<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 7, 1997
REGISTRATION NO. 333-18317
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
<TABLE>
<S> <C>
WALBRO CORPORATION WALBRO CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (STATE OR OTHER JURISDICTION OF INCORPORATION OR
ORGANIZATION) ORGANIZATION)
36-1358966 36-6683606
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
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 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)
WITH COPIES TO:
<TABLE>
<S> <C>
HOWARD S. LANZNAR, ESQ. WILLIAM M. HARTNETT, ESQ.
LAWRENCE D. LEVIN, ESQ. RICHARD E. FARLEY, ESQ.
KATTEN MUCHIN & ZAVIS CAHILL GORDON & REINDEL
525 WEST MONROE STREET, SUITE 1600 EIGHTY PINE STREET
CHICAGO, ILLINOIS 60661-3693 NEW YORK, NEW YORK 10005
(312) 902-5200 (212) 701-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
-------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED JANUARY 7, 1997
PRELIMINARY PROSPECTUS
$50,000,000
2,000,000 CONVERTIBLE TRUST PREFERRED SECURITIES
WALBRO CAPITAL TRUST
% CONVERTIBLE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER CONVERTIBLE TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
[WALBRO LOGO] AND CONVERTIBLE INTO COMMON STOCK OF,
WALBRO CORPORATION
------------------
The % Convertible Trust Preferred Securities (the "Preferred Securities")
offered hereby (the "Offering") represent preferred undivided beneficial
interests in the assets of Walbro Capital Trust, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"). Walbro
Corporation, a Delaware corporation (the "Company"), will directly or indirectly
own all the common securities (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities") representing undivided beneficial
interests in the assets of the Trust. The Trust exists for the sole purpose of
issuing the Preferred Securities and the Common Securities and investing the
proceeds thereof in an equivalent amount of % Convertible Subordinated
Debentures due 2017 (the "Convertible Debentures") of the Company.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
PUBLIC PROCEEDS TO
OFFERING PRICE(1) UNDERWRITING TRUST(3)(4)
COMMISSIONS(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security........... $25.00 (3) $
- --------------------------------------------------------------------------------------------------
Total(5)......................... $50,000,000 (3) $
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued distributions, if any, from , 1997.
(2) For information regarding indemnification of the Underwriters, see
"Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in the Convertible Debentures, the Company has agreed to pay to
the Underwriters, as compensation for their arranging the investment
therein of such proceeds, $ per Preferred Security (or $ in
the aggregate). See "Underwriting."
(4) Expenses of the offering, which are payable by the Company, are estimated
to be $500,000.
(5) The Trust and the Company have granted the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up
to 300,000 additional Preferred Securities solely to cover
over-allotments, if any. If the option is exercised in full, the total
Public Offering Price, Underwriting Commissions and Proceeds to Trust will
be $ , $ and $ , respectively.
------------------
The Preferred Securities offered hereby are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions, including approval of certain legal
matters by Cahill Gordon & Reindel, counsel for the Underwriters. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about
, 1997.
------------------
Smith Barney Inc. Interstate/Johnson Lane
Corporation
, 1997
<PAGE> 3
[WALBRO CORPORATION LOGO]
Walbro Automotive Products
[PLASTIC FUEL TANK DIAGRAM]
Walbro supplies complete automotive fuel storage and delivery systems including
plastic fuel tank, fuel module (with pump, reservoir and level sensor), fill
pipe, and emission control devices.
Walbro Engine Management Products
[PHOTO]
Float feed and diaphragm carburetors
are designed to meet new environ-
mental standards.
[PHOTO]
[PHOTO]
Walbro provides both ignition sys-
tems and carburetors, which are the
basis of new engine management
systems.
Innovative electronic systems includ-
ing ignition modules enhance engine
performance.
<PAGE> 4
(Cover continued from previous page)
Each Preferred Security is convertible on or after , 1997
(60 days after the date of issue), at the option of the holder thereof into
shares of common stock, par value $.50 per share (the "Common Stock"), of the
Company, at a conversion rate of shares of Common Stock for each Preferred
Security (equivalent to $ per share of Common Stock), subject to
adjustment in certain circumstances. The Common Stock is quoted on the Nasdaq
National Market (the "NNM") under the symbol "WALB." On January 3, 1997, the
last reported sale price of the Common Stock on the NNM was $18 1/4. Application
has been made to have the Preferred Securities approved for quotation on the
NNM, subject to official notice of issuance, under the symbol "WALBP". Trading
of the Preferred Securities on the NNM is expected to commence within 30 days
after initial delivery of the Preferred Securities. See "Underwriting."
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from, and including, , 1997 and
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing March 31, 1997 ("distributions"). The payment of
distributions out of moneys held by the Trust and payments on liquidation of the
Trust or the redemption of Preferred Securities, as set forth below, are
guaranteed by the Company (the "Guarantee") to the extent described under
"Description of the Guarantee." The Guarantee covers payments of distributions
and other payments on the Preferred Securities only if and to the extent that
the Company has made a payment of interest or principal or other payments on the
Convertible Debentures held by the Trust as its sole assets. The Guarantee, when
taken together with the Company's obligations under the Convertible Debentures,
the Indenture (as defined herein) pursuant to which the Convertible Debentures
are issued and its obligations under the Declaration, including its obligations
to pay costs, expenses, debts and liabilities of the Trust (other than with
respect to the Trust Securities), provides a full and unconditional guarantee of
amounts due on the Preferred Securities. The obligations of the Company under
the Guarantee rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, (ii) pari passu with the most senior preferred or
preference stock, if any, issued from time to time by the Company and (iii)
senior to the Common Stock. The obligations of the Company under the Convertible
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness (as defined herein) of the Company, which aggregated
approximately $272 million at September 30, 1996, after giving effect to the
application of the net proceeds of the Offering, and rank pari passu with the
Company's other general unsecured obligations. The obligations of the Company
under the Convertible Debentures are also effectively subordinated to all
existing and future indebtedness and other liabilities, including trade
payables, of the Company's subsidiaries. At September 30, 1996, the indebtedness
and other liabilities of such subsidiaries, after giving effect to the
application of the net proceeds of the Offering, aggregated $369 million
(including the $272 million referred to above).
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Convertible Debentures,
which will be the sole assets of the Trust. As a result, if principal or
interest is not paid on the Convertible Debentures, no amounts will be paid on
the Preferred Securities because the Trust will not have sufficient funds to
make distributions on the Preferred Securities. In such event, the Guarantee
will not apply to such distributions until the Trust has sufficient funds
available therefor.
The Company has the right to defer payments of interest on the Convertible
Debentures by extending the interest payment period on the Convertible
Debentures at any time for up to 20 consecutive quarters (each, an "Extension
Period"); provided, that no such Extension Period may extend beyond the maturity
date of the Convertible Debentures. If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During any
Extension Period, distributions on the Preferred Securities will continue to
accrue with interest thereon (to the extent permitted by applicable law) at an
annual rate of % per annum compounded quarterly. Additionally, during any
Extension Period, holders of Preferred Securities will be required to include
deferred interest income in the form of original issue discount ("OID") in their
gross income for United States federal income tax purposes in advance of receipt
of cash distributions with respect to such deferred interest payments. See
"Description of the Convertible Debentures -- Interest Income and Option to
Extend Interest Payment Periods," "Risk Factors -- Company Option to Extend
Interest Payment
2
<PAGE> 5
(Cover continued from previous page)
Periods; OID Risk" and "United States Federal Income Taxation -- Interest Income
and Original Issue Discount."
The Convertible Debentures are redeemable by the Company, in whole or in
part, from time to time, on or after , 2000, at the redemption
price specified herein, or at any time, in whole or in part, in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If the
Company redeems Convertible Debentures, the Trust will redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Convertible Debentures so redeemed at the redemption price specified
herein per Trust Security, plus accrued and unpaid distributions thereon to the
date fixed for redemption. See "Description of the Preferred Securities --
Mandatory Redemption of Trust Securities." The Preferred Securities will be
redeemed upon maturity of the Convertible Debentures on , 2017. In
addition, upon the occurrence of a Special Event arising from a change in laws
or a change in legal interpretation regarding tax or investment company matters,
unless the Convertible Debentures are redeemed in the limited circumstances
described herein, the Trust shall be dissolved, with the result that the
Convertible Debentures will be distributed to the holders of the Trust
Securities, on a pro rata basis, in lieu of any cash distribution. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution." In certain circumstances, the Company will have the right to
redeem the Convertible Debentures prior to , 2000, which would
result in the redemption by the Trust of Trust Securities in the same amount on
a pro rata basis. If the Convertible Debentures are distributed to the holders
of the Preferred Securities, the Company will use its best efforts to have the
Convertible Debentures quoted on the NNM or on such other exchange as the
Preferred Securities are then listed. See "Description of the Preferred
Securities -- Special Event Redemption or Distribution" and "Description of the
Convertible Debentures."
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, the holders of the Preferred Securities
will be entitled to receive for each Preferred Security a liquidation amount of
$25 plus accrued and unpaid distributions thereon (including interest thereon)
to the date of payment, unless, in connection with such dissolution, winding up
or termination of the Trust, the Convertible Debentures are distributed to the
holders of the Preferred Securities. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution."
------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AND OF THE COMMON STOCK OF WALBRO CORPORATION AT LEVELS ABOVE
THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
3
<PAGE> 6
AVAILABLE INFORMATION
The Company and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made. Statements made in this Prospectus as to the contents of any agreement or
other document are not necessarily complete; with respect to each such 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 this
reference.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (Commission File No.
0-6955), and in accordance therewith files periodic reports, proxy statements
and other information with the Commission relating to its business, financial
statements and other matters. The Registration Statement, as well as such
reports, proxy statements and other information, may be inspected and copied at
prescribed rates at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and should be
available for inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained at prescribed rates by writing to the Commission
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a Web site that contains reports, proxy statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov. Such material can
also be inspected at the reading room of the library of the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., 2nd Floor, Washington, D.C.
20006.
No separate financial statements of the Trust have been included herein.
The Company does not consider that such financial statements would be material
to holders of Preferred Securities because (i) all of the voting securities of
the Trust will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) the Trust has no independent operations and
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in the Convertible Debentures issued by the Company and (iii) the
obligations of the Trust under the Trust Securities are fully and
unconditionally guaranteed by the Company to the extent that the Trust has funds
available to meet such obligations. See "Walbro Capital Trust," "Description of
the Guarantee" and "Description of the Convertible Debentures."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; and
(3) the Company's Current Reports on Form 8-K dated July 27, 1995 and
December 19, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Preferred Securities shall be deemed
incorporated by reference in this Prospectus and a part hereof from the
respective date of filing each such document. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
4
<PAGE> 7
The Company undertakes to provide, without charge, to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents referred to above that
have been incorporated in this Prospectus by reference, other than exhibits to
such documents. Requests for such copies should be directed to the Secretary,
Walbro Corporation, 6242 Garfield Street, Cass City, Michigan 48726, telephone
(517) 872-2131.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 concerning
certain aspects of the business of the Company. These forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated in such forward-looking statements,
including, without limitation, changes in demand for automobiles and light
trucks, relationships with significant customers, price pressures, the timing
and structure of future acquisitions or dispositions, the impact of
environmental regulations, continued availability of adequate funding sources,
currency and other risks inherent in international sales, and general economic
and business conditions. See "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." Prospective investors are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to release publicly any revisions
to these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
5
<PAGE> 8
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 appearing elsewhere or
incorporated by reference in this Prospectus. Unless the context otherwise
requires, all references in this Prospectus to the Company or Walbro refer to
Walbro Corporation and its consolidated subsidiaries and assume no exercise of
the Underwriters' over-allotment option.
THE COMPANY
The Company is a global leader in the design, development and manufacture
of precision fuel storage and delivery systems and products for automotive and
small engine markets worldwide. The Company manufactures plastic fuel tanks,
fuel pumps, fuel modules, fuel rails and fuel level sensors for sale to
automotive original equipment manufacturers ("OEMs"). 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 1990 to 1995, the
Company (excluding Dyno as defined herein) increased net sales at the compound
rate of approximately 17% per year. 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 net sales
of $459.3 million in 1995 and net sales of $440.5 million for the first nine
months of 1996.
WALBRO AUTOMOTIVE
Approximately 75% of the Company's net sales for the first nine months of
1996 were generated by Walbro Automotive. Through Walbro Automotive, the Company
designs, develops and manufactures fuel storage and delivery systems and
components for a broad range of U.S. and foreign manufacturers of passenger
automobiles and light trucks (including minivans). The Company and its joint
ventures hold a strong market position in North America, Europe and South
America and a growing market presence in Asia. In July 1995, the Company
substantially expanded its European automotive business by acquiring the fuel
systems business of Dyno Industrier A.S ("Dyno"), of Oslo, Norway (the "Dyno
Acquisition"). In 1996, management estimates that the Company supplied Chrysler
with approximately three-quarters of its fuel pump and fuel module requirements,
including all requirements for Chrysler's passenger cars and minivans and
approximately one-half of its requirements for Chrysler's light trucks. In
addition, the Company manufactures fuel pumps, fuel modules and fuel rails for a
number of Ford's minivans and light vehicles. Management believes that the
Company manufactures substantially all of the fuel tank systems for Saab and
Volvo light vehicles and all of the fuel tanks for the Mercedes-Benz C Class,
Volkswagen Polo and Renault Twingo. Other automotive customers of the Company,
and its joint ventures, include Audi, Daewoo, Fiat, General Motors, Hyundai,
Kia, Nedcar, Peugeot and Rover. The Company has recently been awarded
significant new contracts that include new fuel tank business for a variety of
General Motors platforms, including Saturn, Monte Carlo/Impala, Sonoma truck,
the Suburban, Yukon/Tahoe and Blazer/Jimmy sport utility vehicles, fuel tanks
for the redesigned Mercedes-Benz C Class, and a complete fuel tank system for
the Dodge Durango sport utility vehicle. In addition, the Company has been
awarded new contracts for the first time with Honda, Toyota and Ssangyong.
The Company's growth strategy is to position itself 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. Due to 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 components with the ultimate goal of being responsible for
the complete fuel storage and delivery systems ("FSDS") which would integrate
all of the components necessary for fuel delivery. By assuming responsibility
for the development of complete systems, the Company allows its OEM customers to
reduce their 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.
