Memorandum (as
then amended or supplemented). The foregoing indemnity agreement shall be in
addition to any liability which the Issuers may otherwise have.
(b) If any action, suit or proceeding shall be brought
against any of the Initial Purchasers or any person who controls any of the
Initial Purchasers in respect of which indemnity may be sought against the
Issuers, any such Initial Purchaser or any such person who controls an Initial
Purchaser shall promptly notify in writing the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Any of the Initial Purchasers
or any person who controls an Initial Purchaser shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Initial Purchaser or any such person who controls an Initial
Purchaser unless (i) the indemnifying parties have agreed in writing to pay
such fees and expenses, (ii) the indemnifying parties have failed to assume the
defense and employ counsel on a timely basis and such failure to assume the
defense is reasonably likely to adversely affect the preparation for or conduct
of such action, suit or proceeding, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Initial Purchaser or any such person who controls an Initial Purchaser and any
of the indemnifying parties and such Initial Purchaser or any such person who
controls an Initial Purchaser shall have been advised by its counsel that
representation of such indemnified party and any such indemnifying party by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between them
(in which case the indemnifying party shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such Initial Purchaser
or any such person who controls an Initial Purchaser). It is understood,
however, that the indemnifying parties shall, in connection with any one such
action, suit or proceeding or separate but substantially similar or
<PAGE> 20
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related actions, suits or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable
fees and reasonable expenses of only one separate firm of attorneys (in
addition to any local counsel) at any time for any Initial Purchaser and any
such person who controls an Initial Purchaser not having actual or potential
differing interests with such indemnifying parties or another Initial
Purchaser, which firm shall be designated in writing by Smith Barney Inc., and
that all such reasonable fees and reasonable expenses shall be reimbursed on a
monthly basis as provided in paragraph (a) hereof. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent, but if settled with such written
consent, or if there be a final judgment for the plaintiff in any such action,
suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless the Initial Purchasers, to the extent provided in paragraph (a), and
any person who controls an Initial Purchaser from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
(c) Each of the Initial Purchasers, severally and not
jointly, agrees to indemnify and hold harmless the Issuers, and their
respective directors and officers, and any person who controls an Issuer within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the
same extent as the indemnity from an Issuer to the Initial Purchasers set forth
in paragraph (a) hereof, but only with respect to information relating to such
Initial Purchaser furnished in writing by or on behalf of such Initial
Purchaser expressly for use in the Preliminary Offering Memorandum or Offering
Memorandum or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against any of the Issuers, any of their respective
directors or officers, or any such controlling person based on the Preliminary
Offering Memorandum or Offering Memorandum, or any amendment or supplement
thereto, and in respect of which indemnity may be sought against an Initial
Purchaser pursuant to this paragraph (c), such Initial Purchaser shall have the
rights and duties given to the Issuers by paragraph (b) above (except that if
the Issuers shall have assumed the defense thereof such Initial Purchaser shall
not be required to do so, but may employ separate counsel therein and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at such Initial Purchaser's expense), and the Issuers, their
respective directors and officers, and any such controlling person shall have
the rights and duties given to the Initial Purchasers by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Initial Purchasers may otherwise have.
(d) If the indemnification provided for in this Section 6
is unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or
<PAGE> 21
-21-
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Issuers on the one hand and an Initial Purchaser on
the other hand from the offering of the Securities, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Issuers on the one
hand and such Initial Purchaser on the other in connection with the statements
or omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Issuers on the one hand and an 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 Issuers
bear to the total discounts and commissions received by such Initial Purchaser,
in each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Issuers on the one hand and an Initial
Purchaser on the other hand 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 Issuers on the one hand or by such Initial
Purchaser on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The Issuers and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 6 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities and expenses referred to in paragraph
(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or depending on any such
action, suit or proceeding. Notwithstanding the provisions of this Section 6,
no Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the total price of the Securities purchased by it exceeds
the amount of any damages which such Initial Purchaser has otherwise been
required to pay 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 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 6 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Issuers set forth
<PAGE> 22
-22-
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any of the Initial
Purchasers or any person who controls an Initial Purchaser, the Issuers, their
respective directors or officers or any person controlling the Issuers, (ii)
acceptance of any Securities and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to an Initial Purchaser or any
person who controls an Initial Purchaser, or to an Issuer, their respective
directors or officers or any person controlling an Issuer, shall be entitled to
the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 6.
(g) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, suit or proceeding.
7. Conditions of the Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase and pay for the Securities on
the Closing Date hereunder is subject to the fulfillment, in the Initial
Purchasers' sole discretion, of the following conditions:
(a) At the time of execution of this Agreement and on the
Closing Date, no order or decree preventing the use of the Offering Memorandum
or any amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending or, to the knowledge of
the Issuers, be contemplated. No order suspending the sale of the Securities
in any jurisdiction shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge of the
Issuers, shall be contemplated.
(b) On the Closing Date, the Issuers shall have delivered
to each of the Initial Purchasers true, correct and complete conformed copies
of the Credit Agreement; each of the representations and warranties given by
the Company and its Subsidiaries party thereto in the Credit Amendment shall be
true and correct in all material respects on and as of the Closing Date; on and
as of the Closing Date (after giving effect to the consummation of the
transactions contemplated by this Agreement, including the Acquisition) there
shall not exist any condition which would constitute a Default or an Event of
Default (as defined in the Credit Agreement); and each condition to the initial
<PAGE> 23
-23-
funding under the Credit Agreement shall have been satisfied and the Company
shall have received borrowings of at least $30 million thereunder.
(c) Subsequent to the date hereof, (i) there shall not have
occurred any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), business, properties,
assets, net worth or results of operations of the Company, the Subsidiaries or
the Dyno Assets which, in the opinion of the Initial Purchasers, would
materially adversely affect the market for the Securities, or (ii) the Offering
Memorandum shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading if amending or supplementing the Offering Memorandum
to correct such misstatement or omission would, in the sole discretion of the
Initial Purchasers, materially adversely affect the marketability of the
Securities.
(d) The Initial Purchasers shall have received on the
Closing Date an opinion of Katten Muchin & Zavis, counsel for the Issuers,
dated the Closing Date and addressed to the Initial Purchasers, in the form of
Exhibit A hereto.
(e) The Initial Purchasers shall have received on the
Closing Date an opinion of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, dated the Closing Date, and addressed to the Initial Purchasers,
with respect to such matters as the Initial Purchasers may request.
(f) The Initial Purchasers shall have received letters
addressed to the Initial Purchasers, and dated the date hereof and the Closing
Date, from Arthur Andersen LLP, independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchasers.
(g) (i) There shall not have been any change in the capital
stock of the Company nor any material increase in the consolidated short-term
or consolidated long-term debt of the Company (other than in the ordinary
course of business) from that set forth or contemplated in the Offering
Memorandum (or any amendment or supplement thereto); (ii) there shall not have
been, since the respective dates as of which information is given in the
Offering Memorandum, except as may otherwise be stated in the Offering
Memorandum, any material adverse change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of the
Company, the Subsidiaries and the Dyno Assets, taken as a whole; (iii) the
Company, the Subsidiaries and the Dyno Assets shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company, the Subsidiaries and the Dyno
Assets, taken as a whole, other than those
<PAGE> 24
-24-
reflected in the Offering Memorandum; (iv) all the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects 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; and (v) the Initial
Purchasers shall have received a certificate, dated the Closing Date and signed
by the chief executive officer and the chief accounting officer of the Company
(or such other officers as are acceptable to the Initial Purchasers), to the
effect set forth in this Section 7(g) and in Section 7(h) hereof.
(h) The Issuers shall not have failed at or prior to the
Closing Date to have performed or complied with any of their agreements herein
contained and required to be performed or complied with by them hereunder at or
prior to the Closing Date.
(i) There shall not have been any announcement by any
"nationally recognized statistical rating organization," as defined for
purposes of Rule 436(g) under the Act, that (i) it is downgrading its rating
assigned to any class of securities of the Company, or (ii) it is reviewing its
ratings assigned to any class of securities of the Company with a view to
possible downgrading, or with negative implications, or direction not
determined.
(j) The Securities shall have been approved for trading on
PORTAL.
(k) Each of the conditions to closing contained in the
Acquisition Agreement (other than the payment of the Purchase Price (as defined
in the Acquisition Agreement)) shall have been satisfied or, with the consent
of the Initial Purchasers, not to be unreasonably withheld, waived.
(l) The Issuers shall have furnished or caused to be
furnished to the Initial Purchasers such further certificates and documents as
the Initial Purchasers shall have reasonably requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for
the Initial Purchasers.
Any certificate or document signed by any officer of an Issuer
and delivered to the Initial Purchasers, or to counsel for the Initial
Purchasers, shall be deemed a representation and warranty by the Issuers to the
Initial Purchasers as to the statements made therein.
8. Expenses. (a) Whether or not the purchase and sale of
the Securities hereunder is consummated or this Agreement is terminated
pursuant to Section 9 hereof,
<PAGE> 25
-25-
the Issuers agree, jointly and severally, to pay the following costs and
expenses and all other costs and expenses incident to the performance by them
of their obligations hereunder: (i) the preparation, printing or reproduction
of the Preliminary Offering Memorandum and the Offering Memorandum (including
financial statements thereto), and each amendment or supplement to any of them,
this Agreement, the Registration Rights Agreement and the Indenture; (ii) the
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Offering Memorandum, the Preliminary Offering
Memorandum and all amendments or supplements as may be reasonably requested for
use in connection with the offering and sale of the Securities; (iii) the
preparation, printing, authentication, issuance and delivery of certificates
for the Securities, including any stamp taxes in connection with the original
issuance and sale of the Securities; (iv) the printing (or reproduction) and
delivery of the preliminary and supplemental Blue Sky Memoranda and all other
agreements and documents printed (or reproduced) and delivered in connection
with the offering of the Securities; (v) the application for quotation of the
Securities on PORTAL; (vi) the qualification of the Securities for offer and
sale under the securities or Blue Sky laws of the several states as provided in
Section 4(f) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Initial Purchasers relating to the preparation, printing or
reproduction, and delivery of the preliminary and supplemental Blue Sky
Memoranda and such qualification); (vii) the performance by the Issuers of
their obligations under the Registration Rights Agreement; and (viii) the fees
and expenses of the Issuers' accountants and the fees and expenses of counsel
(including local and special counsel) for the Issuers. The Issuers hereby
agree that they will pay in full on the Closing Date the fees and expenses
referred to in clause (vi) of this Section 8 by delivering to counsel for the
Initial Purchasers on such date a check payable to such counsel in the
requisite amount.
(b) If the purchase and sale of the Securities hereunder is
not consummated because any condition to the obligations of the Initial
Purchasers set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 9 hereof or because of any failure,
refusal or inability on the part of the Issuers to perform all obligations and
satisfy all conditions on their part to be performed or satisfied hereunder
other than by reason of a default by the Initial Purchasers in payment for the
Securities on the Closing Date, the Issuers shall reimburse the Initial
Purchasers promptly upon demand for all out-of-pocket expenses (including fees
and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities and the other
transactions contemplated hereby.