6
<PAGE> 9
The Company and its joint ventures in Europe, South America and East Asia
design, develop, manufacture and distribute fuel delivery components and systems
worldwide to support OEMs as they produce vehicles for the global automotive
market. The Company's product development efforts focus on the regulatory and
competitive challenges facing its customers worldwide. For example, the Company
has used its technical skills to develop multi-layer plastic fuel tanks and
onboard running and vapor recovery ("ORVR") devices, which are designed, in
part, to assist OEMs in complying with increasingly strict emission regulations.
WALBRO ENGINE MANAGEMENT
Approximately 25% of the Company's net sales for the first nine months of
1996 were generated by Walbro Engine Management. Through Walbro Engine
Management, 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 marine engines) 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 75%
share of the global diaphragm carburetor market including sales to such leading
chain saw and weed trimmer manufacturers as Poulan/Weedeater, Deere and Company
(Homelite), Stihl Incorporated, McCulloch Corporation, Ryobi Ltd. and Kioritz
(Echo) Corporation. The Company believes it has an approximate 10% 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 Mercury Marine, a major manufacturer of outboard
marine engines. The Company produces substantial volumes of float feed
carburetors for the Chinese two-wheeled vehicle market. The Company also
manufactures replacement products for both the automotive and small engine
aftermarkets, sales of which are included within its small engine product
business.
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 and India, to profit from the growing
market for carburetors for two-wheeled vehicles, gasoline-powered portable tools
used for infrastructure development and other small engine applications.
7
<PAGE> 10
THE OFFERING
General....................... The Preferred Securities represent undivided
beneficial interests in the Trust's assets,
which will consist solely of the Convertible
Debentures. The Convertible Debentures, in
which the proceeds of the Preferred Securities
offered hereby will be invested, mature on
, 2017, unless the Convertible
Debentures are redeemed by the Company prior to
such maturity as described under "Description
of the Preferred Securities -- Mandatory
Redemption of Trust Securities" and
"Description of the Preferred Securities --
Special Event Redemption or Distribution."
Distributions................. The distributions payable on each Preferred
Security will be fixed at a rate per annum of
% of the stated liquidation amount of $25 per
Preferred Security, will be cumulative, will
accrue from , 1997, the date of
issuance of the Preferred Securities, and will
be payable quarterly in arrears, on March 31,
June 30, September 30 and December 31 of each
year, commencing March 31, 1997. See
"Description of the Preferred Securities --
Distributions."
Option to Extend Interest
Payment Period................ The Company has the right at any time, and from
time to time, during the term of the
Convertible Debentures, to defer payments of
interest on the Convertible Debentures for a
period not exceeding 20 consecutive quarters;
provided, that no Extension Period may extend
beyond the maturity date of the Convertible
Debentures. As a consequence of the Company's
extension of the interest payment period,
quarterly distributions on the Preferred
Securities would be deferred (though such
distributions would continue to accrue with
interest thereon compounded quarterly, since
interest would continue to accrue on the
Convertible Debentures) during any such
extended interest payment period. In the event
that the Company exercises its right to extend
an interest payment period, then (a) the
Company shall not declare or pay any dividend
on, make any distributions or liquidation
payments with respect to, or redeem, purchase
or acquire any of its capital stock (other than
(i) purchases or acquisitions of shares of
Common Stock in connection with the
satisfaction by the Company of its obligations
under any employee benefit plans or the
satisfaction by the Company of its obligations
pursuant to any contract or security requiring
the Company to purchase shares of the Common
Stock, (ii) as a result of a reclassification
of the Company's capital stock or the exchange
or conversion of one class or series of the
Company's capital stock for another class or
series of the Company's capital stock, (iii)
the purchase of fractional interests in shares
of the Company's capital stock pursuant to the
conversion or exchange provisions of such
capital stock or the security being converted
or exchanged or (iv) stock dividends paid by
the Company where the dividend stock is the
same stock as that on which the dividend is
paid), (b) the Company shall not make any
payment of interest on or principal of (or
premium, if any, on) or repay, repurchase or
redeem any debt securities (including
guarantees) issued by the Company which rank
pari passu with or junior to the Convertible
8
<PAGE> 11
Debentures and (c) the Company shall not make
any guarantee payments with respect to the
foregoing (other than pursuant to the
Guarantee). Prior to the termination of any
Extension Period, the Company may further
extend such Extension Period, provided that
such Extension Period together with all such
previous and further extensions thereof may not
exceed 20 consecutive quarters. Upon the
termination of any Extension Period and the
payment of all amounts then due, the Company
may commence a new Extension Period, subject to
the foregoing requirements. Should an Extension
Period occur, Preferred Security holders will
continue to recognize interest income for
United States federal income tax purposes. As a
result, such holders will be required to
include such interest in gross income for
United States federal income tax purposes in
advance of the receipt of cash, and such
holders will not receive the cash from the
Trust related to such income if such holders
dispose of Preferred Securities prior to the
record date for payment of distributions. See
"United States Federal Income Taxation --
Interest Income and Original Issue Discount."
Conversion into Common
Stock......................... Each Preferred Security is convertible on or
after , 1997 (60 days after the
date of issue), at the option of the holder
into shares of Common Stock, at the rate of
shares of Common Stock for each Preferred
Security (equivalent to a conversion price of
$ per share of Common Stock), subject to
adjustment in certain circumstances. The last
reported sale price of the Common Stock on the
NNM on January 3, 1997 was $18 1/4 per share.
In connection with any conversion of a
Preferred Security, the Conversion Agent (as
defined herein) will exchange such Preferred
Security for the appropriate principal amount
of Convertible Debentures held by the Trust and
immediately convert such Convertible Debentures
into shares of Common Stock. No fractional
shares of Common Stock will be issued as a
result of conversion, but in lieu thereof such
fractional interest will be paid by the Company
in cash. See "Description of the Preferred
Securities -- Conversion Rights." In addition,
no additional shares of Common Stock will be
issued upon conversion of the Preferred
Securities to account for any accrued and
unpaid distributions on the Preferred
Securities at the time of conversion. See
"Description of the Convertible Debentures --
Optional Redemption," "Description of Preferred
Securities -- Conversion Rights" and "--
Mandatory Redemption of Trust Securities."
Mandatory Redemption.......... Upon the repayment of the Convertible
Debentures, whether at maturity or upon earlier
redemption as provided in the Indenture, the
proceeds from such repayment will be applied by
the Institutional Trustee to redeem a like
amount of Trust Securities, upon the terms and
conditions described herein. See "Description
of the Preferred Securities -- Mandatory
Redemption of Trust Securities."
Optional Redemption........... The Company has the right to redeem the
Convertible Debentures (a) on or after
, 2000, in whole at any time or
in part from time to time, subject to the
conditions described in "Description of the
Preferred Securities -- Optional Redemption" at
the
9
<PAGE> 12
redemption prices set forth herein, together
with any accrued but unpaid interest to, but
not including, the redemption date or (b) at
any time, in whole or in part, in certain
circumstances upon the occurrence of a Tax
Event (as defined herein) as described under
"Description of the Preferred Securities --
Special Event Redemption or Distribution," at
100% of the principal amount of Convertible
Debentures being redeemed, together with any
accrued but unpaid interest to, but not
including, the redemption date. See
"Description of the Convertible Debentures --
Optional Redemption." If the Company redeems
any Convertible Debentures, the proceeds from
such redemption will be applied by the
Institutional Trustee to redeem a like amount
of Trust Securities.
Special Event Distribution.... Subject to certain conditions and except in
limited circumstances, if at any time a Special
Event (as defined herein) shall occur and be
continuing, the Trust shall be dissolved with
the result that Convertible Debentures with an
aggregate principal amount equal to the
aggregate stated liquidation amount of, with an
interest rate identical to the distribution
rate of, and with accrued and unpaid interest
equal to accrued and unpaid distributions on,
the Trust Securities outstanding at such time,
would be distributed to the holders of the
Trust Securities in liquidation of such
holders' interests in the Trust on a pro rata
basis within 90 days following the occurrence
of such Special Event. See "Description of the
Preferred Securities -- Special Event
Redemption or Distribution."
Voting Rights................. Generally, the holders of the Preferred
Securities will not have any voting rights. See
"Description of the Preferred Securities --
Voting Rights." Subject to certain conditions,
including the Institutional Trustee obtaining
the opinion of counsel described under
"Description of the Preferred Securities --
Voting Rights" prior to taking certain actions,
the holders of a majority in aggregate
liquidation amount of the Preferred Securities
have the right to direct the time, method and
place of conducting any proceeding for any
remedy available to the Institutional Trustee,
or direct the exercise of any trust or power
conferred upon the Institutional Trustee under
the Declaration, including the right to direct
the Institutional Trustee, as holder of the
Convertible Debentures, to (i) exercise the
remedies available under the Indenture with
respect to the Convertible Debentures, (ii)
waive any past Indenture Event of Default (as
defined herein) that is waivable under the
Indenture, (iii) exercise any right to rescind
or annul a declaration that the principal of
all the Convertible Debentures shall be due and
payable, or (iv) consent to any amendment,
modification or termination of the Indenture or
the Convertible Debentures where such consent
shall be required; provided, however, that
where a consent or action under the Indenture
would require the consent or act of a Super
Majority (as defined herein) of holders of the
Convertible Debentures affected thereby, only
the holders of at least such Super Majority in
aggregate liquidation amount of the Preferred
Securities may direct the Institutional Trustee
to give such consent or take such action. See
"Description of the Preferred Securities --
Voting Rights."
10
<PAGE> 13
Use of Proceeds............... The proceeds from the sale of the Preferred
Securities offered hereby will be used by the
Trust to purchase the Convertible Debentures
issued by the Company. The Company expects to
use such proceeds to repay a portion of the
borrowings under the Credit Facility. See "Use
of Proceeds."
Listing....................... The Company has applied for quotation of the
Preferred Securities on the NNM. Trading of the
Preferred Securities on the NNM is expected to
commence within a 30-day period after the
initial delivery of the Preferred Securities.
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the matters set forth under the
caption "Risk Factors" before purchasing the Preferred Securities offered
hereby.
11
<PAGE> 14
SUMMARY HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth summary historical financial data of the
Company. 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 nine-month periods ended September 30 was 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 reflects the results of Dyno
subsequent to its acquisition in July 1995 and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company included
elsewhere or incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................ $440,501 $312,786 $459,272 $325,205 $273,463 $241,416 $200,130
Cost of sales............ 361,951 256,030 377,755 261,501 216,804 185,712 158,743
Gross margin............. 78,550 56,756 81,517 63,704 56,659 55,704 41,387
Selling and
administrative
expenses............... 52,847 35,975 57,495 39,318 33,043 33,614 26,961
Reorganization and
restructuring
charges................ -- -- -- -- 1,760 -- 2,230
Operating income......... 25,703 20,781 24,022 24,386 21,856 22,090 12,196
Interest expense, net.... 14,644 6,638 11,111 3,771 2,559 3,113 6,014
Equity in (income) loss
of joint ventures...... (3,969) (2,612) (3,877) (2,609) 89 (179) 465
Net income(1)............ 11,704 11,212 13,830 14,595 9,667 12,526 4,838
Net income per
share(2)............... 1.35 1.30 1.61 1.70 1.13 1.63 .98
Weighted average shares
outstanding............ 8,642,598 8,599,392 8,609,431 8,602,077 8,537,375 7,675,974 4,952,951
Ratio of earnings to
fixed charges.......... 1.5x 2.6x 1.8x 4.5x 6.2x 4.2x 1.9x
OTHER DATA:
Depreciation and
amortization........... $ 20,201 $ 13,568 $ 22,451 $ 14,672 $ 11,339 $ 10,339 $ 6,996
Capital expenditures..... 70,453 33,319 46,240 18,844 20,260 14,681 9,717
EBITDA(3)................ 45,932 33,924 45,245 36,345 31,128 31,513 19,192
BALANCE SHEET DATA:
(at end of period)
Total assets............. $574,858 $500,627 $493,473 $257,366 $215,295 $193,020 $161,243
Total long-term debt,
less current portion... 295,489 246,918 233,389 66,136 52,392 49,638 62,777
Total debt............... 310,857 263,620 249,396 81,548 58,175 59,349 70,922
Total stockholders'
equity(4)(5)........... 139,983 135,058 135,427 127,915 114,146 99,910 50,339
</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 $2,581, $2,571, $3,429, $3,426, $3,403,
$3,192 and $610 in the nine months ended September 30, 1996 and 1995 and the
years ended December 31, 1995, 1994, 1993, 1992 and 1991, 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.
12
<PAGE> 15
RISK FACTORS
Prospective purchasers of the Preferred Securities offered hereby should
consider carefully the following factors, as well as other information set forth
or incorporated by reference in this Prospectus, in evaluating an investment in
the Preferred Securities.
RISK FACTORS RELATING TO THE COMPANY
SUBSTANTIAL LEVERAGE
The Company has consolidated indebtedness that is substantial in relation
to its stockholders' equity. As of September 30, 1996, the Company had
outstanding approximately $311 million of total debt and approximately $140
million of stockholders' equity.
The Company's indebtedness will have several important consequences for the
holders of the Preferred Securities (or Common Stock which may be acquired upon
conversion), 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 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 satisfy its 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 Credit Facility (as defined herein) will be sufficient to permit the
Company to meet its operating expenses and to service its debt requirements,
including the Convertible Debentures underlying the Preferred Securities, 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. In addition,
there can be no assurance that the Company will not increase its leverage to
meet capital requirements in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The indenture relating to the 2005 Notes (the "2005 Note 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. In addition, the Credit Facility
contains other and more restrictive covenants. The agreement under which the
2004 Notes were issued (the "2004 Note Agreement") requires, and the 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 Credit Facility. In an event of default under the 2004 Note Agreement or the
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 Credit Facility could terminate all commitments
thereunder. Such event would constitute an event of default under the 2005 Note
Indenture pursuant to which the 2005 Notes were issued, entitling the holders of
the 2005 Notes to declare the principal and interest on the 2005 Notes to
13
<PAGE> 16
be immediately due and payable. 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. See
"Description of Certain Indebtedness."
DEPENDENCE ON CUSTOMER RELATIONSHIPS
Sales to Chrysler, the Company's largest customer, accounted for 20%, 19%,
23% and 21% of the Company's consolidated net sales for the nine months ended
September 30, 1996 and the years 1995, 1994 and 1993, respectively. Although the
Company has ongoing supply relationships with Chrysler and certain of its other
OEM customers, there can be no assurance that sales to these customers will
continue at current levels. Further, continuation of the Company's customer
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 Chrysler or any
of the Company's other significant customers were to reduce substantially or
discontinue its purchases, the Company would be adversely affected. See
"Business -- Walbro Automotive -- Automotive Markets and Customer Base."
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 products are cyclical and can be
affected by the strength of a country's general economy, prevailing interest
rates, weather 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.
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.
RISKS ASSOCIATED WITH FOREIGN OPERATIONS
Walbro has significant international operations, specifically in Europe,
South America and Asia 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 receives a substantial portion of its net sales in currencies other
than U.S. Dollars. Fluctuations in the exchange rates of these currencies with
respect to the U.S. Dollar could 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 -- Foreign Currency Transactions."
IMPACT OF ENVIRONMENTAL REGULATIONS
In 1992, the California Air Resources Board promulgated comprehensive air
quality regulations limiting small engine emissions, which became effective in
August 1995. A more stringent phase is scheduled to become effective in 1999. In
addition, the Environmental Protection Agency ("EPA") has imposed similar
regulations which became effective in August 1996, with the more stringent phase
expected to become
14
<PAGE> 17
effective during the 2002 to 2005 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
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. 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 -- 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 has received claims against it and requests for
payment from its OEM customers to remedy complaints made by the ultimate
consumers. 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 -- Automotive Warranty and Other Product
Exposure."
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE
DEBENTURES
The Company's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of the Company and pari passu with the most
senior preferred or preference stock issued, from time to time, if any, by the
Company. The obligations of the Company under the Convertible Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Company and pari passu with obligations to or rights of the
Company's other general unsecured creditors. No payment of principal (including
redemption payments, if any), or premium, if any, or interest on the Convertible
Debentures may be made if (i) any Senior Indebtedness of the Company is not paid
when due and any applicable grace period with respect to such default has ended
with such default not having been cured or waived or ceasing to exist, or (ii)
the maturity of any Senior Indebtedness has been accelerated because of a
default. As of September 30, 1996, Senior Indebtedness, after giving effect to
the application of the net proceeds of the Offering, aggregated approximately
$272 million. In addition, because a significant portion of the Company's
operations are conducted through its subsidiaries and the subsidiaries have not
guaranteed the payment of principal of and interest on the Convertible
Debentures, all liabilities of such subsidiaries, including trade payables, are
effectively senior to the Convertible Debentures and the Guarantee. As of
September 30, 1996, the subsidiaries, after giving effect to the application of
the net proceeds of the Offering, had indebtedness and other liabilities of
approximately $369 million (including the $272 million referred to above)
outstanding. There are no terms in the Preferred Securities, the Convertible
Debentures or the Guarantee that limit the Company's or any subsidiary's ability
to incur additional indebtedness, including indebtedness that ranks senior to
the Convertible Debentures and the Guarantee. See "Description of the Guarantee
- -- Status of the Guarantee" and "Description of the Convertible Debentures."
HOLDING COMPANY STRUCTURE AND SUBORDINATION
The ability of the Trust to pay amounts due on the Preferred Securities is
wholly dependent upon the Company making payments on the Convertible Debentures.
Since the Company is a holding company with a substantial portion of its
operations conducted through its subsidiaries, the ability of the Company to pay
interest and principal on the Convertible Debentures, and, therefore, for the
Trust to make distributions and other payments on the Preferred Securities, will
be dependent on such subsidiaries' ability to pay dividends to the Company.
Because such subsidiaries do not guarantee the payment of principal of and
interest on the Convertible Debentures, claims of holders of the Preferred
Securities effectively will be subordinate to the
15
<PAGE> 18
claims of creditors of the subsidiaries, including trade creditors. See "--
Ranking of Subordinate Obligations Under the Guarantee and Convertible
Debentures."
The ability of the Company's subsidiaries to pay dividends, as well as to
repay debt, is dependent on the Company's financial and operating performance
which, in turn, is subject to prevailing economic conditions and to financial,
business and other factors beyond its control.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Guarantee Trustee (as
defined herein) will act as indenture trustee under the Guarantee for the
purposes of compliance with the provisions of the Trust Indenture Act. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent the Trust has funds available
therefor, (ii) the Redemption Price, including all accrued and unpaid
distributions with respect to the Preferred Securities called for redemption by
the Trust, to the extent the Trust has funds available therefor, and (iii) upon
a voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Convertible Debentures to the
holders of Preferred Securities or a redemption of all the Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to the date of the
payment, to the extent the Trust has funds available therefor, or (b) the amount
of assets of the Trust remaining available for distribution to holders of the
Preferred Securities in liquidation of the Trust. The holders of a majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee or to direct the exercise of any trust or power conferred
upon the Guarantee Trustee under the Guarantee. Notwithstanding the foregoing,
if the Company has failed to make a payment under the Guarantee, any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other person or
entity. If the Company were to default on its obligation to pay amounts payable
on the Convertible Debentures, the Trust would lack available funds for the
payment of distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the Preferred Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, holders of the Preferred Securities would be required to rely on the
enforcement by (i) the Institutional Trustee (as defined herein) of its rights
as registered holder of the Convertible Debentures against the Company pursuant
to the terms of the Convertible Debentures or (ii) such holder of its right
against the Company under certain circumstances to enforce payments on the
Convertible Debentures. See "-- Enforcement of Certain Rights by Holders of
Preferred Securities," "Description of the Guarantee" and "Description of the
Convertible Debentures." The Declaration provides that each holder of Preferred
Securities, by acceptance thereof, agrees to the provisions of the Guarantee,
including the subordination provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Institutional Trustee of its rights as a holder of the
Convertible Debentures against the Company. In addition, the holders of a
majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee or to direct the exercise of any trust or
power conferred upon the Institutional Trustee under the Declaration, including
the right to direct the Institutional Trustee to exercise the remedies available
to it as a holder of the Convertible Debentures. If the Institutional Trustee
fails to enforce its rights under the Convertible Debentures, to the fullest
extent permitted by law, any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the Institutional
Trustee's rights under the Convertible Debentures without first instituting any
legal proceeding against the Institutional Trustee or any other person or
entity. Notwithstanding the foregoing, if a Declaration
16
<PAGE> 19
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the Convertible Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures. The Indenture
provides that the Indenture Trustee (as defined herein) shall give holders of
the Convertible Debentures notice of all uncured defaults or events of default
within 30 days after occurrence. However, except in the case of a default or an
event of default in payment on the Convertible Debentures, the Indenture Trustee
(as defined herein) is protected in withholding such notice if its officers or
directors in good faith determine that withholding of such notice is in the
interest of the holders.
COMPANY OPTION TO EXTEND INTEREST PAYMENT PERIODS; OID RISK
The Company has the right under the Indenture to defer payments of interest
on the Convertible Debentures by extending the interest payment period at any
time, and from time to time, on the Convertible Debentures. As a consequence of
such an extension, quarterly distributions on the Preferred Securities would be
deferred (but despite such deferral would continue to accrue interest thereon,
compounded quarterly) by the Trust during any such extended interest payment
period. Such right to extend the interest payment period for the Convertible
Debentures is limited to a period not exceeding 20 consecutive quarters, during
which no interest shall be due and payable, provided, that no such Extension
Period may extend beyond the maturity date of the Convertible Debentures. In the
event that the Company exercises this right to defer interest payments, the
Company has agreed, among other things, (a) not to declare or pay dividends on,
or make a distribution with respect to, or redeem or purchase or acquire, or
make a liquidation payment with respect to, any of its capital stock (other than
(i) purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security requiring the Company to purchase shares of Common Stock, (ii) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock or (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged), (b) not to make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank pari passu with or junior
to the Convertible Debentures and (c) not to make any guarantee payments with
respect to the foregoing (other than pursuant to the Guarantee). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period; provided, that such Extension Period, together with all
such previous and further extensions thereof, may not exceed 20 consecutive
quarters or extend beyond the maturity date of the Convertible Debenture. Upon
the termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, subject to the above
requirements. See "Description of the Preferred Securities -- Distributions" and
"Description of the Convertible Debentures -- Interest Income and Option to
Extend Interest Payment Periods."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities will
continue to accrue income (as OID) in respect of the deferred interest allocable
to its Preferred Securities for United States federal income tax purposes, which
will be allocated but not distributed, to holders of record of Preferred
Securities. As a result, each such holder of Preferred Securities will recognize
income for United States federal income tax purposes in advance of the receipt
of cash and will not receive the cash from the Trust related to such income if
such holder disposes of its Preferred Securities prior to the record date for
the date on which distributions of such amounts are made. The Company has no
current intention of exercising its right to defer payments of interest by
extending the interest
17
<PAGE> 20
payment period on the Convertible Debentures. However, should the Company
determine to exercise such right in the future, the market price of the
Preferred Securities is likely to be affected. A holder that disposes of its
Preferred Securities during an Extension Period might not receive the same
return on its investment as a holder that continues to hold its Preferred
Securities. In addition, as a result of the existence of the Company's right to
defer interest payments, the market price of the Preferred Securities (which
represent an undivided beneficial interest in the Convertible Debentures) may be
more volatile than other securities on which OID accrues that do not have such
rights. See "United States Federal Income Taxation -- Interest Income and
Original Issue Discount."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event (as defined), the Trust shall be
dissolved, except in the limited circumstance described below, with the result
that the Convertible Debentures would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In the case of a
Special Event that is a Tax Event, in certain circumstances, the Company shall
have the right to redeem the Convertible Debentures, in whole or in part, in
lieu of a distribution of the Convertible Debentures by the Trust, in which
event the Trust will redeem the Trust Securities on a pro rata basis to the same
extent as the Convertible Debentures are redeemed by the Company. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution."
Under current United States federal income tax law, a distribution of
Convertible Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Preferred Securities. Upon occurrence of a Tax Event,
however, a dissolution of the Trust in which holders of the Preferred Securities
receive cash would be a taxable event to such holders. See "United States
Federal Income Taxation -- Receipt of Convertible Debentures or Cash Upon
Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Convertible Debentures that may be distributed in exchange for
the Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Convertible Debentures that a holder of Preferred Securities may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
Because holders of Preferred Securities may receive Convertible Debentures upon
the occurrence of a Special Event, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the Convertible
Debentures and should carefully review all the information regarding the
Convertible Debentures contained in this Prospectus. See "Description of the
Preferred Securities -- Special Event Redemption or Distribution."
PROPOSED TAX LEGISLATION
On March 19, 1996, the U.S. Treasury Department proposed certain tax law
changes (the "Proposed Legislation") that would, among other things, generally
deny corporate issuers a deduction for interest in respect of certain debt
obligations, with a maximum term of more than 20 years, that are not shown as
indebtedness on the consolidated balance sheet of the issuer. The Convertible
Debentures have a maximum term of 20 years, and therefore would not be adversely
affected by passage of the Proposed Legislation, even if the Proposed
Legislation has a retroactive effective date. However, there can be no assurance
that any Proposed Legislation, if enacted, would not apply to debt obligations
with a term of 20 or fewer years, including the Convertible Debentures.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr.
and House Ways and Means Committee Chairman Bill Archer issued a joint statement
(the "Joint Statement") indicating their intent that the Proposed Legislation,
if adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the
Convertible Debentures because they will be issued prior to the date of any
"appropriate Congressional action." There can be no assurance, however, that any
proposed legislation enacted after the
18
<PAGE> 21
date hereof will not otherwise adversely affect the ability of the Company to
deduct the interest payable on the Convertible Debentures. Accordingly, there
can be no assurance that a Tax Event will not occur. See "Description of the
Preferred Securities -- Special Event Redemption or Distribution."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will
not be entitled to vote to appoint, remove, replace, or increase or decrease the
number of Trustees, which voting rights are vested exclusively in the holder of
the Common Securities. Prior to any conversion, holders of Preferred Securities
will not have any voting rights with respect to the Common Stock of Walbro. See
"Description of the Preferred Securities -- Voting Rights."
UNCERTAINTY WITH RESPECT TO TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Convertible Debentures. In addition, as a result of the Company's right to defer
interest payments, the market price of the Preferred Securities (which represent
an undivided interest in the assets of the Trust) may be more volatile than
other similar securities where the issuer does not have such right to defer
interest payments. A holder who disposes of his Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Convertible Debentures through the date of
disposition in income as ordinary income (i.e., OID) and to add such amount to
his adjusted tax basis in his pro rata share of the underlying Convertible
Debentures deemed disposed. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all accrued
but unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for federal income tax purposes. See "United States Federal Income Taxation --
Interest Income and Original Issue Discount" and "-- Sales of Preferred
Securities."
19
<PAGE> 22
WALBRO CAPITAL TRUST
The Trust is a statutory business trust created under Delaware law pursuant
to (i) a declaration of trust, dated as of December 17, 1996, executed by the
Company, as sponsor (the "Sponsor"), and certain of the trustees of the Trust
(as described below) and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on December 17, 1996. Such
declaration will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The
Declaration will be qualified as an indenture under the Trust Indenture Act.
Upon issuance of the Preferred Securities, the purchasers thereof will own all
of the Preferred Securities. See "Description of the Preferred Securities --
Book-Entry Only Issuance -- The Depository Trust Company." The Company will
directly or indirectly acquire Common Securities in an aggregate liquidation
amount equal to 3% or more of the total capital of the Trust. The Trust exists
for the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds of the Trust Securities in the Convertible Debentures and (iii)
engaging in only those other activities necessary or incidental thereto.
The Trust's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Common Securities. Pursuant to the
Declaration, the number of trustees of the Trust will be five: Bankers Trust
Company, as the institutional trustee (the "Institutional Trustee"), Bankers
Trust (Delaware), as the Delaware trustee (the "Delaware Trustee"), and three
individual trustees (the "Regular Trustees" and, together with the Institutional
Trustee and the Delaware Trustee, the "Trustees") will be persons who are
employees or officers of, or who are affiliated with the Company. Initially, the
Regular Trustees will be Lambert E. Althaver, Daniel L. Hittler and Michael A.