9. Termination of Agreement. This Agreement shall be
subject to termination in the absolute discretion of the Initial Purchasers,
without liability on the part of the Initial Purchasers to the Issuers, by
notice to the Issuers, if prior to the
<PAGE> 26
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Closing Date, (i) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market shall have been
suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York shall have been declared by either Federal or
state authorities, or (iii) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis
or change in political, financial or economic conditions, the effect of which
on the financial markets of the United States or the market for the Securities
is such as to make it, in the sole judgment of the Initial Purchasers,
impracticable or inadvisable to commence or continue the offering of the
Securities on the terms set forth on the cover page of the Offering Memorandum
or to enforce contracts for the resale of the Securities by the Initial
Purchasers. Notice of such termination may be given to the Issuers by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
10. Information Furnished by the Initial Purchasers. The
statements set forth in the stabilization legend on the inside front cover, the
last paragraph on the cover page and in the third paragraph under the caption
"Private Placement" in the Preliminary Offering Memorandum and Offering
Memorandum, constitute the only information furnished by or on behalf of the
Initial Purchasers as such information is referred to in Sections 5(b) and 6
hereof.
11. Miscellaneous. Except as otherwise provided in
Sections 4 and 9 hereof, notice given pursuant to any provision of this
Agreement shall be in writing and shall be delivered (i) if to the Issuers, at
the office of the Company at 6242 Garfield Street, Cass City, MI 48726-0096
(with a copy to Howard S. Lanznar, Katten Muchin & Zaivs, 525 W. Monroe Street,
Chicago, IL 60661, Attention: L.E. Althaver, Chief Executive Officer, or (ii)
if to the Initial Purchasers, to Smith Barney Inc., 1345 Avenue of the
Americas, New York, NY 10105, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of
the Initial Purchasers and the Issuers, and their respective directors,
officers and the controlling persons referred to in Section 6 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the terms "successors and assigns" as used in
this Agreement shall include a purchaser from the Initial Purchasers of any of
the Securities in his status as such purchaser.
12. Applicable Law; Counterparts. This Agreement 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 within the State of New York.
<PAGE> 27
-27-
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
<PAGE> 28
-28-
Please confirm that the foregoing correctly sets forth the
agreement between the Issuers and the Initial Purchasers.
Very truly yours,
WALBRO CORPORATION
By:______________________________
Name:
Title:
WALBRO AUTOMOTIVE CORPORATION
By:_________________________________
Name:
Title:
WALBRO ENGINE MANAGEMENT CORPORATION
By:_________________________________
Name:
Title:
SHARON MANUFACTURING CORPORATION
By:_________________________________
Name:
Title:
<PAGE> 29
-29-
WHITEHEAD ENGINEERED PRODUCTS, INC.
By:_________________________________
Name:
Title:
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
McDONALD & COMPANY SECURITIES, INC.
STIFEL, NICOLAUS AND COMPANY, INCORPORATED
By: Smith Barney Inc.
By_____________________________________
Name:
Title:
<PAGE> 30
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
Initial Purchasers of Senior Notes
- ------------------ ----------------
<S> <C>
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . . . . $ 88,000,000
A.G. Edwards & Sons, Inc. . . . . . . . . . . . . . . . . . . . . $ 8,800,000
McDonald & Company Securities, Inc. . . . . . . . . . . . . . . . $ 8,800,000
Stifel, Nicolaus and Company,
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,400,000
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $110,000,000
============
</TABLE>
<PAGE> 1
EXHIBIT 4.4
________________________________________________________________________________
________________________________________________________________________________
9-7/8% SENIOR NOTES DUE 2005
REGISTRATION RIGHTS AGREEMENT
Dated July 21, 1995
by and among
WALBRO CORPORATION,
WALBRO AUTOMOTIVE CORPORATION,
WALBRO ENGINE MANAGEMENT CORPORATION,
SHARON MANUFACTURING COMPANY,
WHITEHEAD ENGINEERED PRODUCTS, INC.
and
SMITH BARNEY INC.,
A.G. EDWARDS & SONS, INC.,
McDONALD & COMPANY SECURITIES, INC.
and
STIFEL, NICOLAUS & COMPANY, INCORPORATED
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 2
This Registration Rights Agreement is made and entered into
this 21st day of July, 1995, by and among Walbro Corporation, a Delaware
corporation (the "Company"), Walbro Automotive Corporation, a Delaware
corporation, Walbro Engine Management Corporation, a Delaware corporation,
Sharon Manufacturing Company, a Michigan corporation, Whitehead Engineered
Products, Inc., a Delaware corporation (the "Guarantors" and, together with the
Company, the "Issuers"), Smith Barney Inc. ("Smith Barney"), A.G. Edwards &
Sons, Inc. ("A.G. Edwards"), McDonald & Company Securities, Inc. ("McDonald")
and Stifel, Nicolaus & Company, Incorporated ("Stifel" and, together with Smith
Barney, A.G. Edwards, and McDonald, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement,
dated July 21, 1995, among the Company, the Guarantors and Initial Purchasers
(the "Purchase Agreement"). In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuers have agreed to provide the
registration rights provided for in this Agreement to the Initial Purchasers
and their respective direct and indirect transferees. The execution and
delivery of this Agreement is a condition to the closing of the transactions
contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: As defined in Section 4(a) hereof.
Advice: As defined in the last paragraph of Section 5 hereof.
Affiliate: With respect to any specified person, "Affiliate"
shall mean any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person. For the
purposes of this definition, "control," when used with respect to any person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
Agreement: This Registration Rights Agreement, as the same
may be amended, supplemented or modified from time to
<PAGE> 3
-2-
time in accordance with the terms hereof.
Business Day: Any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York generally are required or
authorized by law or other government action to be closed.
Company: As defined in the preamble hereof.
Consummate or consummate: When used to qualify the term
"Exchange Offer" shall mean validly and lawfully to issue and deliver the
Exchange Notes pursuant to the Exchange Offer for all Notes validly tendered
and not validly withdrawn pursuant thereto in accordance with the terms of this
Agreement.
Consummation Date: The date that is 20 Business Days
immediately following the date that the Exchange Registration Statement shall
have been declared effective by the SEC.
Effectiveness Period: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Notes: The 9-7/8% Senior Notes due 2005, Series B,
of the Company, guaranteed on a senior unsecured basis by each of the
Guarantors, that are identical to the Notes in all material respects, except
that the provisions regarding restrictions on transfer shall be modified, as
appropriate, and the issuance thereof pursuant to the Exchange Offer shall have
been registered pursuant to an effective Registration Statement in compliance
with the Securities Act.
Exchange Offer: An offer to issue, in exchange for any and
all of the Notes, a like aggregate principal amount of Exchange Notes, which
offer shall be made by the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a)
hereof.
Guarantors: As defined in the preamble hereof.
Indemnified Person: As defined in Section 7(a) hereof.
<PAGE> 4
-3-
Indenture: The Indenture, dated as of July 27, 1995, among
the Issuers and Bankers Trust Company, as trustee thereunder, pursuant to which
the Notes are issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereof.
Issue Date: As defined in Section 2(a).
Issuers: As defined in the preamble hereof.
Notes: The 9-7/8% Senior Notes due 2005, Series A, of the
Company, guaranteed on a senior unsecured basis by each of the Guarantors,
issued pursuant to the Indenture.
Participating Broker-Dealer: As defined in Section 2(e)
hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Notes: As defined in Section 2(c) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated pursuant to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Notes, Exchange
Notes or Private Exchange Notes covered by such Registration Statement, and all
other amendments and supplements to any such prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference, if any, in such prospectus.
Registration Default: As defined in Section 4(a) hereof.
Registration Statement: Any registration statement of the
Company and the Guarantors that covers any of the Notes, Exchange Notes or
Private Exchange Notes pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference, if any, in such
<PAGE> 5
-4-
registration statement.
Rule 144: Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
Shelf Registration: As defined in Section 3 hereof.
Shelf Registration Statement: As defined in Section 3 hereof.
Special Counsel: Cahill Gordon & Reindel, special
<PAGE> 6
-5-
counsel to the holders of Transfer Restricted Securities, or such other counsel
as shall be agreed upon by the Issuers and holders of a majority in aggregate
principal amount of Transfer Restricted Securities, the expenses of which
holders of Transfer Restricted Securities will be reimbursed by the Issuers
pursuant to Section 6.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Securities: The Notes, upon original
issuance thereof, and at all times subsequent thereto, each Exchange Note as to
which Section 3(a)(iii) 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) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other than with
respect to an Exchange Note as to which Section 3(a)(iii) hereof applies)
pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by
Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date
on which such Exchange Note has been sold by such Participating Broker-Dealer
by means of the Prospectus contained in the Exchange Registration Statement and
(y) the date on which the Exchange Registration Statement has been effective
under the Securities Act for a period of 6 months after the Consummation Date,
(iii) a Shelf Registration Statement covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed
of in accordance with such effective Shelf Registration Statement, (iv) the
date on which such Note, Exchange Note or Private Exchange Note, as the case
may be, is distributed to the public pursuant to Rule 144 (or any similar
provisions then in effect) or is saleable pursuant to Rule 144(k) promulgated
by the SEC pursuant to the Securities Act or (v) the date on which such Note,
Exchange Note or Private Exchange Note, as the case may be, ceases to be
outstanding for purposes of the Indenture or any other indenture under which
such Exchange Note or Private Exchange Note was issued.
Trustee: The trustee under the Indenture.
underwritten registration or underwritten offering: A
registration in connection with which securities are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
<PAGE> 7
-6-
2. Exchange Offer
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Issuers shall (A)
prepare and, on or prior to 60 days after the date of original issuance of the
Notes (the "Issue Date"), file with the SEC a Registration Statement under the
Securities Act with respect to an offer by the Company to the holders of the
Notes to issue and deliver to such holders, in exchange for Notes, a like
principal amount of Exchange Notes, (B) use their best efforts to cause the
Registration Statement relating to the Exchange Offer to be declared effective
by the SEC under the Securities Act on or prior to 120 days after the Issue
Date, and (C) commence the Exchange Offer and use their best efforts to issue,
on or prior to the Consummation Date, the Exchange Notes. The offer and sale
of the Exchange Notes pursuant to the Exchange Offer shall be registered
pursuant to the Securities Act on the appropriate form (the "Exchange
Registration Statement") and duly registered or qualified under all applicable
state securities or Blue Sky laws and will comply with all applicable tender
offer rules and regulations under the Exchange Act and state securities or Blue
Sky laws. The Exchange Offer shall not be subject to any condition, other than
that the Exchange Offer does not violate any applicable law or interpretation
of the staff of the SEC. Upon consummation of the Exchange Offer in accordance
with this Section 2, the Issuers shall have no further registration obligations
other than with respect to (i) Private Exchange Notes, (ii) Exchange Notes held
by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which
Section 3(a)(iii) hereof applies. No securities shall be included in the
Exchange Registration Statement other than the Exchange Notes.