Shope, each of whom is an officer of the Company. The Institutional Trustee will
act as the sole indenture trustee under the Declaration for purposes of
compliance with the Trust Indenture Act until removed or replaced by the holder
of the Common Securities. Bankers Trust Company will act as indenture trustee
(the "Guarantee Trustee") under the Guarantee for the purposes of compliance
with the provisions of the Trust Indenture Act. See "Description of the
Guarantee" and "Description of Convertible Debentures."
The Institutional Trustee will hold title to the Convertible Debentures for
the benefit of the holders of the Trust Securities and, in its capacity as the
holder, the Institutional Trustee will have the power to exercise all rights,
powers and privileges under the indenture pursuant to which the Convertible
Debentures are issued. In addition, the Institutional Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Convertible
Debentures for the benefit of the holders of the Trust Securities. The
Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise for the holders of the Trust Securities
out of funds from the Property Account. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Preferred Securities. The
Company, as the direct or indirect holder of all the Common Securities, will
have the right, subject to certain restrictions constrained in the Declaration,
to appoint, remove or replace any Trustee and to increase or decrease the number
of Trustees. The Company will pay all fees and expenses related to the Trust and
the offering of the Trust Securities. See "Description of the Convertible
Debentures -- Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act") and
the Trust Indenture Act. See "Description of the Preferred Securities."
The place of business and the telephone number of the Trust are the
principal executive offices and telephone numbers of the Company.
20
<PAGE> 23
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the Preferred Securities shown as
"Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of
Walbro Capital Trust Holding Solely Convertible Debentures." See
"Capitalization."
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is traded on the Nasdaq National Market ("NNM")
under the symbol "WALB." The following table sets forth, for the quarters
indicated, the high and low sales prices as reported by NNM, and the per share
cash dividends declared in such quarters.
<TABLE>
<CAPTION>
MARKET PRICE
------------ DIVIDENDS
HIGH LOW PER SHARE
---- ---- ---------
<S> <C> <C> <C>
1997
First Quarter (through January 3).................................. $18 1/2 $17 3/4 $ --
1996
Fourth Quarter..................................................... $21 1/4 $18 1/4 $ .10
Third Quarter...................................................... 21 18 1/4 .10
Second Quarter..................................................... 22 1/2 19 5/8 .10
First Quarter...................................................... 20 3/4 17 3/4 .10
----
$ .40
====
1995
Fourth Quarter..................................................... $ 21 $17 1/4 $ .10
Third Quarter...................................................... 23 1/2 17 3/4 .10
Second Quarter..................................................... 20 3/4 17 1/2 .10
First Quarter...................................................... 20 17 1/4 .10
----
$ .40
====
</TABLE>
On January 3, 1997, the closing price of the Common Stock as reported on
the NNM was $18 1/4. On January 2, 1997, the Common Stock was held by 1,123
stockholders of record. On December 5, 1996, the Company declared a dividend of
$0.10 per share of Common Stock, payable on January 31, 1997 to stockholders of
record on December 31, 1996. The Company currently intends to continue to
declare and pay cash dividends on its Common Stock on a quarterly basis.
However, all dividend payments are subject to the Company's earnings, financial
condition and capital requirements at the time of declaration and will be paid
only if, as and to the extent declared by the Company's Board of Directors.
The Credit Facility, the 2004 Note Agreement and the 2005 Note Indenture
contain restrictions on the Company's ability to pay dividends. See "Description
of Certain Indebtedness."
21
<PAGE> 24
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities offered hereby will
be invested by the Trust in the Convertible Debentures. The Company intends to
apply the net proceeds (net of the underwriting commissions and estimated
expenses) from the sale of the Convertible Debentures, estimated to be
approximately $47,937,500 ($55,203,125 if the Underwriters' over-allotment
option is exercised in full) to repay a portion of the borrowings under the
Credit Facility (as defined herein). Borrowings under the Credit Facility bear
interest at a per annum rate equal to LIBOR plus 1.75%. See "Capitalization."
After giving effect to the application of the net proceeds of the Offering,
management believes the availability under the Credit Facility, combined with
funds from operations, will provide the Company with sufficient financial
flexibility to fund planned capital expenditures, most of which are associated
with expansion programs related to contract awards for new automotive OEM
platforms and facilities for new small engine business, and increased working
capital requirements for the foreseeable future. The Company's plans for 1997
capital expenditures, which total approximately $70 million, are principally for
new blow molding machines, tooling and equipment to produce fuel tank systems
for five new platforms the Company has been awarded by U.S. OEM customers and
for facilities to support new small engine business.
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of September 30, 1996 and as adjusted to give effect to the issuance of the
Preferred Securities being offered hereby, the receipt by the Company of the net
proceeds of approximately $47.9 million therefrom and the application of the
estimated net proceeds as described under "Use of Proceeds." This table should
be read in conjunction with "Selected Financial Information" and the condensed
consolidated financial statements of the Company and related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1996
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash................................................................... $ 15,227 $ 15,227
======== ========
Total short-term debt, including current portion of long-term debt..... $ 15,368 $ 15,368
Long-term debt, net of current portion................................. 295,489 247,551
-------- --------
Total debt........................................................ 310,857 262,919
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of Walbro Capital Trust holding solely Convertible
Debentures(1)........................................................ -- 50,000
Total stockholders' equity............................................. 139,983 139,983
-------- --------
Total capitalization.............................................. $450,840 $ 452,902
======== ========
</TABLE>
- -------------------------
(1) As described herein, the sole assets of the Trust will be the %
Convertible Debentures with a principal amount of approximately $50 million
($57.5 million if the Underwriters' over-allotment option is exercised in
full), and upon redemption of such debt, the Preferred Securities will be
mandatorily redeemable.
(2) Excludes the shares of Common Stock reserved for issuance upon conversion of
the Convertible Debentures.
22
<PAGE> 25
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth selected historical financial and operating
data of the Company. 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 nine months ended September 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 reflects the results of Dyno subsequent to its acquisition in
July 1995 and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements of the Company and the notes thereto, included elsewhere or
incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales......................... $440,501 $312,786 $459,272 $325,205 $273,463 $241,416 $200,130
Cost of sales..................... 361,951 256,030 377,755 261,501 216,804 185,712 158,743
Gross margin...................... 78,550 56,756 81,517 63,704 56,659 55,704 41,387
Selling and administrative
expenses........................ 52,847 35,975 57,495 39,318 33,043 33,614 26,961
Reorganization and restructuring
charges......................... -- -- -- -- 1,760 -- 2,230
Operating income.................. 25,703 20,781 24,022 24,386 21,856 22,090 12,196
Interest expense, net............. 14,644 6,638 11,111 3,771 2,559 3,113 6,014
Equity in (income) loss of joint
ventures........................ (3,969) (2,612) (3,877) (2,609) 89 (179) 465
Net income(1)..................... 11,704 11,212 13,830 14,595 9,667 12,526 4,838
Net income per share(2)........... 1.35 1.30 1.61 1.70 1.13 1.63 .98
Weighted average shares
outstanding..................... 8,642,598 8,599,392 8,609,431 8,602,077 8,537,375 7,675,974 4,952,951
Ratio of earnings to fixed
charges......................... 1.5x 2.6x 1.8x 4.5x 6.2x 4.2x 1.9x
OTHER DATA:
Depreciation and amortization..... $ 20,201 $ 13,568 $ 22,451 $ 14,672 $ 11,339 $ 10,339 $ 6,996
Capital expenditures.............. 70,453 33,319 46,240 18,844 20,260 14,681 9,717
EBITDA(3)......................... 45,932 33,924 45,245 36,345 31,128 31,513 19,192
BALANCE SHEET DATA: (at end of
period)
Total assets...................... $574,858 $500,627 $493,473 $257,366 $215,295 $193,020 $161,243
Total long-term debt, less current
portion......................... 295,489 246,918 233,389 66,136 52,392 49,638 62,777
Total debt........................ 310,857 263,620 249,396 81,548 58,175 59,349 70,922
Total stockholders'
equity(4)(5).................... 139,983 135,058 135,427 127,915 114,146 99,910 50,339
</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 $2,581, $2,571, $3,429, $3,426, $3,403,
$3,192, and $610 in the nine months ended September 30, 1996 and 1995 and
the years ended December 31, 1995, 1994, 1993, 1992 and 1991, 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.
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the nine months ended September 30, 1995 and 1996
and the years ended December 31, 1993, 1994 and 1995. The information contained
in the table below and the following discussion reflect the results of Dyno
subsequent to its acquisition in July 1995 and should be read in conjunction
with the consolidated and condensed consolidated financial statements of the
Company and the related notes thereto and other financial information included
elsewhere in this Prospectus.
GENERAL
The Company's business is operated in two segments: automotive and small
engine. Selected financial information about the Company's continuing operations
by business segment is set forth below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Sales:
Automotive.............................. $329,759 $204,786 $318,143 $198,260 $167,201
Small Engine............................ 110,742 108,000 141,129 126,945 106,262
-------- -------- -------- -------- --------
Total................................ $440,501 $312,786 $459,272 $325,205 $273,463
======== ======== ======== ======== ========
Cost of Sales:
Automotive.............................. $273,569 $170,437 $264,906 $161,649 $133,989
Small Engine............................ 88,382 85,593 112,849 99,852 82,815
-------- -------- -------- -------- --------
Total................................ $361,951 $256,030 $377,755 $261,501 $216,804
======== ======== ======== ======== ========
Gross Margin:
Automotive.............................. $ 56,190 $ 34,349 $ 53,237 $ 36,611 $ 33,212
Small Engine............................ 22,360 22,407 28,280 27,093 23,447
-------- -------- -------- -------- --------
Total................................ $ 78,550 $ 56,756 $ 81,517 $ 63,704 $ 56,659
======== ======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net Sales. Net sales for the first nine months of 1996 increased 40.8% to
$440.5 million compared to $312.8 million for the same period of 1995. Net sales
for the first nine months of 1995 included two months of Dyno net sales. Net
sales for the first nine months of 1996, excluding net sales relating to Dyno,
increased 1.8%. Net sales of automotive products increased 61.0% to $329.8
million for the first nine months of 1996 compared to $204.8 million for the
same period of 1995 (1.3% increase excluding Dyno net sales). The increased
automotive product net sales were primarily the result of increased net sales
due to the inclusion of Dyno net sales for the entire 1996 period, partially
offset by lower net sales of fuel pumps and fuel modules to one of the Company's
largest customers as a result of the customer's increased in-house production.
Net sales of small engine products increased 2.7% to $88.7 million for the
first nine months of 1996 compared to $86.4 million for the same period of 1995.
The increased small engine product net sales were the result of increased net
sales of ignition systems products and carburetors in China. These increased net
sales were mostly offset by declines in diaphragm carburetors in the U.S. due to
reduced demand for handheld power equipment caused by drought in the Southeast
and Southwest U.S. and cold, wet spring conditions in other areas of the United
States, and in Japan because of lower demand and because of the lower yen-dollar
exchange rate.
24
<PAGE> 27
Net sales to the aftermarket decreased 4.7% to $18.3 million for the first
nine months of 1996 compared to $19.2 million for the same period of 1995. Net
sales of aftermarket products declined during the first nine months of 1996
because of increased in-house production by one of the Company's aftermarket
customers.
Cost of Sales. The Company's cost of sales is composed primarily of
material, labor, and manufacturing and engineering overhead. Cost of sales for
the first nine months of 1996 increased 41.4% to $362.0 million compared to
$256.0 million for the same period of 1995 (0.5% increase without Dyno). Cost of
sales as a percent of net sales was 82.2% for the first nine months of 1996
compared to 81.9% for the same period of 1995. For the first nine months of
1996, gross margin decreased slightly primarily as a result of the inclusion of
Dyno, which had a lower margin product mix, partially offset by higher sales
volumes of fuel tanks and fuel rails. In February 1996, the Company announced
its plans to sell the steel fuel rail business at its Ligonier, Indiana plant,
and is currently evaluating its strategic alternatives related to this business.
In small engine products, gross margin decreased primarily because of lower
diaphragm carburetor volume, partially offset by higher volume of ignition
system products.
Selling and Administrative Expenses. Selling and Administrative ("S&A")
expenses (which include research and development ("R&D") expenses) increased by
46.9% for the first nine months of 1996 compared to the same period of 1995. R&D
expenses increased by 29.5% for the first nine months of 1996 compared to the
same period of 1995. As a percent of net sales, S&A expenses increased to 12.0%
for the first nine months of 1996, from 11.5% for the same period in 1995. The
increase in S&A expenses was due primarily to the inclusion of nine months of
Dyno results in 1996 and to start-up costs for the Company's new plastic fuel
tank facility near Sao Paulo, Brazil, its new carburetor facility in Tianjin,
China and its new diecast facility in Tucson, Arizona.
Net Interest Expense. Net interest expense for the first nine months of
1996 increased 121.2% to $14.6 million compared to $6.6 million for the same
period of 1995. This increase was a result of increased borrowings relating to
the Dyno Acquisition and for additional working capital required to support
sales growth and for capital expenditures.
Income Taxes. The provision for income taxes was 34.7% lower for the first
nine months of 1996 compared to the same period of 1995 because of lower taxable
income and a lower effective tax rate of 28.2% for the 1996 nine month period
compared to 35.1% for the same 1995 period. The lower effective tax rate
resulted from research and development tax credits.
Joint Venture Income. The equity in income from joint ventures was $4.0
million for the first nine months of 1996 compared to $2.6 million for the same
period of 1995 because of the increased net sales and improved profitability at
Marwal Systems (France), Marwal do Brasil and Mitsuba-Walbro (Japan) during the
first nine months of 1996, which more than offset the start-up costs at Korea
Automotive Fuel Systems, Ltd.
Net Income and Income Per Share. Net income for the first nine months of
1996 was $11.7 million, an increase of 4.4% compared to net income of $11.2
million for the same period of 1995. The increase was due to the reasons
described above. Net income per share was $1.35 for the first nine months of
1996 compared to $1.30 for the first nine months of 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO 1994, 1994 COMPARED TO 1993
Net Sales. The Company reported record net sales in 1995 of $459.3 million,
an increase of 41.2%. Excluding net sales of $88.5 million contributed by Dyno,
1995 net sales increased 14.0%. Net sales in 1994 were $325.2 million compared
to net sales of $273.5 million in 1993, an increase of 18.9%. The $134.1 million
of additional net sales in 1995 were divided primarily among the automotive
market with a $119.8 million increase and the small engine market with a $10.8
million increase. On a percentage basis, net sales to the automotive market
increased 60.4% in 1995 (15.8% increase without Dyno net sales) compared to an
18.6% increase in 1994, while net sales to the small engine market increased
10.6% in 1995 compared to a 16.5% increase in 1994. Aftermarket net sales were
flat in 1995 compared to an increase of 32.8% in 1994.
Net sales of the Company's original equipment automotive products were
$318.1 million in 1995 ($229.7 million without Dyno), up from $198.3 million in
1994 and $167.2 million in 1993. In 1995, the Company was able to increase U.S.
based automotive product net sales (representing all automotive net sales other
than
25
<PAGE> 28
those of Dyno) by $31.4 million or 15.8% in spite of the U.S. light vehicle
market decline. The U.S. light vehicle market declined in 1995 to approximately
14.8 million vehicles compared to approximately 15.1 million in 1994, a 2.1%
decrease. U.S. light vehicle sales increased by 8.4% in 1994 and by 8.0% in
1993. The Company was able to record a net sales increase of its U.S. based
automotive products in the face of a declining vehicle market due to increased
net sales of fuel modules (up 23.7%) because of increased use of fuel modules in
the light truck market and increased net sales of fuel modules with higher
dollar content. Light trucks (which include minivans) experienced moderate sales
growth in 1995. The increase in fuel module net sales was partially offset by
the slower than scheduled start-up of a customer's major new vehicle line with
significant fuel module product content.
Net sales of fuel pumps increased by 3.3% and net sales of fuel rails
declined by 14.9% in 1995 compared to 1994 because of the decline in U.S.
passenger car net sales during 1995. Net sales of plastic fuel tanks were $3.0
million in 1995 compared to $0.6 million in 1994, as the Company's U.S. net
sales of plastic fuel tanks did not begin until the fourth quarter of 1994.
Production of plastic fuel tanks increased in the fourth quarter of 1995 for a
second vehicle platform. Net sales of component parts in 1995 were $20.4 million
compared to $3.6 million in 1994. Dyno automotive product net sales were $88.5
million for the last five months of 1995.
In 1994, the Company was able to increase automotive product net sales by
18.6% while the U.S. light vehicle market grew by 8.4%. Automotive product net
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, net sales of fuel pumps increased modestly while net sales of
fuel rails increased by 22.3% and net sales of fuel modules increased by 32.2%.
Net sales of the Company's small engine products also hit a record level of
$112.6 million in 1995, up from $101.8 million in 1994 and $87.4 million in
1993. Overall net sales growth of small engine products was 10.6% in 1995
compared to 16.5% during 1994. Net sales of diaphragm carburetors increased
16.1% in 1995 compared to 7.4% for 1994, from $58.3 million in 1993 to $62.6
million in 1994 to $72.7 million in 1995. Part of the 1995 increase reflects
depressed U.S. diaphragm carburetor sales in the second half of 1994 because of
delays in the emission certification by the California Air Resources Board for
customers' engines during that period. Increases in U.S. sales of diaphragm
carburetors in the first half of 1994 combined with increases in Europe and the
Far East during all of 1994 more than offset the second half decline in the
U.S., resulting in the overall increase of 7.4% for 1994.
Net sales of float feed carburetors decreased 8.7% in 1995 compared to a
27.7% increase for 1994, with $27.4 million of net sales in 1995 versus $30.0
million in 1994 and $23.5 million in 1993. During 1995, float feed carburetor
sales in the U.S. declined as heavy rain in the spring and a drought during the
summer caused lower sales of lawn and garden products and outdoor power
equipment. Also during 1995, the weak market for marine engines contributed to
lower float feed carburetor sales. The significant increase in 1994 float feed
carburetor net sales was primarily due to a 36% increase in net sales to the
Company's largest lawn and garden customer and a 36% increase in net sales of
marine carburetors.
Net sales of small engine ignition systems were $7.9 million in 1995
compared to $7.1 million in 1994 and $5.1 million in 1993 as customer demand has
grown for this expanding family of products. In addition, carburetor net sales
from the Company's subsidiary in China, Fujian Hualong Carburetor, which the
Company acquired in January, 1994, were $4.6 million in 1995 compared to $1.9
million in 1994.
The Company's aftermarket business for both automotive and small engine
products is consolidated as a business unit within Walbro Engine Management, but
reported separately in this discussion. Aftermarket net sales were $25.2 million
in 1995 compared to $25.1 million in 1994. Aftermarket net sales in 1995 were
flat compared to 1994 for two significant reasons. First, the aftermarket
distribution center in Cass City, Michigan was struck by lightning in August,
1995, causing substantial smoke and water damage to the building and its
contents. Aftermarket operations were shut down for three weeks in August as a
result of the fire and subsequent order levels were lower because of the reduced
inventory available to fill orders. Secondly, a major aftermarket
customer/competitor for fuel pumps chose to manufacture more of its
requirements. The 32.8%
26
<PAGE> 29
increase in 1994 aftermarket net sales was the result of the addition of several
new aftermarket customers and the expansion of the product offering for
aftermarket net sales.
Cost of Sales. Cost of sales was $377.8 million in 1995 ($300.9 million
without Dyno) compared to $261.5 million in 1994 and $216.8 million in 1993.
Cost of sales as a percent of net sales was 82.3% in 1995 (81.1% without Dyno)
compared to 80.4% in 1994 and 79.3% in 1993.
Gross margin for U.S. based automotive products decreased in 1995 because
of lower volumes of fuel rails partially offset by higher volumes of fuel
modules and plastic fuel tanks. The Company's Ligonier, Indiana plant, which
makes steel fuel rails, experienced significantly higher costs in the second
half of 1995 because of lower volumes related to lower passenger car sales. Cost
of sales as a percent of net sales at Dyno was 86.9% for the last five months of
1995. The Dyno gross margin was lower than anticipated during the last five
months of 1995 because of higher raw material prices and lower volumes due to
seasonally lower production schedules and because of a weaker European
automotive market during this period. Also contributing to the higher cost of
sales as a percent of net sales were continuing start-up costs at the Company's
Ossian, Indiana plastic fuel tank plant. The 1994 cost of sales as a percent of
net sales increased because of the Ossian plant start-up costs and additional
costs of expanding production capacity for fuel modules at the Company's
Meriden, Connecticut plant.
Cost of sales as a percent of net sales for small engine products increased
for 1995 because of lower volume of float feed carburetors in the U.S., lower
production volumes at the Company's Singapore manufacturing facility and the
stronger Singapore Dollar versus the U.S. Dollar. These increased costs were
partially offset by higher volume of diaphragm carburetors in Japan and Mexico
and higher volume of float feed carburetors in China. Gross margin decreased in
1994 primarily because of lower volume of diaphragm carburetors in the U.S.
during the second half of the year. A secondary factor for the decreased gross
margin was the higher cost of manufacturing carburetors in Japan and Singapore
as a result 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 12 of
the Notes to the Consolidated Financial Statements for a detailed discussion of
the impact of this change.
Selling and Administrative Expenses. S&A expenses were $57.5 million in
1995, an increase of 46.3% (25.6% without Dyno) compared to $39.3 million in
1994. The 1994 S&A expenses increased by 19.0% compared to $33.0 million in
1993. As a percent of net sales, S&A expenses were 12.5% in 1995 (13.3% without
Dyno), 12.1% in 1994 and 12.1% in 1993. In 1995, S&A expenses increased because
of increased spending for research and development, expansion of the Company's
automotive systems center in Auburn Hills, Michigan and its automotive testing
center in Caro, Michigan, the inclusion of five months of Dyno results in 1995
and general expenses related to adding manufacturing capacity in Meriden,
Connecticut. In 1994, most S&A expense categories increased to support the net
sales growth. Research and development spending increased by 37.3% (14.4%
without Dyno) in 1995 and by 28.3% in 1994 to support the new product
development efforts required by emission regulations for both automotive and
small engine products. Incentive compensation expense in the small engine
business increased in 1994 and again in 1995 because of higher profitability.
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. In
1993, $1.0 million was paid and the remaining $0.8 million was paid in 1994. See
Note 7 of the Notes to the 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 the Company's foreign 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 amortized as foreign currency exchange loss. In 1993 and 1994,
the Company
27
<PAGE> 30
entered into foreign exchange contracts to hedge the Company's foreign currency
risk from foreign currency commitments which did not qualify for deferred
accounting treatment and the losses were recorded as foreign currency exchange
loss in 1993 and 1994. The foreign currency exchange loss in 1995, 1994 and 1993
was $1.5 million, $2.6 million and $1.5 million, respectively. See Note 14 of
the Notes to the Consolidated Financial Statements.
Net Interest Expense. Net interest expense was $11.1 million in 1995, $3.8
million in 1994 and $2.6 million in 1993. To finance the Dyno Acquisition in
July 1995, the Company sold $110 million in aggregate principal amount of the
2005 Notes (as defined herein) and obtained a $135 million secured Credit
Facility (as defined herein). Borrowing levels were also higher in 1995 to
support the higher level of capital expenditures for facility expansions.
General interest rates declined during 1995 but the additional borrowings and
the shift to a higher percentage of long-term fixed rate debt raised the average
cost of capital and caused the higher interest expense. The 1994 increased
interest expense resulted from higher interest rates, increased borrowings for
additional working capital and the full year effect of financing the Company's
Ossian, Indiana plant. During October of 1994, the Company sold $45 million of
the 2004 Notes (as defined herein) which contributed to the higher net interest
expense. The average cost of borrowing was 7.4% in 1995, 5.9% in 1994 and 4.9%
in 1993. See Note 8 of the Notes to Consolidated Financial Statements for
details of the borrowings.
Income Taxes. The provision for income taxes was lower for 1995 compared to
1994 because of an R&D tax credit recorded in 1995. This tax credit resulted
from a change by the Internal Revenue Service in defining the R&D activities
which qualify for the tax credit. The $3.0 million credit results from R&D
activities at the Company from 1988 through 1995. The R&D tax credit resulted in
an effective tax rate of 10.8% for 1995 compared to 32.5% for 1994.
Joint Venture Income. The Company's equity in income of joint ventures was
$3.9 million in 1995, $2.6 million in 1994 and a loss of $89,000 in 1993. The
loss in 1993 was due primarily to first year losses of $538,000 in Brazil and
the significant income in 1994 and 1995 resulted from increased net sales and
profits in all the Company's joint ventures.
Net Income and Income Per Share. Net income for 1995 was $13.8 million, a
decrease of 5.5% compared to $14.6 million in 1994. Income before cumulative
effect of accounting change was $12.6 million in 1993 with net income of $9.7
million for the same period. Net income per share was $1.61 for 1995 compared
with $1.70 for 1994. Income per share before cumulative effect of accounting
change was $1.47 with net income per share of $1.13 for 1993. Net income as a
percent of net sales was 3.0% in 1995, 4.5% in 1994 and 4.6% in 1993 (income
before accounting change as a percent of net sales). The decline in net income
as a percent of net sales in 1995 was related to the Dyno Acquisition, which
contributed to lower profit margins in 1995 and resulted in increased interest
expense. The decline in net income as a percent of net sales during 1994 was the
result of higher cost of sales, higher interest expense and foreign exchange
losses as explained above.
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 material purchases, labor
and other costs. In many cases, the Company has limited ability to pass through
inflation-related cost increases due to the competitive nature of the markets
that the Company serves. In the past three years, however, inflation has not
been a significant factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
Approximately 51% of the Company's net sales during the first nine months
of 1996 were derived from manufacturing operations in Europe, Asia and Mexico.
The financial position and the results of operations of the Company's
subsidiaries in Europe (36% of net sales), Japan (4% of net sales) and China (1%
of net sales) are measured in the local currency of the countries in which they
operate and translated into U.S. dollars. The effects of foreign currency
fluctuations in Europe, Japan and China are somewhat mitigated by the fact that
expenses are generally incurred in the same currencies in which net sales are
generated and the reported
28
<PAGE> 31
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 (3% of net sales) the expenses
are generally incurred in the local currency, but net 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 (7% of net sales) operates as a maquiladora, or contract manufacturer,
where certain direct manufacturing expenses are incurred in the local currency
and net 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 46% of the Company's assets at September 30, 1996 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 stockholders' 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,
Korea and Mexico. 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 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 certain of its firm transaction commitments in foreign currencies and to
hedge its equity investment in certain foreign joint ventures.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had outstanding $15.4 million in
short-term debt, including current portion of long-term debt, and $295.5 million
in long-term debt. The approximate minimum principal payments required on the
Company's long-term debt in each of the five fiscal years subsequent to December
31, 1995 are $1.1 million in 1996, $1.3 million in 1997, $7.9 million in 1998,
$7.6 million in 1999, $64.6 million in 2000 and $152.0 million thereafter.
The net purchase price of the Dyno Acquisition was approximately $114
million (approximately $130 million less approximately $16 million cash acquired
by the Company). The Company financed the acquisition through the combination of
an issuance of $110 million in aggregate principal amount of its 2005 Notes (as
defined herein) and a $135 million secured Credit Facility (as defined herein)
with a group of commercial banks. At September 30, 1996, the Company had
available to it approximately $9 million under the Credit Facility.
In the first nine months of 1996, net working capital increased by $10.0
million and cash used for investing activities was $70.4 million. Financing
activities provided $66.5 million with the remaining cash generated from
operations. In the first nine months of 1995, net working capital increased by
$3.9 million, net of acquisition, while cash used for investing activities was
$169.8 million. Financing activities provided $168.6 million with the remaining
cash generated from operations.
As of September 30, 1996, accounts receivable amounted to $140.8 million,
an increase of $9.9 million, compared to $130.9 million at September 30, 1995.
The increase was due to longer collection periods due to revised payment terms
with certain customers. The average collection period at September 30, 1996 was
89.2 days compared to the average collection period at September 30, 1995 of
77.8 days.
The Company's plans for 1996 capital expenditures total approximately $80
million, of which $70 million had been spent in the first nine months of 1996.
The major projects for 1996 included new blow molding machines for plastic fuel
tanks, expansion of the Ossian, Indiana plant and new plants in Meriden,
Connecticut, Belgium and Brazil. The Company's plans for 1997 capital
expenditures, which total approximately $70 million, are principally for new
blow molding machines, tooling and equipment to produce fuel tank systems for
five new platforms the Company has been awarded by U.S. OEM customers and for
facilities to support new small engine business.