(b) The Issuers may require each holder of Notes as a
condition to its participation in the Exchange Offer to represent to the
Issuers and their counsel in writing (which may be contained in the applicable
letter of transmittal) that at the time of the consummation of the Exchange
Offer (i) any Exchange Notes received by such holder will be acquired in the
ordinary course of its business, (ii) such holder will have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and (iii) such holder is
not an Affiliate of an Issuer, or if it is an Affiliate of an Issuer, it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer, any
of the Initial Purchasers hold any Notes acquired by them and having, or which
are reasonably likely to be determined to
<PAGE> 8
-7-
have, the status of an unsold allotment in the initial distribution, or any
other holder of Notes is not entitled to participate in the Exchange Offer, the
Company upon the request of an Initial Purchaser or any such holder shall,
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to such Initial Purchaser and any such holder, in exchange
(the "Private Exchange") for such Notes held by such Initial Purchaser and any
such holder, a like principal amount of debt securities of the Company,
guaranteed by each of the Guarantors on a senior unsecured basis, that are
identical in all material respects to the Exchange Notes (the "Private Exchange
Notes") (and which are issued pursuant to the same indenture as the Exchange
Notes). The Private Exchange Notes shall bear the same CUSIP number as the
Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by
any applicable law or interpretation of the staff of the SEC, the Company shall
mail the Exchange Offer Prospectus and appropriate accompanying documents,
including appropriate letters of transmittal, to each holder of Notes
providing, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the date of acceptance for exchange (the "Exchange
Date"), which date shall in no event be later than the Consummation
Date (unless otherwise required by applicable law);
(iii) that holders of Notes electing to have a Note
exchanged pursuant to the Exchange Offer will be required to surrender
such Note, together with the enclosed letters of transmittal, to the
institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice prior to the close of
business on the Exchange Date; and
(iv) that holders of Notes that do not tender all such
securities pursuant to the Exchange Offer may no longer have any
registration rights hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof
validly tendered and not validly withdrawn
<PAGE> 9
-8-
pursuant to the Exchange Offer or the Private Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by
the Company, and issue, cause the Trustee under the Indenture (or the
indenture pursuant to which the Exchange Notes are issued) to
authenticate, and mail to each holder of Notes, Exchange Notes equal
in principal amount to the principal amount of the Notes surrendered
by such holder.
(e) The Issuers and each Initial Purchaser
acknowledge that the staff of the SEC has taken the position that any
broker-dealer that owns Exchange Notes that were received by such broker-dealer
for its own account in the Exchange Offer (a "Participating Broker-Dealer") may
be deemed to be an "underwriter" within the meaning of the Securities Act and
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes (other than a resale of an
unsold allotment resulting from the original offering of the Notes).
The Issuers and each Initial Purchaser also acknowledge
that it is the SEC staff's position that if the Prospectus contained in the
Exchange Registration Statement includes a plan of distribution containing a
statement to the above effect and the means by which Participating
Broker-Dealers may resell the Exchange Notes, without naming the Participating
Broker-Dealers or specifying the amount of Exchange Notes owned by them, such
Prospectus may be delivered by Participating Broker-Dealers to satisfy their
prospectus delivery obligations under the Securities Act in connection with
resales of Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the Securities Act.
In light of the foregoing, if requested by a
Participating Broker-Dealer, the Issuers agree (x) to use their best efforts to
keep the Exchange Registration Statement continuously effective for a period of
up to 6 months or such earlier date as each Participating Broker-Dealer shall
have notified the Company in writing that such Participating Broker-Dealer has
resold all Exchange Notes acquired in the Exchange Offer, (y) to comply with
the provisions of Section 5 of this Agreement, as they relate to the Exchange
Offer and the Exchange Registration Statement, and (z) to deliver to such
Participating Broker-Dealer a "cold comfort" letter of the independent public
accountants of the Issuers and a legal opinion as to matters reasonably
requested by such
<PAGE> 10
-9-
Participating Broker-Dealer relating to the Exchange Registration Statement and
the related Prospectus and any amendments or supplements thereto.
(f) The Initial Purchasers shall have no liability
to any Participating Broker-Dealer with respect to any request made pursuant to
Section 2(e).
(g) 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 date of the original issuance of
the Notes.
(h) The Exchange Notes and the Private Exchange
Notes may 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 the Exchange Notes shall not 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 neither the Exchange Notes, the
Private Exchange Notes nor the Notes will have the right to vote or consent as
a separate class on any matter.
3. Shelf Registration
(a) If (i) the Company is not permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
any applicable law or applicable interpretation of the staff of the SEC or (ii)
the Company has not consummated the Exchange Offer within 180 days of the Issue
Date or (iii) any holder of a Note notifies the Company on or prior to the
Exchange Date that (A) due to a change in law or policy it is not entitled to
participate in the Exchange Offer, (B) due to a change in law or policy it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Registration Statement is not appropriate or available for such
resales by such holder or (C) it is a broker-dealer that owns Notes (including
any Initial Purchaser that holds Notes as part of an unsold allotment from the
original offering of the Notes) acquired directly from an Issuer or an
Affiliate of an Issuer or (iv) any holder of Private Exchange Notes so requests
within 120 days after the consummation of the Private Exchange (each such event
referred to in clauses (i) through (iv), a "Shelf Filing Event"), the Issuers
shall cause to be filed with the SEC pursuant to Rule 415 a shelf registration
statement (the "Shelf Registration Statement") prior to the
<PAGE> 11
-10-
later of (x) 60 days after the Issue Date and (y) 30 days after the occurrence
of such Shelf Filing Event, relating to all Transfer Restricted Securities (the
"Shelf Registration") the holders of which have provided the information
required pursuant to Section 3(b) hereof, and shall use their best efforts to
have the Shelf Registration Statement declared effective by the SEC on or prior
to the later of (i) 150 days after the Issue Date and (ii) 90 days after the
occurrence of such Shelf Filing Event. In such circumstances, the Issuers
shall use their best efforts to keep the Shelf Registration Statement
continuously effective under the Securities Act, until (A) 36 months following
the date on which the Shelf Registration Statement was initially declared
effective (subject to extension pursuant to the last paragraph of Section 5
hereof) or (B) if sooner, the date immediately following the date that all
Transfer Restricted Securities covered by the Shelf Registration Statement have
been sold pursuant thereto (the "Effectiveness Period"); provided that the
Effectiveness Period shall be extended to the extent required to permit dealers
to comply with the applicable prospectus delivery requirements of Rule 174 and
as otherwise provided herein.
(b) No holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such holder furnishes to
the Company in writing, within 30 days after receipt of a request therefor,
such information as the Company may reasonably request for use in connection
with any Shelf Registration Statement or Prospectus or preliminary prospectus
included therein. No holder of Transfer Restricted Securities shall be
entitled to Additional Interest pursuant to Section 4 hereof unless and until
such holder shall have provided all such reasonably requested information.
Each holder of Transfer Restricted Securities as to which any Shelf
Registration Statement 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 holder not materially
misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of
Transfer Restricted Securities will suffer damages if the Issuers fail to
fulfill their obligations pursuant to Section 2 or Section 3, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, in the event that (i) the applicable Registration Statement is not
filed with the SEC on or prior to the date specified herein for such filing,
(ii) the applicable Registration Statement has not
<PAGE> 12
-11-
been declared effective by the SEC on or prior to the date specified herein for
such effectiveness after such obligation arises, (iii) if the Exchange Offer is
required to be Consummated hereunder, the Company has not exchanged Exchange
Notes for all Notes validly tendered and not validly withdrawn in accordance
with the terms of the Exchange Offer by the Consummation Date or (iv) the
applicable Registration Statement is filed and declared effective but shall
thereafter cease to be effective without being succeeded immediately by any
additional Registration Statement covering the Notes, the Exchange Notes or the
Private Exchange Notes, as the case may be, which has been filed and declared
effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), then the interest rate on Transfer Restricted
Securities will increase ("Additional Interest"), with respect to the first
90-day period immediately following the occurrence of such Registration
Default, by 0.50% per annum and will increase by an additional 0.50% per annum
with respect to each subsequent 90-day period until such Registration Default
has been cured, up to a maximum amount of 2% per annum with respect to all
Registration Defaults. Following the cure of a Registration Default, the
accrual of Additional Interest with respect to such Registration Default will
cease and upon the cure of all Registration Defaults the interest rate will
revert to the original rate.
(b) The Company shall notify the Trustee and paying
agent under the Indenture (or the trustee and paying agent under such other
indenture under which the Transfer Restricted Securities are issued)
immediately upon the happening of each and every Registration Default. The
Company shall pay the Additional Interest due on the Transfer Restricted
Securities by depositing with the paying agent (which shall not be the Company
for these purposes) for the Transfer Restricted Securities, in trust, for the
benefit of the holders thereof, prior to 11:00 A.M. on the next interest
payment date specified by the Indenture (or such other indenture), sums
sufficient to pay the Additional Interest then due. The Additional Interest
due shall be payable on each interest payment date specified by the Indenture
(or such other indenture) to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay Additional
Interest shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the Additional
Interest provided for in this Section 4 constitutes a reasonable estimate of
the damages that will be suffered by holders of Transfer Restricted Securities
by reason of the happening of any Registration Default.
<PAGE> 13
-12-
5. Registration Procedures
In connection with the Issuers' registration obligations
hereunder, the Issuers shall effect such registrations on the appropriate form
available for the sale of the Notes, the Exchange Notes or Private Exchange
Notes, as applicable, to (i) in the case of the Exchange Offer, permit the
exchange of Exchange Notes for Notes in the Exchange Offer and, if applicable,
resales of Exchange Notes by Participating Broker-Dealers and (ii) in the case
of a Shelf Registration, permit the sale of the applicable Transfer Restricted
Securities in accordance with the method or methods of disposition thereof
specified by the holders of such Transfer Restricted Securities, and pursuant
thereto the Issuers shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a
reasonable period of time prior to the initial filing of
a Shelf Registration Statement or Prospectus and a
reasonable period of time prior to the filing of any
amendment or supplement thereto (including any document
that would be incorporated or deemed to be incorporated
therein by reference), furnish to the holders of the
Transfer Restricted Securities included in such Shelf
Registration Statement, their Special Counsel and the
managing underwriters, if any, copies of all such
documents proposed to be filed, which documents (other
than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such holders,
their Special Counsel and such underwriters, if any, and
cause the officers and directors of the Issuers, counsel
to the Issuers and independent certified public
accountants to the Issuers to respond to such reasonable
inquiries as shall be necessary, in the opinion of
respective counsel to such holders and such underwriters,
to conduct a reasonable investigation within the meaning
of the Securities Act; provided that the foregoing
inspection and information gathering shall be coordinated
on behalf of the Initial Purchasers by Smith Barney, Inc.
and on behalf of any other persons, by one counsel
designated by and on behalf of such other persons;
provided, however, that the Issuers shall not be deemed
to have kept a Shelf Registration Statement effective
during the applicable period if any of them voluntarily
takes or fails to take any reasonable action that results
in holders of the Transfer Restricted Securities covered
thereby not being able to sell such Transfer Restricted
Securities pursuant
<PAGE> 14
-13-
to Federal securities laws during that period (and the
time period during which such Shelf Registration
Statement is required to remain effective hereunder shall
be extended by the number of days during which such
holders of Transfer Restricted Securities are not able to
sell such Transfer Restricted Securities). The Issuers
shall not file any such Shelf Registration Statement or
related Prospectus or any amendments or supplements
thereto which the holders of a majority of the Transfer
Restricted Securities included in such Shelf Registration
Statement shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such
amendments, including post-effective amendments, to each
Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the
applicable time period required hereunder; cause the
related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424; and comply with the provisions of
the Securities Act and the Exchange Act with respect to
the disposition of all securities covered by such
Registration Statement during such period in accordance
with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so
amended or in such Prospectus as so supplemented;
(c) Notify the holders of Transfer
Restricted Securities to be sold or, in the case of an
Exchange Offer, tendered for, their Special Counsel and
the managing underwriters, if any, promptly, and (if
requested by any such person), confirm such notice in
writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be
filed, and (B) with respect to a Registration Statement
or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other
Federal or state governmental authority for amendments or
supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the
issuance by the SEC, any state securities commission, any
other governmental agency or any court of any stop
order, order or injunction suspending or enjoining the
use of a Prospectus or the effectiveness of a
Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by
<PAGE> 15
-14-
the Company of any notification with respect to the
suspension of the qualification or exemption from
qualification of any of the Notes, Exchange Notes or
Private Exchange Notes for sale in any jurisdiction, or
the initiation or threatening of any proceeding for such
purpose, and (v) of the happening of any event or
information becoming known that makes any statement made
in a 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 such
Registration Statement, Prospectus or documents so that
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 a
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;
(d) Use their best efforts to avoid the
issuance of or, if issued, obtain the withdrawal of any
order enjoining or suspending the use of a Prospectus or
the effectiveness of a Registration Statement or the
lifting of any suspension of the qualification (or
exemption from qualification) of any of the Notes,
Exchange Notes or Private Exchange Notes for sale in any
jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is
filed pursuant to Section 3 hereof and if requested by
the managing underwriters, if any, or the holders of a
majority in aggregate principal amount of the Transfer
Restricted Securities being sold pursuant to such Shelf
Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and
such holders reasonably believe should be included
therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment
under the Securities Act as soon as practicable after the
Company has received notification of the matters to be
incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the
Issuers shall not be required to take any action
<PAGE> 16
-15-
pursuant to this Section 5(e) that would, in the
opinion of counsel for the Issuers, violate applicable
law;
(f) Upon written request to the Company,
furnish to each holder of Notes, Exchange Notes or
Private Exchange Notes to be exchanged or sold pursuant
to a Registration Statement, their Special Counsel and
each managing underwriter, if any, without charge, at
least one conformed copy of such Registration Statement
and each amendment thereto, including financial
statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all
exhibits to the extent requested (including those
previously furnished or incorporated by reference) as
soon as practicable after the filing of such documents
with the SEC;
(g) Deliver to each holder of Notes,
Exchange Notes or Private Exchange Notes to be exchanged
or sold pursuant to a Registration Statement, their
Special Counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus (including each
form of prospectus) and each amendment or supplement
thereto as such persons reasonably request; and the
Issuers hereby consent to the use of such Prospectus and
each amendment or supplement thereto by each of the
selling holders of Transfer Restricted Securities and the
underwriters, if any, in connection with the offering and
sale of the Transfer Restricted Securities covered by
such Prospectus and any amendment or supplement thereto;
(h) Prior to any public offering of Notes,
Exchange Notes or Private Exchange Notes, use their best
efforts to register or qualify or cooperate with the
holders of Notes, Exchange Notes or Private Exchange
Notes to be sold or tendered for, the underwriters, if
any, and their respective counsel in connection with the
registration or qualification (or exemption from such
registration or qualification) of such Notes, Exchange
Notes or Private Exchange Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions
within the United States as any such holder or
underwriter reasonably requests in writing; 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 necessary or
advisable
<PAGE> 17
-16-
to enable the disposition in such jurisdictions of the
Notes, Exchange Notes or Private Exchange Notes covered
by the applicable Registration Statement; provided,
however, that the Issuers shall not be required to (i)
qualify generally to do business in any jurisdiction
where they are not then so qualified or (ii) take any
action which would subject them to general service of
process or to taxation in any jurisdiction where they are
not so subject;
(i) In connection with any sale or transfer
of Transfer Restricted Securities that will result in
such securities no longer being Transfer Restricted
Securities, cooperate with the holders thereof and the
managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing
Transfer Restricted Securities 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 to enable such Transfer
Restricted Securities to be in such denominations and
registered in such names as the managing underwriters, if
any, or such holders may request at least two Business
Days prior to any sale of Transfer Restricted Securities;
(j) Upon the occurrence of any event
contemplated by Section 5(c)(v), as promptly as
practicable, prepare a supplement or amendment,
including, if appropriate, a post-effective amendment, to
each Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered,
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;
(k) Prior to the effective date of the
Exchange Registration Statement, to provide a CUSIP
number for the Exchange Notes (and Private Exchange Notes
if applicable);
(l) If a Shelf Registration Statement is
filed pursuant to Section 3 hereof, enter into such
agreements (including an underwriting agreement in form,
scope and substance as is customary in
<PAGE> 18
-17-
underwritten offerings) and take all such other
reasonable actions in connection therewith (including
those reasonably requested by the managing underwriters,
if any, or the holders of a majority in aggregate
principal amount of the Transfer Restricted Securities
being sold) in order to expedite or facilitate the
disposition of such Transfer Restricted Securities, and,
whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten
registration, (i) make such representations and
warranties to the holders of such Transfer Restricted
Securities and the underwriters, if any, with respect to
the business of the Company and its subsidiaries
(including with respect to businesses or assets acquired
or to be acquired by any of them), and the Shelf
Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Issuers
and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to
the managing underwriters, if any, and Special Counsel to
the holders of the Transfer Restricted Securities being
sold), addressed to each selling holder of Transfer
Restricted Securities and each of the underwriters, if
any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other
matters as may be reasonably requested by such Special
Counsel and underwriters; (iii) use their best efforts to
obtain customary "cold comfort" letters and updates
thereof from the independent certified public accountants
of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for
which financial statements and financial data is, or is
required to be, included in the Shelf Registration
Statement), addressed (where reasonably possible) to each
selling holder of Transfer Restricted Securities and each
of the underwriters, if any, such letters to be in
customary form and covering matters of the type
customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less
<PAGE> 19
-18-
favorable to the selling holders and the underwriters,
if any, 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 Transfer
Restricted Securities covered by such Shelf Registration
Statement and the managing underwriters, if any); and (v)
deliver such documents and certificates as may be
reasonably requested by the holders of a majority in
aggregate principal amount of the Transfer Restricted
Securities being sold, their Special Counsel and the
managing underwriters, if any, to evidence the continued
validity of the representations and warranties made
pursuant to clause (i) above and to evidence compliance
with any customary conditions contained in the
underwriting agreement or other agreement entered into by
the Issuers;
(m) In the case of a Shelf Registration,
make available for inspection by a representative of the
holders of Transfer Restricted Securities being sold, any
underwriter participating in any such disposition of
Transfer Restricted Securities, and any attorney,
consultant or accountant retained by such selling holders
or underwriter, at the offices where normally kept,
during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of
the Company and its subsidiaries (including with respect
to businesses and assets acquired or to be acquired to
the extent that such information is available to the
Company), and cause the officers, directors, agents and
employees of the Company and its subsidiaries (including
with respect to businesses and assets acquired or to be
acquired to the extent that such information is available
to the Company) to supply all information in each case
reasonably requested by any such representative,
underwriter, attorney, consultant or accountant in
connection with such Shelf Registration; 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 (i)
disclosure of such information is required by court or
administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of
such information is required by law (including any
disclosure requirements pursuant to Federal
<PAGE> 20
-19-
securities laws in connection with the filing of the
Shelf Registration Statement or the use of any
Prospectus), (iii) 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 or (iv) such information becomes available to
such person from a source other than the Company and its
subsidiaries and such source is not bound by a
confidentiality agreement; and provided, further, that
the foregoing inspection and information gathering shall
be coordinated on behalf of the Initial Purchasers by
Smith Barney, Inc. and on behalf of any other persons, by
one counsel designated by and on behalf of such other
persons;
(n) Provide an indenture trustee for the
Notes and/or the Exchange Notes and Private Exchange
Notes, as the case may be, and cause an indenture to be
qualified under the TIA not later than the effective
date of the first Registration Statement relating to the
Notes and/or the Exchange Notes and Private Exchange
Notes, as the case may be; and if such indenture shall be
the Indenture, in connection therewith, cooperate with the
Trustee and the holders of the Notes and/or the Exchange
Notes and Private Exchange Notes, to effect such changes
to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA;
and execute, and use its reasonable efforts to cause the
Trustee to execute, all customary documents as may be
required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner;
(o) Comply with all applicable rules and
regulations of the SEC and make generally available to
their securityholders earning statements satisfying the
provisions of Section 11(a) of the Securities Act and
Rule 158, no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm
commitment or reasonable efforts underwritten offering
and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter
after the effective date of a Registration Statement,
which statement shall cover
<PAGE> 21
-20-
said period, consistent with the requirements of Rule
158; and
(p) Cooperate with each seller of Transfer
Restricted Securities covered by any Registration
Statement and each underwriter, if any, participating in
the disposition of such Transfer Restricted Securities
and their respective counsel in connection with any
filings required to be made with the National Association
of Securities Dealers, Inc.
(q) Use their best efforts to cause the
Exchange Notes, if issued, to be listed on the New York
Stock Exchange on or prior to the consummation of the
Exchange Offer.
The Issuers may require a holder of Transfer Restricted
Securities to be included in a Registration Statement to furnish to the Issuers
such information regarding the distribution of such Transfer Restricted
Securities as is required by law to be disclosed in such Registration Statement
and the Issuers may exclude from such Registration Statement the Transfer
Restricted Securities of any holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
If any such Registration Statement refers to any holder
by name or otherwise as the holder of any securities of an Issuer, then such
holder shall have the right to require (i) the insertion therein of language,
in form and substance reasonably satisfactory to such holder, to the effect
that the holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Issuers'
securities covered thereby and that such holding does not imply that such
holder will assist in meeting any future financial requirements of the Issuers,
or (ii) in the event that such reference to such holder by name or otherwise is
not required by the Securities Act, the deletion of the reference to such
holder in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3
hereof, each holder of Transfer Restricted Securities agrees by acquisition of
such Transfer Restricted Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, such holder will forthwith
discontinue disposition of such Transfer Restricted Securities covered by such
Registration Statement or
<PAGE> 22
-21-
Prospectus until such holder'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, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any
such notice, the Effectiveness Period shall be extended by the number of days
during such period from and including the date of the giving of such notice to
and including the date when each holder of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies of
the supplemented or amended Prospectus contemplated by Section 5(j) hereof or
(y) the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not any Registration Statement is filed or becomes effective and
whether or not any Notes, Exchange Notes or Private Exchange Notes are issued
or sold pursuant to any Registration Statement. The fees and expenses referred
to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the National Association
of Securities Dealers, Inc. and (B) in compliance with securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Notes, Exchange Notes and Private Exchange Notes in a
form eligible for deposit with The Depository Trust Company and of printing
Prospectuses), (iii) reasonable fees and disbursements of counsel for the
Issuers and the Special Counsel, (iv) fees and disbursements of all independent
certified public accountants referred to in Section 2(e) and 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), (v) if
required, the reasonable fees and expenses of any "qualified independent
underwriter" and its counsel, and (vi) fees and expenses of all other persons
retained by the Issuers. In addition, the Issuers shall pay their internal
expenses (including, without limitation, all salaries and expenses of their
respective officers and employees performing legal or accounting duties), the
expense of any annual audit, and the fees and expenses incurred in connection
with the listing of the Notes, Exchange Notes or
<PAGE> 23
-22-
Private Exchange Notes to be registered on any securities exchange.