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. Management believes the availability under the
Credit Facility, combined with funds from operations, will provide the Company
with sufficient financial flexibility to fund planned capital expenditures and
increased working capital requirements for the foreseeable future.
29
<PAGE> 32
BUSINESS
GENERAL
Walbro Corporation is a global leader in the design, development and
manufacture of precision fuel storage and delivery systems and products for
automotive and small engine markets worldwide. The Company manufactures plastic
fuel tanks, fuel pumps, fuel modules, fuel rails and fuel level sensors for sale
to automotive OEMs. 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 1990 to 1995, the Company (excluding Dyno) increased net
sales at the compound rate of approximately 17% per year. 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 net sales of $459.3 million in 1995 and net sales of $440.5 million
for the first nine months of 1996.
Approximately 75% of the Company's net sales for the first nine months of
1996 were generated by Walbro Automotive. Through Walbro Automotive, the Company
designs, develops and manufactures fuel storage and delivery systems and
components for a broad range of U.S. and foreign manufacturers of passenger
automobiles and light trucks (including minivans). The Company and its joint
ventures hold a strong market position in North America, Europe and South
America and growing market presence in Asia. In 1996, management estimates that
the Company supplied Chrysler with approximately three-quarters of its fuel pump
and fuel module requirements, including all requirements for Chrysler's
passenger cars and minivans and approximately one-half the requirements for
Chrysler's light trucks. In addition, the Company manufactures fuel pumps, fuel
modules and fuel rails for a number of Ford's passenger cars, minivans and light
trucks. Management believes that the Company manufactures substantially all of
the fuel tank systems for Saab and Volvo light vehicles and all of the fuel
tanks for the Mercedes-Benz C Class, Volkswagen Polo and Renault Twingo. Other
automotive customers of the Company and its joint ventures, include Audi,
Daewoo, Fiat, General Motors, Hyundai, Kia, Nedcar, Peugeot and Rover.
Approximately 25% of the Company's net sales for the first nine months of
1996 were generated by Walbro Engine Management. Through Walbro Engine
Management, 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 marine engines) 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 75%
share of the global diaphragm carburetor market including sales to leading chain
saw and weed trimmer manufacturers such as Poulan/Weedeater, Deere and Company
(Homelite), Stihl Incorporated, McCulloch Corporation, Ryobi Ltd. and Kioritz
(Echo) Corporation. The Company believes it has an approximate 10% 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 Mercury Marine, a major manufacturer of outboard
marine engines. The Company produces substantial volumes of float feed
carburetors for the Chinese two-wheeled vehicle market. The Company also
manufactures replacement products for both the automotive and small engine
aftermarkets, sales of which are included within its small engine product
business.
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.
30
<PAGE> 33
WALBRO AUTOMOTIVE
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. Automotive OEMs are relying increasingly on
suppliers who can provide entire systems rather than a number of different
parts. OEMs can reduce their own internal engineering efforts and the number of
suppliers by purchasing 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 is being
adopted outside North America and that the Company will be able to provide
systems to the European market in the future.
Globalization of the OEM Supplier Base. Several OEMs, including Ford,
General Motors and Volkswagen, 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 is
requiring suppliers to establish international development and manufacturing
facilities capable of providing system components with consistent quality on a
worldwide basis. The Company believes it is well positioned as a major supplier
of fuel storage and delivery systems ("FSDS") to the world automotive markets.
Expansion of OEM Supplier Responsibilities. Since the 1980s, Ford, Chrysler
and General Motors have been actively reducing their respective supplier bases
to those 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 key suppliers. The
Company has received a number of quality awards from its OEM customers,
including the Ford Q1 Award, Chrysler QE Award and General Motors Supplier of
the Year 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 fuel injection systems. 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 reduce
evaporative emissions and the development of new "flexible" fuels such as
ethanol and methanol blends. In response to these changes, the Company has
developed a number of products including electric pumps designed for electronic
fuel injection systems, onboard running and vapor recovery ("ORVR") systems and
plastic fuel tanks which reduce hydrocarbon permeation and are corrosion
resistant to flexible fuels.
31
<PAGE> 34
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:
Systems Approach to Product Development. The Company is utilizing its
expertise to develop integrated FSDS 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 product content on each
vehicle in which its products are installed while providing customers with
substantial performance and cost benefits. This systems approach has made
possible an increase in the dollar value of the Company's products per vehicle.
For example, the new Dodge Durango, which is scheduled to begin volume
production in the third quarter of 1997, is equipped with the Company's fuel
storage and delivery system. These products have a selling price of greater than
$120, compared to a typical 1987 Chrysler vehicle equipped with only $15 of the
Company's products. The Company's ability to assume responsibility for the
development of FSDS allows OEMs to reduce internal engineering efforts and use
fewer suppliers through the purchase of systems rather than components.
Global Capabilities. The Company's international manufacturing and market
presence allows the Company to offer its current and future FSDS technology to
the global automotive market. The Company's presence in Europe provides it 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. The Company's international sales
for the first nine months of 1996 were 51% of the Company's net sales (excluding
joint ventures) compared to 20% in 1994. The Company's plastic tank
manufacturing capability allows it to pursue its systems strategy in Europe and
serve 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 a market presence in Brazil, South Korea
and Japan and it has entered into joint ventures with foreign manufacturers in
Brazil, France, India, Japan, Mexico, Argentina and South Korea which enable the
Company to access those foreign markets.
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. An
example of these products is the ORVR system which captures fuel vapors from the
fuel system and routes them to a carbon canister for storage and reuse.
The Company has made substantial investments in fuel systems technology,
product design and test capability and technical personnel to advance 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 and
has longer term plans to expand its technical capabilities in Asia.
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 injected engines demand an
uninterrupted supply of fuel under pressure and some vehicles require complex
fuel tank
32
<PAGE> 35
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 sold by General Motors, Ford and
Chrysler in North America in 1995 used fuel modules. In 1995, the Company
supplied approximately 70% of all of the fuel modules purchased in North
America, principally to Ford and Chrysler.
Approximately 25% of North American vehicles and 70% of European vehicles
produced in 1995 contained 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. The Company began production of three-layer plastic fuel
tanks during the fourth quarter of 1994 for the 1995 Ford Windstar. The
multi-layer construction of the Company's new, six-layer plastic tank
substantially eliminates fuel permeation, making this one of the first plastic
tanks which complies with the U.S. Environmental Protection Agency (the "EPA")
permeability requirements which became effective beginning in model year 1996.
The first production run of six-layer tanks began in 1996 for the GM T600.
The Company is currently producing mono-layer plastic fuel tanks, which
include coatings and permeation barriers that meet European emission
requirements, for Audi, Mercedes-Benz, Nedcar, Peugeot, Renault, Rover, Saab,
Volkswagen and Volvo. As these customers require more sophisticated fuel tanks,
the Company will likely supplement a portion of its mono-layer blow molding
machines with multi-layer blow molding machines to provide the Company's OEM
customers in Europe with advanced, plastic fuel tank 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. 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
1996, Chrysler began to install this rail on the V-8 engine for its Dodge Ram
truck.
An important advantage of the Company's systems approach is that it assists
customers in responding to developments in safety and environmental standards.
For example, current 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 has developed a variety of ORVR devices which
help prevent fuel vapor loss from fuel delivery systems. These devices are
expected to enter production during 1997.
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 Company has recently been
awarded significant new contracts that include new fuel tank business for a
variety of General Motors platforms, including Saturn, Monte Carlo/Impala,
Sonoma
33
<PAGE> 36
truck, the Suburban, Yukon/Tahoe and Blazer/Jimmy sport utility vehicles, fuel
tanks for the redesigned Mercedes-Benz C Class, and a complete fuel tank system
for the Dodge Durango sport utility vehicle. In addition, the Company has been
awarded new contracts for the first time with Honda, Toyota and Ssangyong for a
variety of platforms. The following table depicts a summary of the various
customers and platforms for which the Company expects to supply products during
1997:
<TABLE>
<CAPTION>
CUSTOMER PLATFORM PRODUCT
- ------------------------- --------------------------------------- -------------------------
<S> <C> <C>
Chrysler................. Cirrus/Stratus, Dodge Dakota, Dodge Fuel Pump/Module
Durango, Dodge B-Van, Dodge Ram Truck, Assembly, Service
K-Base Passenger Car, LH (Intrepid, Pump/Module
Vision, Concord, New Yorker and LHS),
Minivan (Caravan, Voyager and Town &
Country), Neon, Viper, Prowler
Dodge Ram Truck Plastic Fuel Rail
Dodge Durango Plastic Fuel Tank
Assembly
Ford..................... Windstar Plastic Fuel Tank
Mustang, Ranger Oil Separator
Aerostar, Cougar, Crown Victoria, Grand Fuel Rail
Marquis, Mustang, Ranger, Sable,
Taurus, Thunderbird, Town Car
F-Series, E-Series Light Trucks Fuel Pump
All North American Light Vehicle Service Fuel Pump
Platforms
F-100(1), BE-6(1), CE-14(1) Fuel Module
General Motors........... T600 Truck Plastic Fuel Tank
Saturn, Corvette Fuel Module
Fiat..................... Tempra(1), Uno(1), 178(1) Fuel Module
Dedra(2), Miero(2), Panda(2), Punto(2), Fuel Pump, Bracket
Tempra(2), Tipo(2), Uno(2) Assembly and Level Sensor
Land Rover/Rover......... Discovery, Defender Plastic Fuel Tank, Fill
Pipe and various
blow-molded parts
Rover, R-8(2), 200(2), 400(2) Fuel Pump and Bracket
Assembly
Mercedes-Benz............ C Class, Truck Glendewagen, Light Truck Plastic Fuel Tank, Filler
Pipe, Expansion Tank
Nedcar................... S-40 Plastic Fuel Tank
300(2), 400(2) Fuel Module, Fuel Pump,
Bracket Assembly and
Sensor
Peugeot.................. 306, 309, 405, 505 Plastic Fuel Tank, Filler
Tubes and Air Ducts
106(2), 205(2), 306(2), 405(2), 504(2), Fuel Pump, Bracket
505(2), 605(2) Assembly and Level Sensor
Renault.................. Twingo, Safrane, Espace, Spider Plastic Fuel Tank
R-19(1), CL10(1) Fuel Module
R-5(2), R-9/11(2), Twingo(2), X-S4(2), Fuel Pump/Module
X-06(2)
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
CUSTOMER PLATFORM PRODUCT
- ------------------------- --------------------------------------- -------------------------
<S> <C> <C>
Saab..................... 900, 9000, 640 Plastic Fuel Tank, Air
Hose, Air Duct and
Coolant Reservoir
900(2), 9000(2), I16(2) Fuel Pump
Volkswagen/Audi.......... Polo, Golf, Audi 100 Diesel, Audi V8, Plastic Fuel Tank
Van and GOL
Golf(1), Santana(1) Fuel Sending Unit
Volvo.................... 850, 1150, 940, 960, P80, S-40, P-2X Plastic Fuel Tanks,
various other blow-molded
parts and Coolant
Reservoir
Heavy Truck Coolant Reservoir
Daewoo................... J-Car(3), T-Car(3), V-Car(3) Fuel Pump
Honda.................... AWD Fuel Module and Air Ducts
KIA...................... Various Platforms Fuel Pump
S-2 ORVR
Ssangyong................ FJ(3), KJ(3) Fuel Module
Toyota................... Carina, Corolla Plastic Fuel Tank
Carina Air Duct
</TABLE>
- -------------------------
(1) South American customers supplied by Marwal do Brasil, Ltda.
(2) European customers supplied by Marwal Systems, S.N.C.
(3) Korean customers supplied through Korean Automotive Fuel Systems, Ltd.
In addition to the customers described above, the Company also supplies a
variety of its products to a number of other customers including, but not
limited to, the following: IBC, Iveco, J.I. Case, Lister Petter, New Holland,
Scandia, VME and Steyr-Puch.
North America. Net sales to Chrysler and Ford for the first nine months of
1996 accounted for 20% and 11% of the Company's consolidated net sales,
respectively. 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 Chrysler and Ford. 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 Chrysler and Ford, and to assume a key role in
the development of new fuel system products, such as ORVR devices. General
Motors historically developed and produced substantially all of its fuel storage
and delivery systems internally but recently has sourced a significant portion
of future plastic fuel tank programs to outside suppliers, including the
Company.
In October 1996, the Company announced its intent to form a joint venture
with two minority business owners to produce automotive components in Detroit's
Empowerment Zone. The joint venture is expected to manufacture FSDS products
(including blow-molded plastic fuel tanks), air ducts, reservoirs and similar
small blow-molded components for automotive applications. General Motors has
awarded $300 million of new business to the proposed joint venture over a
five-year period commencing in 1998. Chrysler has also committed to awarding new
business to the proposed joint venture. In September 1996, the Company received
a tax credit worth an estimated $13.6 million from the Michigan Economic Growth
Authority for this new facility.
Europe. In 1991, the Company began operations in Europe with the
establishment of its Marwal Systems joint venture in France with Magneti Marelli
S.p.A. of Italy to serve customers that include Fiat, Nissan, Peugeot, Renault,
Rover, Saab and Volvo. As a result of the Dyno Acquisition, the Company is the
only integrated FSDS supplier in Europe, which has provided the Company with the
immediate opportunity to increase its participation in the European automotive
market. In addition, the Company is using its
35
<PAGE> 38
relationships in the U.S. to increase its sales to North American manufacturers
in Europe. Similarly, the Company is leveraging its relationships with
Mercedes-Benz, Peugeot, Renault, Saab, Volkswagen, Volvo and other European
manufacturers to enhance the Company's marketing efforts with these European
manufacturers around the world. Approximately 70% of the European light duty
vehicles and 25% of the North American light duty vehicles are equipped with
plastic fuel tanks. The Company's management estimates that operations in Europe
produced plastic fuel tanks accounting for approximately 20% of the European
plastic fuel tank market in the first nine months of 1996.
South America. In January 1993, operations began at the Company's Marwal do
Brasil joint venture, which targets the South American automotive market of
approximately two million units per year. In September 1995, the Company
established Walbro Automotive do Brasil to manufacture plastic fuel tanks for
the Brazilian automotive market. It began production of plastic fuel tanks for
Volkswagen in November 1996. The Company recently received an order from Ford
for a supply of plastic fuel tanks for Ranger trucks to be produced in
Argentina.