Notwithstanding the foregoing or anything in this Agreement to the contrary,
each holder of Transfer Restricted Securities shall pay all underwriting
discounts and commissions of any underwriters with respect to any Notes,
Exchange Notes or Private Exchange Notes sold by it.
7. Indemnification
(a) The Issuers agree, jointly and severally, to
indemnify and hold harmless (i) each of the Initial Purchasers, each holder of
Notes, Exchange Notes and Private Exchange Notes and each Participating
Broker-Dealer, (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any of the foregoing
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a "controlling person"), and (iii) the respective officers, directors,
partners, employees, representatives and agents of the Initial Purchasers, each
holder of Notes, Exchange Notes and Private Exchange Notes, each Participating
Broker-Dealer and any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Person"), from
and against any and all losses, claims, damages, liabilities and judgments
arising out of or relating to any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement, Prospectus or
preliminary prospectus or in any amendment or supplement thereto, or arising
out of or relating to any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or preliminary prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Indemnified Person
furnished in writing to the Issuers by or on behalf of such Indemnified Person
expressly for use therein; provided that the foregoing indemnity with respect
to any preliminary prospectus shall not inure to the benefit of any Indemnified
Person from whom the person asserting such losses, claims, damages, liabilities
and judgments purchased securities if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary prospectus is
eliminated or remedied in the Prospectus and a copy of the Prospectus shall not
have been furnished to such person in a timely manner due to the wrongful
action or wrongful inaction of such Indemnified Person.
<PAGE> 24
-23-
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such
Prospectus or preliminary prospectus or any amendment or supplement thereto and
with respect to which indemnity may be sought against the Issuers hereunder,
such Indemnified Person shall promptly notify the Issuers in writing and the
Company shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such Indemnified Person and payment of all fees and
expenses. Any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified
Person, unless (i) the employment of such counsel shall have been specifically
authorized in writing by the Issuers, (ii) the Company shall have failed to
assume the defense and employ counsel or pay all such fees and expenses or
(iii) the named parties to any such action (including any impleaded parties)
include both such Indemnified Person and an Issuer and such Indemnified Person
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
any such Issuer (in which case the Company shall not have the right to assume
the defense of such action on behalf of such Indemnified Person, it being
understood, however, that the Issuers shall not, in connection with any one
such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by such Indemnified Persons,
and that all such reasonable fees and expenses shall be reimbursed as they are
incurred). The Issuers shall not be liable for any settlement of any such
action effected without their written consent but if settled with the written
consent of the Issuers, the Issuers agree, jointly and severally, to indemnify
and hold harmless each Indemnified Person from and against any loss or
liability by reason of such settlement. No Issuer shall, without the prior
written consent of each Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding.
(c) In connection with any Registration Statement
pursuant to which a holder of Transfer Restricted Securities offers or sells
Transfer Restricted Securities, such holder
<PAGE> 25
-24-
agrees, severally and not jointly, to indemnify and hold harmless the Issuers,
their respective directors and officers and any person controlling an Issuer
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 Issuers to
each Indemnified Person but only with respect to information relating to such
holder furnished in writing by or on behalf of such holder expressly for use in
such Registration Statement. In any such case in which any action shall be
brought against an Issuer, any director or officer of an Issuer or any person
controlling an Issuer based on such Registration Statement and in respect of
which indemnity may be sought against a holder of Transfer Restricted
Securities, such holder shall have the rights and duties given to the Issuers
(except that if an Issuer shall have assumed the defense thereof, such holder
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such holder), and the Issuers, their respective
directors and officers and any person controlling an Issuer shall have the
rights and duties given to the Indemnified Persons by Section 7(b) hereof.
(d) If the indemnification provided for in this
Section 7 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party on the one hand and the indemnified party on the other hand
from the offering of the Notes, the Exchange Notes or the Private Exchange
Notes, as the case may be (it being expressly understood and agreed that the
relative benefits received by the Issuers from the offering of the Notes,
Exchange Notes or Private Exchange Notes, as the case may be, shall be the
amount of the net proceeds received by the Company from the sale of the Notes
to the Initial Purchasers), or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of each indemnifying party on the one hand and the
indemnified party on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative fault of the each indemnifying party on the one hand the indemnified
party on the other hand shall be determined by reference to, among
<PAGE> 26
-25-
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by an
indemnifying party or such indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuers and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 7(d)
were determined by pro rata allocation (even if the Indemnified Person were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the net profits received by it in connection with
the sale of the Notes, Exchange Notes or Private Exchange Notes contemplated by
this Agreement exceeds the amount of any damages which such Indemnified Person
has otherwise been required to pay 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. The Indemnified Person's obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective amount of Notes, Exchange Notes or Private Exchange Notes included
in any such Registration Statement by each Indemnified Person and not joint.
8. Rules 144 and 144A
Each of Issuers shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any holder of Transfer Restricted Securities, make
available other information as required by, and so long as necessary to permit,
sales of its Transfer Restricted Securities pursuant to Rule 144A.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require an Issuer to register any
<PAGE> 27
-26-
of its securities pursuant to the Exchange Act.
9. Underwritten Registrations
If any of the Transfer Restricted Securities 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
administer the offering will be selected by the holders of a majority in
aggregate principal amount of such Transfer Restricted Securities included in
such offering, subject to the consent of the Company (which will not be
unreasonably withheld or delayed).
No person may participate in any underwritten
registration hereunder unless such person (i) agrees to sell such Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) 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) Remedies. In the event of a breach by an Issuer
or by a holder of Notes, Exchange Notes or Private Exchange Notes of any of its
obligations under this Agreement, each holder of Notes, Exchange Notes or
Private Exchange Notes and each Issuer, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Subject
to Section 4 hereof, the Issuers and each holder of Notes, Exchange Notes and
Private Exchange Notes agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement and each hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuers will
not enter into any agreement with respect to their securities that is
inconsistent with the rights granted to the holders of Notes, Exchange Notes
and Private Exchange Notes and Indemnified Persons in this Agreement or
otherwise conflicts with the provisions hereof. Without the written consent of
the holders of a majority in aggregate principal amount of the outstanding
Transfer Restricted Securities, the Issuers shall not grant to any person any
rights which conflict with or are
<PAGE> 28
-27-
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. The Issuers
shall not grant to any of their securityholders (other than the holders of
Transfer Restricted Securities in such capacity) the right to include any of
their securities in any Registration Statement other than Transfer Restricted
Securities.
(d) 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, otherwise than with the prior written
consent of the holders of not less than a majority of the then outstanding
aggregate principal amount of Transfer Restricted Securities; provided,
however, that, for the purposes of this Agreement, Transfer Restricted
Securities that are owned, directly or indirectly, by the Issuers or any of
their Affiliates are not deemed outstanding. 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 Transfer Restricted
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Transfer Restricted Securities may be given by holders of a majority in
aggregate principal amount of the Transfer Restricted Securities 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.
Notwithstanding the foregoing, no amendment, modification, supplement, waiver
or consent with respect to Section 7 shall be made or given otherwise than with
the prior written consent of each Indemnified Person affected thereby.
(e) Notices. All notices and other communications
provided for herein shall be made in writing by hand-delivery, next-day air
courier, certified first-class mail, return receipt requested, telex or
telecopier:
(i) if to the Issuers, as provided in the Purchase
Agreement,
(ii) if to the Initial Purchasers, as provided in
the Purchase Agreement, or
(iii) if to any other person who is then the
registered holder of Notes, Exchange Notes or Private
Exchange Notes, to the address of such holder as it
<PAGE> 29
-28-
appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by
hand, if personally delivered; one business day after being timely delivered to
a next-day air courier; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties and shall inure to the benefit of each holder of
Notes, Exchange Notes and Private Exchange Notes. The Issuers may not assign
any of their rights or obligations hereunder without the prior written consent
of each holder of Transfer Restricted Securities and each Indemnified Person.
Notwithstanding the foregoing, no successor or assignee of an Issuer shall have
any of the rights granted under this Agreement until such person shall
acknowledge its rights and obligations hereunder by a signed written statement
of such person's acceptance of such rights and obligations.
(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.
(h) Governing Law; Submission to Jurisdiction. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE
OF NEW YORK. THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
(i) Severability. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law. 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
<PAGE> 30
-29-
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their 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) Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
<PAGE> 31
-30-
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed as of the date first written
above.
WALBRO CORPORATION
By: ___________________________
Name:
Title:
WALBRO AUTOMOTIVE CORPORATION
By: ___________________________
Name:
Title:
WALBRO ENGINE MANAGEMENT
CORPORATION
By: ___________________________
Name:
Title:
SHARON MANUFACTURING COMPANY
By: ___________________________
Name:
Title:
WHITEHEAD ENGINEERED PRODUCTS,
INC.
By: ___________________________
Name:
Title:
<PAGE> 32
-31-
SMITH BARNEY INC.
A.G. EDWARD & SONS, INC.
McDONALD & COMPANY SECURITIES, INC.
STIFEL, NICOLAUS AND COMPANY, INCORPORATED
By: SMITH BARNEY INC.
By: ____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT FOR RATIOS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------ ----------------------------
1994 1995
PRO FORMA 1994 1993 1992 1991 1990 PRO FORMA 1995 1994
--------- ---- ---- ---- ---- ---- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest on debt $ 18,437 $ 3,862 $ 2,594 $ 3,704 $ 6,724 $ 7,309 $ 10,162 $ 2,666 $ 1,540
Interest element of rentals (1) 2,183 1,108 885 936 875 475 1,064 620 582
Preferred stock dividends (2) -- -- -- -- -- 280 -- -- --
--------- -------- -------- -------- -------- -------- -------- -------- --------
$ 20,620 $ 4,970 $ 3,479 $ 4,640 $ 7,599 $ 8,064 $ 11,226 $ 3,286 $ 2,122
========= ======== ======== ======== ======== ======== ======== ======== ========
EARNINGS:
Net income $ 6,009 $ 14,595 $ 9,667 $ 12,526 $ 4,838 $ 1,097 $ 8,044 $ 8,923 $ 8,960
Provision for national income
taxes 4,979 5,824 4,574 4,664 2,056 1,618 3,465 3,751 4,953
Cumulative effect of accounting
change -- -- 4,394 -- -- -- -- -- --
Fixed charges 20,620 4,970 3,479 4,640 7,599 8,064 11,226 3,286 2,122
Minority interest in income 92 92 -- -- -- -- -- -- --
Equity in (income) losses of
joint ventures (2,609) (2,609) 89 (179) 465 2,128 (2,074) (2,074) (592)
--------- -------- -------- -------- -------- -------- -------- -------- --------
$ 29,091 $ 22,872 $ 22,203 $ 21,651 $ 14,958 $ 12,907 $ 20,661 $ 13,886 $ 15,443
========= ======== ======== ======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES 1.4x 4.6x 6.4x 4.7x 2.0x 1.6x 1.8x 4.2x 7.3x
FIXED CHARGES IN EXCESS OF EARNINGS $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
(1) Deemed to be approximately one-third of rental expenses.
(2) Represents actual preferred stock dividends of $120 in 1990 grossed-up to a
pre-income-tax basis at the 1990 effective income tax rate of 57.1%
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 14, 1995 (except with respect to the matters discussed in Notes
20 and 21, as to which the date is June 30, 1995), with respect to the
consolidated balance sheets of Walbro Corporation and Subsidiaries as of
December 31, 1994, 1993 and 1992 and the related consolidated statements of
income, stockholders' equity and cash flows for the years then ended, included
in or made a part of this registration statement.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
September 22, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated May 12, 1995, with respect to the combined balance sheet of the Fuel
Tank Division of Dyno Industrier A.S as of December 31, 1994 and the related
combined statements of income, stockholders' and divisional equity, and cash
flows for the year then ended, included in or made a part of this registration
statement.
ARTHUR ANDERSEN & Co. G.m.b.H.
Stuttgart, Germany,
September 22, 1995
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation of our report dated May 12, 1995 of the combined
balance sheet of the Fuel Tank System Division of Dyno Industrier A.S as of
December 31, 1993 and the related combined statements of income and cash flows
for the year then ended, and our report dated May 30, 1995 of the combined
statement of revenues and direct costs and expenses of the Fuel Tank System
Division of Dyno Industrier A.S for the year ended December 31, 1992, which
reports are included in this Registration Statement on form S-4 of Walbro
Corporation.
DELOITTE & TOUCHE
Oslo, Norway
September 25, 1995
<PAGE> 1
EXHIBIT 25
___________________________________________________________________________
UNITED STATES
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) _________________________________________
_________________________________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national Identification no.)
bank)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
_________________________________
WALBRO CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 38-1358966
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
6242 GARFIELD STREET
CASS CITY, MICHIGAN 48726
(Address of principal executive offices) (Zip Code)
SEE TABLE OF ADDITIONAL SUBSIDIARY OBLIGORS
______________________________
$110,000,000
9 7/8% SENIOR NOTES
DUE 2005, SERIES B
(Title of the indenture securities)
______________________________________________________________________________
<PAGE> 2
-2-
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.
NAME ADDRESS
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of
Bankers Trust Company dated August 7,
1990 and Certificate of Amendment of the
Organization Certificate of Bankers
Trust Company dated March 28, 1994 -
Incorporated herein by reference to
Exhibit 1 filed with Form T-1 Statement,
Registration No. 33-79862.
EXHIBIT 2 - Certificate of Authority to commence
business - Incorporated herein by
reference to Exhibit 2 filed with Form
T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise
corporate trust powers - Incorporated
herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration
No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust
Company, dated as amended on September
21, 1993. - Incorporated herein by
reference to Exhibit 4 filed with Form
T-1 Statement, Registration No. 33-52359.
<PAGE> 3
-3-
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company
required by Section 321(b) of the Act. -
Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement,
Registration No. 22-18864.
EXHIBIT 7 - A copy of the latest report of condition
of Bankers Trust Company dated as of
March 31, 1995.
EXHIBIT 8 - Not Applicable
EXHIBIT 9 - Not Applicable
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee,
Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New York,
on the 22 day of September, 1995.
BANKERS TRUST COMPANY
By: Terence Rawlins
---------------
Terence Rawlins
Assistant Treasurer
<PAGE> 5
Legal Title of Bank: Bankers Trust Company Call Date: 3/31/95 ST-
BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT:
00623 Page RC-1
City, State ZIP: New York, NY 10006
11
FDIC Certificate No.: 0 0 6 2 3
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS MARCH 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
_______________
________________________ C400
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
/ / / / / / / / / / / / / / / / / /
<S><C>
1. Cash and balances due from depository institutions (from Schedule RC-A):
/ / / / / / / / / / / / / / / / / /
a. Noninterest-bearing balances and currency and coin(1) ...............................
0081 1,690,000 1.a.
b. Interest-bearing balances(2) ..........................................................................
0071 2,805,000 1.b.
2. Securities:
/ / / / / / / / / / / / / / / / / /
a. Held-to-maturity securities (from Schedule RC-B, column A) .......................
1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)......................
1773 3,255,000 2.b.
3 Federal funds sold and securities purchased under agreements to resell in domestic offices
/ / / / / / / / / / / / / / / / / /
of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
/ / / / / / / / / / / / / / / / / /
a. Federal funds sold ........................................................................................
0276 4,331,000 3.a.
b. Securities purchased under agreements to resell .............................................
0277 911,000 3.b.
4. Loans and lease financing receivables:
/ / / / / / / / / / / / / / / / / /
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 21,354,000
/ / / / / / / / / / / / / / / / / / 4.a.
b. LESS: Allowance for loan and lease losses......................................RCFD 3123
1,196,000 / / / / / / / / / / / / / / / / / / 4.b.
c. LESS: Allocated transfer risk reserve ..............................................RCFD 3128
0 / / / / / / / / / / / / / / / / / / 4.c.
d. Loans and leases, net of unearned income,
/ / / / / / / / / / / / / / / / / /
allowance, and reserve (item 4.a minus 4.b and 4.c) ............................................
2125 20,158,000 4.d.
5. Assets held in trading accounts ................................................................................
3545 39,393,000 5.
6. Premises and fixed assets (including capitalized leases) ............................................
2145 890,000 6.
7. Other real estate owned (from Schedule RC-M) .......................................................
2150 258,000 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)
2130 233,000 8.
9. Customers' liability to this bank on acceptances outstanding ..................................
2155 387,000 9.
10. Intangible assets (from Schedule RC-M) .................................................................
2143 11,000 10.
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
11. Other assets (from Schedule RC-F) ..........................................................................
2160 7,797,000 11.
12. Total assets (sum of items 1 through 11) .................................................................
2170 82,119,000 12.
------------------------------------------------
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE> 7
Legal Title of Bank: Bankers Trust Company Call Date: 3/31/95 ST-BK:
36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT:
00623 Page RC-2
City, State Zip: New York, NY 10006
12
FDIC Certificate No.: 0 0 6 2 3
SCHEDULE RC--CONTINUED
___________________________________
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Dollar Amounts in Thousands / / / / / / / /
<S><C>
/ / Bil Mil Thou
LIABILITIES / / / / /
/ / / / / / / / / / / / / / / / / / /
3. Deposits: / / / /
/ / / / / / / / / / / / / / / / / / /
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)
RCON 2200 7,086,000 13.a.
(1) Noninterest-bearing(1) ............................RCON 6631 2,504,000...........
/ / / / / / / / / / / / / / / / / / / / / / / 13.a.(1)
(2) Interest-bearing .................................. .....RCON 6636 4,582,000...........
/ / / / / / / / / / / / / / / / / / / / / / / 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E / / / / /
/ / / / / / / / / / / / / / / / / /
part II) RCFN
2200 20,209,000 13.b.
(1) Noninterest-bearing ..................................RCFN 6631 641,000
/ / / / / / / / / / / / / / / / / / / / / / / 13.b.(1)
(2) Interest-bearing .......................................RCFN 6636 19,568,000
/ / / / / / / / / / / / / / / / / / / / / / / 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in / / / / /
/ / / / / / / / / / / / / / / / / /
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
/ / / / / / / / / / / / / / / / / / / / / / /
a. Federal funds purchased ........................................................................................
RCFD 0278 3,334,000 14.a.
b. Securities sold under agreements to repurchase ....................................................
RCFD 0279 418,000 14.b.
15. a. Demand notes issued to the U.S. Treasury ............................................................
RCON 2840 0 15.a.
b. Trading liabilities .................................................................................................
RCFD 3548 25,202,000 15.b.
16. Other borrowed money: / / / / /
/ / / / / / / / / / / / / / / / / /
a. With original maturity of one year or less ............................................................
RCFD 2332 9,875,000 16.a.
b. With original maturity of more than one year ......................................................
RCFD 2333 2,307,000 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ................................
RCFD 2910 36,000 17.
18. Bank's liability on acceptances executed and outstanding ............................................
RCFD 2920 387,000 18.
19. Subordinated notes and debentures ..............................................................................
RCFD 3200 1,225,000 19.
20. Other liabilities (from Schedule RC-G) .......................................................................
RCFD 2930 8,122,000 20.
21. Total liabilities (sum of items 13 through 20) .............................................................
RCFD 2948 78,201,000 21.
/ / / / /
/ / / / / / / / / / / / / / / / / /
22. Limited-life preferred stock and related surplus ...........................................................
RCFD 3282 0 22.
EQUITY CAPITAL / / / / /
/ / / / / / / / / / / / / / / / / /
23. Perpetual preferred stock and related surplus ..............................................................
RCFD 3838 250,000 23.
24. Common stock ..............................................................................................................
RCFD 3230 852,000 24.
</TABLE>
<PAGE> 8
<TABLE>
<S><C>
25. Surplus (exclude all surplus related to preferred stock) ................................................
RCFD 3839 498,000 25.
26. a. Undivided profits and capital reserves .....................................................................
RCFD 3632 2,681,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ....................
RCFD 8434 ( 3,000) 26.b.
27. Cumulative foreign currency translation adjustments ................................................
RCFD 3284 ( 360,000) 27.
28. Total equity capital (sum of items 23 through 27) .....................................................
RCFD 3210 3,918,000 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22,
/ / / / / / / / / / / / / / / / / / / / / / /
and 28)
......................................................................................................................
RCFD 3300 82,119,000 29.