Asia. In December 1986, the Company entered into a joint venture in Japan
known as Mitsuba-Walbro, Inc. with Mitsuba Electric Manufacturing Company to
manufacture fuel pump components. 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 November 1995, the
Company established Mutual Walbro P. Ltd., a joint venture with Mutual
Industries Ltd., in India to manufacture plastic fuel tanks for the Indian
automotive market.
AUTOMOTIVE COMPETITION
The Company competes with several other manufacturers, including the OEMs
themselves, many 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, Denso Corp., Ltd., VDO (a division of Mannesmann), Electronics and
Fuel Handling Division of Ford and Delphi Automotive Systems (GM's component
group). In the fuel rail market, the Company's major competitors include Delphi,
Ford, Echlin Inc. and Siemens A.G. The Company has competition in the fuel
module market from Delphi and Ford. The Company's largest competitors in the
plastic fuel tank market include Kautex Werke Reinold Hagen A.G. (which signed a
definitive agreement in November 1996 to be acquired by Textron Inc., subject to
regulatory approval), 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 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 three 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, the Company is generally able to determine a few years in
advance the models for which it will supply products. The Company's sales force
works closely with the Company's engineering departments and systems center in
Auburn Hills in the research, design, development and improvement of its
products. When the Company's systems center in Europe is completed, the Company
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
capability to provide comprehensive engineering
36
<PAGE> 39
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.
WALBRO ENGINE MANAGEMENT
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 emissions of gasoline-powered small engines
were 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 in 1999. In addition, the EPA has implemented similar
regulations that became effective in August 1996, with a more stringent phase
expected to be phased in beginning 2002. The products designed to meet these new
emission standards in the small engine market will require more sophisticated
product research and new production 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, 5.2 million in 1994 and management estimates 1995 production to
have been approximately 7.8 million units. In addition, management believes
demand for diaphragm carburetors used in gasoline-powered portable tools will
grow in these developing countries. The inaccessibility of electrical power
distribution and geographic isolation of many 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, the Company 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. The Company'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.
37
<PAGE> 40
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. The Company's diaphragm carburetor, float feed
carburetor and ignition system sales accounted for 53%, 23% and 6%,
respectively, of the Company's 1995 small engine net sales. The remaining 18% of
small engine net sales 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.
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 is integrating 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 that became effective 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 2002 to 2005. 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.
The Company has acquired an exclusive license to apply electronic fuel
injection to two stroke engines. It has operating prototypes for outboard marine
(including personal watercraft) and snowmobile applications. The Company
believes that this technology known as "side wall injection" offers competitive
and performance benefits and expects to obtain new supply contracts beginning in
1998. Also, the Company has developed an all-mechanical fuel injection system
for application to small displacement (150 cc or less) two-wheeled vehicles.
This system has also been presented as an operating prototype to potential
customers.
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 the Company's sales and 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, Deere and Company (Homelite), Stihl
Incorporated, McCulloch Corporation, 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 major outboard engine manufacturer,
buys all of its outboard engine carburetors from the Company.
38
<PAGE> 41
One of the Company's opportunities for growth in the small engine industry
is the Chinese market. In January 1994, the Company acquired a 60% interest,
increased to 70% in 1995, 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 has built a new manufacturing
facility in Tianjin to provide additional capacity to take advantage of growth
in the two-wheeled vehicle market. This new facility began production in October
1996.
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
Products, both of which have greater sales and financial resources than the
Company. The Company's major competitor in the ignition systems market is R.E.
Phelon Company Inc.
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 Corporation and Standard Motor Products, Inc., 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 $25.2 million in 1995 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.
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 systems product manufacturers 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 it 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 new acquisitions or joint ventures.
39
<PAGE> 42
MANUFACTURING AND FACILITIES
The Company (including the Company's joint ventures) conducts operations in
approximately 1.9 million square feet of space in a total of 31 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 the Company'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, the Company's Norway facility
has been named a General Motors Supplier of the Year four years in a row
beginning in 1991. In 1995, Walbro Automotive was named a supplier of the year
by General Motors. Various other Company factories have been recognized by
customers such as Mercury Marine, Stihl and Federal-Mogul Corporation for
excellence in product quality and delivery.
In addition, the Company's domestic automotive customers have cooperated in
the development of a broad based quality procedure for which their suppliers are
required to be certified. The procedure, known as QS 9000, has been derived from
the International Standards Organization's ISO 9000 procedure. General Motors
requires its Tier I suppliers to be certified by December 1997; Chrysler
requires its suppliers to be certified by July 1997; and Ford required its
suppliers to complete the self-assessment portion of the procedure during 1996
but has not set a specific date by which suppliers must be certified. The
Company has an aggressive program in place to achieve the required
certifications on or prior to such dates. Management believes that its
manufacturing facilities at Meriden, Connecticut, Caro, Michigan and Ligonier
and Ossian, Indiana will complete certification by the second quarter of 1997.
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, the Company uses
a fully automated assembly line for production of plastic fuel tanks for the
Mercedes-Benz 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 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 1995, 1994 and 1993, the
Company spent approximately $16.7 million, $12.2 million and $9.5 million,
respectively, 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
40
<PAGE> 43
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 production basis and does not maintain a
significant finished product inventory.
EMPLOYEES
As of November 30, 1996, the Company had approximately 4,650 employees. The
Company believes that its relations with its employees are satisfactory. All of
the Company's approximately 850 European plant employees are unionized. All of
the Company's United States plant employees are non-unionized except
approximately 450 employees at both of its Michigan manufacturing locations. The
Company's three-year contract with the bargaining unit for these Michigan plants
expires in November 1998.
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.
41
<PAGE> 44
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........... 65 Chairman of the Board, Chief Executive Officer and
Director
Frank E. Bauchiero............ 62 President, Chief Operating Officer and Director
Robert H. Walpole............. 56 Vice President and a Director; President of Walbro
Engine Management
Gary L. Vollmar............... 45 Vice President; President of Walbro Automotive
Richard H. Whitehead, III..... 52 Vice President
Daniel L. Hittler............. 61 Chief Administrative Officer and Secretary
Michael A. Shope.............. 52 Chief Financial Officer and Treasurer
William T. Bacon, Jr. ........ 73 Director
Herbert M. Kennedy............ 67 Director
Vernon E. Oechsle............. 54 Director
Robert D. Tuttle.............. 71 Director
John E. Utley................. 55 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. 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. Messrs. Bacon, Bauchiero and
Oechsle have been elected to serve for a term expiring in 1999.
Lambert E. Althaver has been Chief Executive Officer of the Company since
1982, served as President from 1977 until August 1996, 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.
Frank E. Bauchiero was appointed President and Chief Operating Officer in
August 1996. He became a Director of the Company in 1990. Mr. Bauchiero served
as President-Industrial, North American Operations, Dana Corporation from
December 1990 until July 1996. 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 of Regal Beloit Corp., a manufacturer of cutting tools for
metalworking applications; Rockford Products Corp., a manufacturer of bolts,
nuts, rivets and washers, cold form fasteners and components for general
industrial use; Madison-Kipp Corp., a manufacturer of aluminum-zinc alloy and
nonferrous die castings; and M and I Bank of Beloit.
Robert H. Walpole has been a Vice President of the Company since 1983 and
President of Walbro Engine Management 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 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.
42
<PAGE> 45
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 1993. He was the Director of Technical Planning from 1989 to 1992.
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. from 1984 to 1994.
Prior to that, he was a Managing Partner of Bacon Whipple & Co., Inc.
Herbert M. Kennedy has served as a Director of the Company since 1981. In
July 1995, he 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 the President, Chief Executive Officer and a Director of Quanex
Corporation, a manufacturer of specialty steel and aluminum products, since
1996. He served as the Chief Operating Officer of Quanex Corporation from 1993
to 1995. 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 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. He is Senior Vice
President of LucasVarity, PLC, a supplier of automotive braking systems,
electrical systems and diesel systems. From 1994 until September 1996 he was
Senior Vice President of Varity Corporation. Mr. Utley was the Chairman of the
Board of Kelsey-Hayes Company from 1992 to September 1996 and was Vice Chairman
and Vice President from 1989 to 1992.
During the first quarter of 1997, the Company plans to modify its
management structure to reflect a matrix organization. In this regard, the
Company expects to appoint three regional presidents from its existing
management team who will have operating responsibilities for the North America,
Europe/South America and Asia-Pacific regions. In addition, global
responsibility for automotive products, small engine products and the Company's
strategic development activities will be allocated to one of each of these three
regional presidents. The Company believes that the benefits of this matrix
organizational structure will include (i) improved focus on the Company's
customers in their local markets, (ii) a better global coordination of the
Company's product lines and development activities, (iii) reduced overhead
expenses, (iv) avoidance of duplication of costs between the Company's product
lines and (v) improved utilization of management expertise and technical
facilities.
43
<PAGE> 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 10, 1996 the total number of
shares of Common Stock of the Company beneficially owned, and the percentage so
owned, by (i) each director of the Company, (ii) each person known to the
Company to be the beneficial owner of more than five percent of the outstanding
Common Stock of the Company, (iii) each of the Company's executive officers and
(iv) all directors and executive officers as a group. The number of shares owned
are those "beneficially owned," as determined under the rules of the Commission,
and such information is not necessarily indicative of beneficial ownership for
any other purpose.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAME BENEFICIAL OWNERSHIP(1) OF CLASS
- --------------------------------------------------------------- ----------------------- ----------
<S> <C> <C>
Franklin Resources, Inc. ...................................... 899,735(2) 10.4%
David L. Babson & Co., Inc. ................................... 730,900(3) 8.5%
The Capital Guardian Trust Company and The Capital Group
Companies, Inc. ............................................. 571,300(4) 6.6%
Lambert E. Althaver............................................ 240,231(5) 2.8%
William T. Bacon, Jr. ......................................... 67,775(6) *
Frank E. Bauchiero............................................. 42,494(7) *
Daniel L. Hittler.............................................. 25,007(8) *
Herbert M. Kennedy............................................. 12,500(9) *
Vernon E. Oechsle.............................................. 12,466(10) *
Michael A. Shope............................................... 10,009(11) *
Robert D. Tuttle............................................... 16,000(12) *
John E. Utley.................................................. 12,516(13) *
Gary L. Vollmar................................................ 51,363(14) *
Robert H. Walpole.............................................. 194,425(15) 2.2%
Richard H. Whitehead, III...................................... 124,790(16) 1.4%
All Directors and Executive Officers as a Group (12 persons)... 809,576(17) 9.4%
</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 August 9, 1996 filed with the
Commission by Franklin Resources, Inc. According to such Schedule 13G,
Franklin Resources, Inc. has sole voting power with respect to 648,400 of
these shares, shared voting power with respect to 215,300 of these shares
and shared dispositive power with respect to all 899,735 of these shares.
The address of the Stockholder is 777 Mariners Island Boulevard, San Mateo,
California 94404.
(3) As reported on a Schedule 13G dated February 15, 1996 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 403,300
of these shares, shared voting power with respect to 327,600 of these
shares and sole dispositive power with respect to all 730,900 of these
shares. The address of the Stockholder is One Memorial Drive, Cambridge,
Massachusetts 02142-1300.
(4) As reported on a Schedule 13G dated February 12, 1996 filed with the
Commission by The Capital Group Companies, Inc. and Capital Guardian Trust
Company. 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 Capital Guardian Trust Company each have sole
voting power with respect to 471,300 of these shares and no voting power
with respect to the remaining 100,000 shares and have sole dispositive
power with respect to all 571,300 of these shares. The address of the
Stockholder is 333 South Hope Street, Los Angeles, California 90071.
(5) Includes 74,643 shares owned by Mr. Althaver's wife. Mr. Althaver disclaims
beneficial ownership of these shares. Also includes 70,974 shares which are
covered by presently exercisable options under the
44
<PAGE> 47
Company's stock option plans and 17,791 shares held for the account of Mr.
Althaver by the trustee of the Company's Advantage Plan.
(6) 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 Company's Equity Plan.
(7) Includes 11,466 shares which are exercisable under the Equity Plan. Also
includes 30,000 shares restricted per terms of an agreement dated October
3, 1996.
(8) Includes 1,600 shares owned by Mr. Hittler's wife. Mr. Hittler disclaims
beneficial ownership of these shares. Also includes 20,669 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.
(9) 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.
(10) Includes 11,466 shares which are exercisable under the Equity Plan.
(11) Includes 7,809 shares which are covered by presently exercisable options
under the Company's stock option plans.
(12) 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.
(13) Includes 500 shares over which Mr. Utley has voting power as trustee of a
trust and 12,016 shares which are exercisable under the Equity Plan.
(14) Includes 38,115 shares which are covered by presently exercisable options
under the Company's stock option plans and 5,250 shares held for the
account of Mr. Vollmar by the trustee of the Company's Advantage Plan.
(15) 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
690 shares held for the account of Mr. Walpole by the trustee of the
Company's Advantage Plan.
(16) Includes 23,583 shares which are covered by presently exercisable options
under the Company's stock option plans. Also includes 1,207 shares held for
the account of Mr. Whitehead by the trustee of the Company's Advantage
Plan.
(17) Includes 226,098 shares which are covered by presently exercisable options
under the Company's stock option plans. Also includes 24,938 shares held
for the account of four 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.