- ----------------------------------
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed
for the bank by independent external
Number
______
auditors as of any date during 1994
......................................................... RCFD
2 M.1
<TABLE>
<S> <C> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors'
examination of the bank performed by other
with generally accepted auditing standards by a certified external
auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of
the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's
financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures
(excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
- ----------------------
(1) Including total demand deposits and noninterest-bearing time and savings deposits.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
[WALBRO LOGO]
LETTER OF TRANSMITTAL
FOR
TENDER OF 9 7/8% SENIOR NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
9 7/8% SENIOR NOTES DUE 2005, SERIES B
WALBRO CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON OCTOBER 31, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
Deliver To The Exchange Agent:
Bankers Trust Company
By Hand/Overnight Courier: By Mail:
Bankers Trust Company Bankers Trust Company
Corporate Trust & Agency Group Corporate Trust & Agency Group
Receipt & Delivery Window Reorganization Department
123 Washington St., 1st Floor P.O. Box 1458
New York, NY 10006 Church Street Station
New York, NY 10008-1458
By Facsimile:
(212) 250-3290 and (212) 250-6275
Confirm by Telephone:
(212) 250-6270
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE
ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS lETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
The undersigned hereby acknowledges receipt and review of the
Prospectus dated , 1995 (the "Prospectus") of Walbro Corporation (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange its
9-7/8% Senior Notes due July 15, 2005, Series B (the "New Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which the Prospectus is a part,
for a like principal amount of its issued and outstanding 9 7/8% Senior Notes
due July 15, 2005, Series A (the "Old Notes"). Capitalized terms used but not
defined herein have the respective meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the latest time and date in which the Exchange
Offer is extended. The Company shall notify the holders of the Old Notes of
any extension by oral or written notice prior to 9:00 A.M., New York City time,
on the next business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Old Notes
either if original Old Notes are to be forwarded herewith or if delivery of Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent 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-Book-Entry Transfer."
Holders of Old Notes whose Old Notes are not immediately available, or who are
unable to deliver their Old Notes and all other documents required by this
Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date,
or who are unable to complete the procedure for book-entry transfer on a timely
basis, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offer-Guaranteed Delivery Procedures." See Instruction 1. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder. 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 Old Notes must
complete this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF
THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
-2-
<PAGE> 3
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED
---------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF AGGREGATE
REGISTERED HOLDER(S), PRINCIPAL
EXACTLY AS NAMES(S) APPEAR(S) AMOUNT PRINCIPAL
ON OLD NOTES REGISTERED REPRESENTED AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY NOTE(S) TENDERED**
------------------------- ---------- ------------ -----------
<S> <C> <C> <C>
TOTAL
</TABLE>
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Old Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Old Notes. All tenders must be in integral multiples of $1,000.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD 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 (FOR
USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution:____________________________________________
Account Number:___________________________________________________________
Transaction Code Number:__________________________________________________
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Notes:______________________________
Date of Execution of Notice of Guaranteed Delivery:________________________
Window Ticket Number (if available):_______________________________________
Name of Eligible Institution that Guaranteed Delivery:_____________________
Account Number (if delivered by book-entry transfer):______________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:______________________________________________________________________
Address:___________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution
of New Notes. If the undersigned is a broker-dealer that will receive New
Notes for its own account in exchange for Old Notes, it acknowledges that the
Old Notes were acquired as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with
any resale of such New Notes; however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
-3-
<PAGE> 4
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal amount of
Old Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Old Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Company all right, title and interest in and to the Old Notes tendered
for exchange hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent, the agent and attorney-in-fact of the undersigned
(with full knowledge that the Exchange Agent also acts as the agent of the
Company in connection with the Exchange Offer) with respect to the tendered Old
Notes with full power of substitution to (i) deliver such Old Notes, or
transfer ownership of such Old Notes on the account books maintained by the
Book-Entry Transfer Facility, to the Company and deliver all accompanying
evidences of transfer and authenticity, and (ii) present such Old Notes for
transfer on the books of the Company and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the
"Commission") that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Holders' business and such Holders are not engaging
in and do not intend to engage in a distribution of the New Notes and have no
arrangement or understanding with any person to participate in a distribution
of such New Notes. The undersigned hereby further represent(s) to the Company
that (i) any New Notes acquired in exchange for Old Notes tendered hereby are
being acquired in the ordinary course of business of the person receiving such
New Notes, whether or not the undersigned, (ii) neither the undersigned not any
such other person is engaging in or intends to engage in a distribution of the
New Notes, (iii) neither the undersigned not any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes, and (iv) neither the Holder not any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company
or, if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If the undersigned or the person receiving the New Notes is a
broker-dealer that is receiving New Notes for its own account in exchange for
Old Notes that were acquired as a result of market-making activities or other
trading activities, the undersigned acknowledges that it or such other person
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that the undersigned or such other person is an
"underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that if the undersigned is participating in the Exchange Offer for
the purpose of distributing the New Notes (i) the undersigned cannot rely on
the position of the staff of the Commission in certain no-action letters and,
in the absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes, in which case the registration
statement must contain the selling
-4-
<PAGE> 5
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission, and (ii) failure to comply with such
requirements in such instance could result in the undersigned incurring
liability under the Securities Act for which the undersigned is not indemnified
by the Company.
If the undersigned or the person receiving the New Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act), the undersigned
represents to the Company that the undersigned understands and acknowledges
that the New Notes may not be offered for resale, resold or otherwise
transferred by the undersigned or such other person without registration under
the Securities Act or an exemption therefrom.
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 exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein 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
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the New Notes issued in exchange for the Old Notes accepted for exchange
and return any Old Notes not tendered or not exchanged, in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail or deliver the New Notes issued in exchange for the
Old Notes accepted for exchange and any Old Notes not tendered or not exchanges
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Issuance Instructions" and "Special Delivery Instructions" are completed,
please issue the New Notes issued in exchange for the Old Notes accepted for
exchange in the name(s) of, and return any Old Notes not tendered or not
exchanged to, the person(s) so indicated. The undersigned recognizes that the
Company has no obligation pursuant to the "Special Issuance Instructions" and
"Special Delivery Instructions" to transfer any Old Notes from the name of the
registered holer(s) thereof if the Company does not accept for exchange any of
the Old Notes so tendered for exchange.
-5-
<PAGE> 6
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
X _______________________________________________________ ________________
Date
X _______________________________________________________ ________________
Date
Area Code and Telephone Number: ________________________________
The above lines must be signed by the registered Holder(s) of Old Notes
as name(s) appear(s) on the Old Notes or on a security position listing, or
by person(s) authorized to become registered Holder(s) by a properly
completed bond power from the registered Holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Old Notes to which this
Letter of Transmittal relate are held of record by two or more joint Holders,
then all such Holders must sign this Letter of Transmittal. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, then such person must (i) set forth his or her full title below and
(ii) unless waived by the Company, submit evidence satisfactory to the
Company of such person's authority so to act. See Instruction 5 regarding
the completion of this Letter of Transmittal, printed below.
Name(s) _________________________________________________________________
_________________________________________________________________
(Please Type or Print)
_________________________________________________________________
(Please Type or 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)
Dated:___________________________________________________________, 1995
-6-
<PAGE> 7
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount not
tendered, or New Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of someone other than the
undersigned, or (ii) if Old Notes tendered by book-entry transfer which
are not exchanged are to be returned by credit to an account maintained by
at the Book-Entry Transfer Facility.
Issue New Notes and/or Old Notes to:
Name(s): ______________________________________
(Please Type or Print)
_______________________________________________
(Please Type or Print)
Address:_______________________________________
_______________________________________________
(Include Zip Code)
_______________________________________________
(Tax Identification or Social Security No.)
(Complete Substitute Form W-9)
[ ] Credit unexchanged Old Notes delivered by
book-entry transfer to the Book-Entry Transfer
Facility set forth below:
_______________________________________________
(Book-Entry Transfer Facility Account Number,
if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or
New Notes issued in exchange for Old Notes accepted for exchange, are to
be mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature.
Mail or deliver New Notes and/or Old Notes to:
Name:____________________________________________
(Please Type or Print)
Address:_________________________________________
_________________________________________________
(Include Zip Code)
_________________________________________________
(Tax Identification or Social Security No.)
-7-
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES OR BOOK-ENTRY
CONFIRMATIONS. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, 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 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Notes, this Letter
of Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the Holder
use an 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.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Old Notes and (a) whose Old Notes are not immediately available, or (b) who
cannot deliver their Old Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent prior to the Expiration Date or
(iii) who are unable to complete the procedure for book-entry transfer on a
timely basis, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. 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 a 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 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 of the Old Notes, the registration 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 (3)] New York
Stock Exchange, Inc. ("NYSE") trading days after the Expiration Date, this
Letter of Transmittal (or facsimile hereof) together with the Old Notes (or a
Book-Entry Confirmation) in proper form for transfer, must be received by the
Exchange Agent within [THREE (3)] NYSE trading days after the Expiration Date;
and (iii) the certificates for all physically tendered shares of Old Notes, in
proper form for transfer, or Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter are received by the Exchange Agent
within [THREE (3)] NYSE trading days after the date of execution of the Notice
of Guaranteed Delivery.
Any Holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of 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.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial Holder of Old Notes who is not the
registered Holder and who wishes to tender should arrange with the registered
Holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in such Holder's name or obtain a properly completed bond power from
the registered Holder.
-8-
<PAGE> 9
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes"
above. The entire principal amount of Old Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated. If the
entire principal amount of all Old Notes is not tendered, then Old Notes for
the principal amount of Old Notes not tendered and New Notes issued in exchange
for any Old Notes accepted 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, promptly after the Old Notes are accepted for exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal
(or facsimile hereof) is signed by the record Holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Notes without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in the
Book-Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the Holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes listed and tendered hereby and the
New Notes issued in exchange therefor is to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered Holder, the
said Holder need not and should not endorse any tendered Old Notes, nor provide
a separate bond power. In any other case, such Holder must either properly
endorse the Old Notes tendered or transmit a properly completed separate bond
power with this Letter of Transmittal, with the signatures on the endorsement
or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered Holder or Holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Old Notes tendered herewith (or by a
participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the tendered Old Notes) and the
issuance of New Notes (and any Old Notes not tendered or not accepted) are to
be issued directly to such registered holder(s) (or, if signed by a participant
in the Book-Entry Transfer Facility, any New Notes or Old Notes not tendered or
not accepted are to be deposited to such participant's account at such
Book-Entry Transfer Facility) and neither the box entitled "Special Delivery
Instructions" nor the box entitled "Special Registration Instructions" has been
completed, or (ii) such Old Notes are tendered for the account of an Eligible
Institution. 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 or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which New Notes or substitute
Old Notes for principal amounts not tendered or not accepted for exchange are
to be issued or sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of
-9-
<PAGE> 10
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered Holder of the Old Notes tendered
hereby, or if tendered Old Notes are registered in the name of any person other
than the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with this Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a
holder of any Old 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 in 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 others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" 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 all 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 Old 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 of 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 Old 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 Old Notes not validly tendered or any Old 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 Old Notes as to any ineligibility of
any holder who seeks to tender Old Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (includes 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 Old 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 Old Notes,
but shall not incur any liability for failure to give such notification.
-10-
<PAGE> 11
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any Holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover 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 OLD NOTES AND ISSUANCE OF NEW NOTES; RETURN
OF OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Exchange Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Old Notes when, as and if the Company
has given written and oral notice thereof to the Exchange Agent. If any
tendered Old Notes are not exchanged pursuant to the Exchange Offer for any
reason, such unexchanged Old Notes will be returned, without expense, to the
undersigned at the address shown above (or credited to the undersigned's
account at the Book-Entry Transfer Facility designated above) or at a different
address as may be indicated under the box entitled "Special Delivery
Instructions."
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."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
HEREOF (TOGETHER WITH THE OLD NOTES) WHICH MUST BE DELIVERED BY BOOK-ENTRY
TRANSFER OR IN ORIGINAL HARD COPY FROM) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION TIME.
-11-
<PAGE> 12
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
PAYOR'S NAME: WALBRO CORPORATION
<TABLE>
<S><C>
SUBSTITUTE Part I-Taxpayer Identification No.-For All Accounts Part II- For Payees Exempt from
FORM W-9 Backup Withholding (see
enclosed Guidelines)
Enter your taxpayer
identification number in the
appropriate box. For most
individuals and sole pro-
DEPARTMENT OF THE TREASURY prietors, this is your
INTERNAL REVENUE SERVICE social security number. Social Security number
For other entities, it is your
Employer Identification
Number. If you do not
have a number, see OR
How to Obtain a TIN
in the enclosed
Guidelines.
PAYER'S REQUEST FOR Note: If the account is
TAXPAYER IDENTIFICATION NO. in more than one name, see
Employer identification number
the chart on page 2
of the enclosed Guidelines
to determine what
number to enter.
</TABLE>
Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and either
(a) I have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service
Center or Social Security Administration Office or (b) I intend to
mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60)
days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number;
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, or (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding; and
(3) Any other information provided on this form is true, correct and
complete.
SIGNATURE . . . . . . . . . . . . . . . . . . . . DATE . . . . . . 1995
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW
NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OFTAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-12-
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
Tender of 9 7/8% Senior Notes due 2005, Series A
in Exchange for
9 7/8% Senior Notes due 2005, Series B
WALBRO CORPORATION
This form or one substantially equivalent hereto must be used by a
holder to accept the Exchange Offer of Walbro Corporation, a Delaware
corporation (the "Company"), who wishes to tender 9 7/8% Senior Notes due 2005,
Series A (the "Old Notes") to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer -- Guaranteed Delivery
Procedures" of the Company's Prospectus, dated , 1995 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Old Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED IN
THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
The Exchange Agent for the Exchange Offer is:
Bankers Trust Company
<TABLE>
<CAPTION>
By Hand/Overnight Courier: By Mail:
<S> <C>
Bankers Trust Company Bankers Trust Company
Corporate Trust & Agency Group Corporate Trust & Agency Group
Receipt & Delivery Window Reorganization Department
123 Washington St., 1st Floor P.O. Box 1458
New York, NY 10006 Church Street Station
New York, NY 10008-1458
</TABLE>
By Facsimile:
(212) 250-3290 and (212) 250-6275
Confirm by Telephone:
(212) 250-6270
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OFINSTRUCTIONS VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A 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 BOX ON THE
LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 2
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
of Old 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 Old Notes listed below:
<TABLE>
<CAPTION>
<S><C>
Certificate Number(s) (if known) of Old Notes or Aggregate Principal Aggregate Principal
Account Number at the Book-Entry Facility Amount Represented Amount Tendered
</TABLE>
<TABLE>
<CAPTION>
PLEASE SIGN AND COMPLETE
<S> <C>
Signatures of Registered Holder(s) or Date: ____________________________________________
Authorized Signatory: ___________________
___________________________________________________ Address: _________________________________________
___________________________________________________ ___________________________________________________
Name(s) of Registered Holder(s): _________________ Area Code and Telephone No. _____________
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Old Notes or on a
security position listing as the owner of Old 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)
Names(s):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Capacity:
________________________________________________________________________________
Address(es):
________________________________________________________________________________
________________________________________________________________________________
-2-
<PAGE> 3
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, guarantees deposit with the Exchange Agent of the
Letter of Transmittal (or facsimile thereof), together with the Old Notes
tendered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility described in the Prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in the
Letter of Transmittal and any other required documents, all by 5:00 p.m.,
New York City time, within five New York Stock Exchange trading day
following the Expiration Date.
<TABLE>
<S> <C>
Name of Firm: ________________________________________ ____________________________________________________
Authorized Signature
Address: ______________________________________________ Name: _____________________________________________
________________________________________________________
(Include Zip Code) Title:____________________________________________
(Please type or print)
Area Code and Telephone Number:
____________________________________________________ Date: ___________________________________, 1995
</TABLE>
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
-3-
<PAGE> 4
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 Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old 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 the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old 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 Old 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. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
-4-
<PAGE> 1
EXHIBIT 99.3
[WALBRO LOGO]
FOR
TENDER OF 9 7/8% SENIOR NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
9 7/8% SENIOR NOTES DUE 2005, SERIES B
WALBRO CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED IN
THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by Walbro Corporation (the "Company"), a Delaware corporation, to
exchange its 9 7/8% Senior Notes Due 2005, Series B (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
9 7/8 Senior Notes Due 2005, Series A (the "Old Notes") upon the terms and
subject to the conditions set forth in the Company's Prospectus, dated
, 1995, and the related Letter of Transmittal (which together constitute
the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 1995;
2. Letter of Transmittal (together with accompanying Substitute
Form W-9 Guidelines);
3. Notice of Guaranteed Delivery; and
4. Letter which may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee,
with space provided for obtaining such client's instruction
with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
<PAGE> 2
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities Act of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the
undersigned nor any such other person is engaged in or intends to participate
in the distribution of such New Notes and (iv) neither the undersigned nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the
undersigned is a broker-dealer (whether or not it is also an "affiliate") that
will receive New Notes for its own account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the undersigned
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer
or to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
BANKERS TRUST COMPANY
-2-
<PAGE> 1
EXHIBIT 99.4
[WALBRO LOGO]
FOR
TENDER OF 9-7/8% SENIOR NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
9-7/8% SENIOR NOTES DUE 2005, SERIES B
WALBRO CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). NOTES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated , 1995,
of Walbro Corporation (the "Company"), a Delaware corporation, and a related
Letter of Transmittal (which together constitute the "Exchange Offer") relating
to the offer by the Company, to exchange its 9-7/8% Senior Notes Due 2005,
Series B (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act") for a like principal amount of its
issued and outstanding 9-7/8% Senior Notes Due 2005, Series A (the "Old
Notes"), upon the terms and subject to the conditions set forth in the Exchange
Offer.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
We are the holder of record of Old Notes held by us for your own
account. A tender of such Old Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities
<PAGE> 2
Act of such New Notes, (iii) if the undersigned is not a broker-dealer, or is a
broker-dealer but will not receive New Notes for its own account in exchange
for Old Notes, neither the undersigned nor any such other person is engaged in
or intends to participate in the distribution of such New Notes and (iv)
neither the undersigned nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or, if the
undersigned is an "affiliate," that the undersigned will comply with the
registration nd prospectus delivery requirements of the Securities Act to the
extent applicable. If the undersigned is a broker-dealer (whether or not it is
also an "affiliate) that will receive New Notes for its own account in exchange
for Old Notes, it represents that such Old Notes were acquired as a result of
market-making activities or other trading activities, and it acknowledges that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the undersigned
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
Very truly yours,
-2-
<PAGE> 1
EXHIBIT 99.5
[WALBRO LOGO]
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT FROM BENEFICIAL OWNER
FOR
TENDER OF 9-7/8% SENIOR NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
9-7/8% SENIOR NOTES DUE 2005, SERIES B
WALBRO CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1995, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED IN THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1995 (the "Prospectus") of Walbro Corporation, a Delaware corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange its 9-7/8% Senior Notes Due 2005, Series B (the "New
Notes") for all of its outstanding 9-7/8% Senior Notes Due 2005, Series A (the
"Old 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 Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$__________ of the 9-7/8% Senior Notes Due 2005, Series A.
<PAGE> 2
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] To TENDER the following Old Notes held by you for the account
of the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE
TENDERED (IF ANY): $_______________
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
-2-
<PAGE> 3
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation 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 New Notes acquired pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the undersigned, (ii) neither the undersigned
nor any such other person has an arrangement or understanding with any person
to participate in the distribution within the meaning of the Securities Act of
1933, as amended (the "Securities Act") of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the
undersigned nor any such other person is engaged in or intends to participate
in the distribution of such New Notes and (iv) neither the undersigned nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the
undersigned is a broker-dealer (whether or not it is also an "affiliate") that
will receive New Notes for its own account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the undersigned
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
-3-
<PAGE> 4
SIGN HERE
Name of beneficial owner(s): _________________________________________________
Signature(s): ________________________________________________________________
Name(s) (please print): ______________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
Telephone Number: ____________________________________________________________
Taxpayer Identification or Social Security Number: ___________________________
Date: ________________________________________________________________________
-4-
<PAGE> 1
EXHIBIT 99.6
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C>
- -------------------------------------------------------
1. An individual's The individual
account
2. Two or more The actual owner of the
individuals account or, if combined
(joint account) funds, any one of the
individuals1
3. Husband and wife The actual owner of the
(joint account) account or, if joint
funds, either person1
4. Custodian account of a The minor2
minor (Uniform Gift to
Minors Act)
5. Adult and minor The adult or, if the minor
(joint account) is the only contributor,
the minor1
6. Account in the name of The ward, minor, or
guardian or committee incompetent person3
for a designated ward,
minor or incompetent
person
7. a. The usual revocable The grantor-trustee1
savings trust
account (grantor is
also trustee)
b. So-called trust The actual owner1
account that is not
a legal or valid
trust under state
law
8. Sole proprietorship The owner4
account
</TABLE>
- ------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C>
- -------------------------------------------------------
9. A valid trust, The legal entity (Do not
estate, or pension furnish the identification
trust number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)5
10. Corporate account The corporation
11. Religious, The organization
charitable, or
educational
organization account
12. Partnership account The partnership
13. Association, club or The organization
other tax-exempt
organization
14. A broker or The broker or nominee
registered nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4 Show the name of the owner.
5 List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a) of the Code.
- - An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1) of the Code.
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
- - Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
- - Payments described in section 6049(b)(5) of the Code to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451 of the Code.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 6050N of the Code and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file a tax return.
Payers must generally withhold 31% of taxable interest, dividends, and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE> 3
<TABLE>
<S><C>
- ---------------------------------------------------------------------------------------------------
PAYER'S NAME: BANKERS TRUST COMPANY
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN PART III--Social Security
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY Number OR
DEPARTMENT OF THE TREASURY BY SIGNING AND DATING BELOW. Employer Identification Number
INTERNAL REVENUE SERVICE
(If awaiting TIN write "Applied
For")
--------------------------------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding, see the
Payer's Request for Taxpayer enclosed Guidelines for Certification of Taxpayer Identification
Identification Number (TIN) Number on Substitute Form W-9 and complete as instructed therein.
- ---------------------------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends,
or the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- --------------------------------------------------------------------------------
NAME____________________________________________________
(Please Print)
SIGNATURE_______________________________________________ DATE ________________
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NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TIN.
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CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of all
payments of the Offer Price made to me thereafter will be withheld until I
provide a number.
SIGNATURE_________________________________________ DATE_______________________
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