45
<PAGE> 48
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Declaration will be qualified
as an indenture under the Trust Indenture Act. Bankers Trust Company, as
Institutional Trustee, will act as indenture trustee under the Declaration for
purposes of compliance with the provisions of the Trust Indenture Act. The terms
of the Preferred Securities will include those stated in the Declaration and
those made part of the Declaration by the Trust Indenture Act. The following
summary of the material terms and provisions of the Preferred Securities does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Declaration, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned, directly or
indirectly, by the Company. The Common Securities rank pari passu, and payments
will be made thereon on a pro rata basis, with the Preferred Securities, except
that upon the occurrence and during the continuance of a Declaration Event of
Default, the rights of the holders of the Common Securities to receive payment
of periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Preferred
Securities. The Declaration does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any indebtedness
by the Trust. Pursuant to the Declaration, the Institutional Trustee will hold
title to the Convertible Debentures purchased by the Trust for the benefit of
the holders of the Trust Securities. The payment of distributions out of money
held by the Trust, and payments upon redemption of the Preferred Securities or
liquidation of the Trust out of money held by the Trust, are guaranteed by the
Company to the extent described under "Description of the Guarantee." The
Guarantee will be held by Bankers Trust Company, the Guarantee Trustee, for the
benefit of the holders of the Preferred Securities. The Guarantee does not cover
payment of distributions when the Trust does not have sufficient available funds
to pay such distributions. In such event, the remedy of a holder of Preferred
Securities is to (i) vote to direct the Institutional Trustee to enforce the
Institutional Trustee's rights under the Convertible Debentures or (ii) if the
failure of the Trust to pay distributions is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures, to institute
a proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on the Convertible Debentures having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Convertible Debentures. See "-- Voting Rights."
DISTRIBUTIONS
Distributions on Preferred Securities will be fixed at a rate per annum of
% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears beyond the first date such distributions are payable
(or would be payable, if not for any Extension Period or default by the Company
on the Convertible Debentures) will bear interest thereon at the rate per annum
of % thereof compounded quarterly. The term "distribution" as used herein
includes any such interest payable unless otherwise stated. The amount of
distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the date of initial issuance and will be payable quarterly in arrears on
each March 31, June 30, September 30 and December 31, commencing March 31, 1997.
When, as and if available for payment, distributions will be made by the
Institutional Trustee, except as otherwise described below.
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Convertible Debentures.
The Company has the right under the Indenture to defer payments of interest
on the Convertible Debentures by extending the interest payment period from time
to time on the Convertible Debentures for an
46
<PAGE> 49
Extension Period not exceeding 20 consecutive quarterly interest periods during
which no interest shall be due and payable; provided, that no such Extension
Period may extend beyond the maturity date of the Convertible Debentures. As a
consequence of the Company's extension of the interest payment period, quarterly
distributions on the Preferred Securities would be deferred (though such
distributions would continue to accrue with interest thereon compounded
quarterly since interest would continue to accrue on the Convertible Debentures)
during any such extended interest payment period. In the event that the Company
exercises its right to extend the interest payment period, then (a) the Company
shall not declare or pay dividends on, or make any distributions or liquidation
payments with respect to, or redeem, purchase or acquire any of its capital
stock (other than (i) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase shares of
the Common Stock, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged or (iv) stock dividends paid
by the Company where the dividend stock is the same stock as that on which the
dividend is paid), (b) the Company shall not make any payment of interest on or
principal of (or premium, if any, on) or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company which rank pari passu
with or junior to the Convertible Debentures and (c) the Company shall not make
any guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any Extension Period, the Company may
further extend such Extension Period; provided, that such Extension Period,
together with all previous and further extensions thereof may not exceed 20
consecutive quarters; and provided further that no Extension Period may extend
beyond the maturity date of the Convertible Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. See
"Description of the Convertible Debentures -- Interest" and "Description of the
Convertible Debentures -- Interest Income and Option to Extend Interest Payment
Periods." The Regular Trustees shall give the holders of the Preferred
Securities notice of any Extension Period upon receipt of notice thereof from
the Company. See "Description of the Convertible Debentures -- Interest Income
and Option to Extend Interest Payment Periods." If distributions are deferred as
a result of an Extension Period, the deferred distributions and accrued interest
thereon shall be paid to holders of record of the Preferred Securities as they
appear on the books and records of the Trust on the record date next following
the termination of such deferral period.
Distributions on the Preferred Securities will be made on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received by the Trust from the Company pursuant to the Convertible
Debentures. See "Description of the Convertible Debentures." The payment of
distributions out of monies held by the Trust is guaranteed by the Company to
the extent set forth under "Description of the Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust at the close of
business on the March 15, June 15, September 15 and December 15, as the case may
be, next preceding the relevant payment dates. Such distributions will be paid
through the Institutional Trustee who will hold amounts received in respect of
the Convertible Debentures in the Property Account for the benefit of the
holders of the Trust Securities. Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment will be made as
described under "-- Book-Entry Only Issuance -- The Depository Trust Company"
below. In the event that any date on which distributions are payable on the
Preferred Securities is not a Business Day, then payment of the distributions
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than Saturday, Sunday or any other day on which banking
institutions in New York, New York, Detroit, Michigan or Wilmington, Delaware
are permitted or required by any applicable law to close.
47
<PAGE> 50
CONVERSION RIGHTS
General. Preferred Securities will be convertible at any time on or after
, 1997 (60 days after the date of issue) and prior to the close of
business on the Business Day immediately preceding the date of repayment of such
Preferred Securities, whether at maturity or upon redemption (either at the
option of the Company or pursuant to a Tax Event), at the option of the holder
thereof and in the manner described below, into shares of Common Stock at an
initial conversion rate of shares of Common Stock for each Preferred
Security (equivalent to a conversion price of $ per share of Common Stock),
subject to adjustment as described under "-- Conversion Price Adjustments"
below. The Trust will covenant in the Declaration not to convert Convertible
Debentures held by it except pursuant to a notice of conversion delivered to the
Institutional Trustee, as conversion agent (the "Conversion Agent"), by a holder
of Preferred Securities. A holder of a Preferred Security wishing to exercise
its conversion right will deliver an irrevocable notice of conversion, together,
if the Preferred Security is a Certificated Security (as defined herein), with
such Certificated Security, to the Conversion Agent, which shall, on behalf of
such holder, exchange such Preferred Security for a portion of the Convertible
Debentures and immediately convert such Convertible Debentures into Common
Stock. Holders may obtain copies of the required form of the notice of
conversion notice from the Conversion Agent. Procedures for converting
book-entry Preferred Securities into shares of Common Stock will differ, as
described under "-- Book-Entry Only Issuance -- The Depository Trust Company."
Holders of Preferred Securities at the close of business on a distribution
record date will be entitled to receive the distribution payable on such
Preferred Securities on the corresponding distribution payment date
notwithstanding the conversion of such Preferred Securities following such
distribution record date but prior to such distribution payment date. If any
Preferred Securities are surrendered for conversion during the period from the
close of business on any record date through and including the next succeeding
distribution payment date (except any such Preferred Securities called for
redemption), such Preferred Securities when surrendered for conversion must be
accompanied by payment in next day funds of an amount equal to the distribution
which the registered holder on such record date is to receive. Except as
described above, no distribution will be payable by the Company on converted
Preferred Securities with respect to any distribution payment date subsequent to
the date of conversion. Except as provided above, neither the Trust nor the
Company will make, or be required to make, any payment, allowance or adjustment
for accumulated and unpaid distributions, whether or not in arrears, on
Preferred Securities. Each conversion will be deemed to have been effected
immediately prior to the close of business on the day on which the related
conversion notice was received by the Conversion Agent.
Shares of Common Stock issued upon conversion of Preferred Securities will
be validly issued, fully paid and nonassessable. No fractional shares of Common
Stock will be issued as a result of conversion, but in lieu thereof such
fractional interest will be paid by the Company in cash based on the last
reported sale price of Common Stock on the date such Preferred Securities are
surrendered for conversion.
Conversion Price Adjustments -- General. The conversion price is subject to
adjustment in certain events, including (a) the issuance of shares of Common
Stock as a dividend or a distribution with respect to Common Stock, (b)
subdivisions, combinations and reclassification of Common Stock, (c) the
issuance to all holders of Common Stock of rights or warrants entitling them
(for a period not exceeding 45 days) to subscribe for shares of Common Stock at
less than the then Current Market Price (as defined below) of the Common Stock,
(d) the distribution to holders of Common Stock of evidences of indebtedness of
the Company, securities or capital stock, cash or assets (including securities,
but excluding those rights, warrants, dividends and distributions referred to
above and dividends and distributions paid exclusively in cash), (e) a
distribution consisting exclusively of cash (excluding any cash distributions
referred to in (d) above) to all holders of Common Stock in an aggregate amount
that, together with (i) all other cash distributions (excluding any cash
distributions referred to in (d) above) made within the 12 months preceding such
distribution and (ii) any cash and the fair market value of other consideration
payable in respect of any tender offer by the Company or a subsidiary of the
Company for the Common Stock consummated within the twelve months preceding such
distribution, exceeds 12.5% of the Company's market capitalization (being the
product of the Current Market Price times the number of shares of Common Stock
then outstanding) on the date fixed for determining the stockholders entitled to
such distribution; and (f) the consummation of a tender offer
48
<PAGE> 51
by the Company or any subsidiary of the Company for the Common Stock which
involves an aggregate consideration that, together with (X) any cash and other
consideration payable in respect of any tender offer consummated by the Company
or a subsidiary of the Company for the Common Stock consummated within the 12
months preceding the consummation of such tender offer and (Y) the aggregate
amount of all cash distributions (excluding any cash distributions referred to
in (d) above) to all holders of the Common Stock within the twelve months
preceding the consummation of such tender offer, exceeds 12.5% of the Company's
market capitalization at the date of consummation of such tender offer. "Current
Market Price" means the average of the daily closing prices for the ten
consecutive trading days selected by the Company commencing not more than 20
trading days before, and ending not later than, the day in question.
The Company from time to time may reduce the conversion price of the
Convertible Debentures (and thus, the conversion price of the Preferred
Securities) by any amount selected by the Company for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
reduction. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Company's Board
of Directors deem advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes. See
"United States Federal Income Taxation -- Conversion of Preferred Securities."
No adjustment of the conversion price will be made upon the issuance of any
shares of Common Stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Common Stock under
any such plan. No adjustment in the conversion price will be required unless
such adjustment would require a change of at least 1% in the conversion price
then in effect; provided, however, that any adjustment that would not be
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any action would require adjustment of the conversion
price pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value to the holder of the Preferred Securities.
Conversion Price Adjustments -- Merger, Consolidation or Sale of Assets of
the Company. In the event that the Company shall be a party to any transaction
or series of transactions constituting a Fundamental Change (as defined below),
including, without limitation, (i) any recapitalization or reclassification of
the Common Stock (other than a change in par value or as a result of a
subdivision or combination of the Common Stock); (ii) any consolidation or
merger of the Company with or into another corporation as a result of which
holders of Common Stock shall be entitled to receive securities or other
property or assets (including cash) with respect to or in exchange for Common
Stock (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of the outstanding Common Stock); (iii) any
sale or transfer of all or substantially all of the assets of the Company; or
(iv) any compulsory share exchange, pursuant to any of which holders of Common
Stock shall be entitled to receive other securities, cash or other property or
assets, then appropriate provision shall be made so that the holders of the
Preferred Securities then outstanding shall have the right thereafter to convert
such Preferred Securities only into (x) if any such transaction does not
constitute a Common Stock Fundamental Change (as defined below), the kind and
amount of the securities, cash or other property or assets that would have been
receivable upon such recapitalization, reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of Common
Stock issuable upon conversion of such Preferred Securities immediately prior to
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange, after, in the case of a Non-Stock Fundamental Change (as
defined below), giving effect to any adjustment in the conversion price in
accordance with clause (i) of the following paragraph, and (y) if any such
transaction constitutes a Common Stock Fundamental Change, shares of common
stock of the kind received by holders of Common Stock as a result of such Common
Stock Fundamental Change in an amount determined in accordance with clause (ii)
of the following paragraph. The company formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Common Stock, as the case may be, shall enter into a supplemental indenture with
the Indenture Trustee, satisfactory in form to the Indenture Trustee and
executed and delivered to the Indenture Trustee, the provisions of which shall
establish
49
<PAGE> 52
such right. Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture, shall be
as nearly equivalent as practical to the relevant adjustments provided for in
the preceding paragraphs and in this paragraph.
Notwithstanding any other provision in the preceding paragraphs, if any
Fundamental Change occurs, the conversion price in effect will be adjusted
immediately after that Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion
price per share of Common Stock immediately following such Non-Stock
Fundamental Change will be the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to the preceding
paragraphs, and (B) the product of (X) the greater of the Applicable Price
(as defined below) and the then applicable Reference Market Price (as
defined below) and (Y) a fraction, the numerator of which is $25 and the
denominator of which is (I) the applicable Redemption Price for one
Preferred Security if the redemption date were the date of such Non-Stock
Fundamental Change ($ , if such change occurs before , 2000)
plus (II) any then-accrued but unpaid distributions on one Preferred
Security; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price per share of Common Stock immediately following the Common Stock
Fundamental Change will be the conversion price in effect immediately prior
to the Common Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs,
multiplied by a fraction, the numerator of which is the Purchaser Stock
Price (as defined below) and the denominator of which is the Applicable
Price; provided, however, that in the event of a Common Stock Fundamental
Change in which (A) 100% of the value of the consideration received by a
holder of Common Stock (subject to certain limited exceptions) is shares of
common stock of the successor, acquiror or other third party (and cash, if
any, paid with respect to any fractional interests in the shares of common
stock resulting from the Common Stock Fundamental Change) and (B) all of
the Common Stock (subject to certain limited exceptions) shall have been
exchanged for, converted into, or acquired for, shares of common stock (and
cash, if any, with respect to fractional interests) of the successor,
acquiror or other third party, the conversion price per share of Common
Stock immediately following the Common Stock Fundamental Change shall be
the conversion price in effect immediately prior to the Common Stock
Fundamental Change divided by the number of shares of common stock of the
successor, acquiror, or other third party received by a holder of one share
of Common Stock as a result of the Common Stock Fundamental Change.
The foregoing conversion price adjustments are designed, in "Fundamental
Change" transactions where all or substantially all of the Common Stock is
converted into securities, cash, or property and not more than 50% of the value
received by the holders of Common Stock consists of stock listed or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the NNM (a "Non-Stock Fundamental Change," as defined herein), to
increase the securities, cash or property into which each Preferred Security is
convertible.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price below) is lower than the then applicable conversion price of
the Preferred Securities but greater than or equal to the Reference Market
Price, the conversion price will be adjusted as described above with the effect
that each Preferred Security will be convertible into securities, cash or
property of the same type received by the holders of Common Stock in such
transaction but in an amount per Preferred Security equal to the amount
indicated as the denominator as of the date of such transaction as set forth in
clause (i) above with respect to conversion prices for Non-Stock Fundamental
Changes.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price below) is lower than both the conversion price of a Preferred
Security and the Reference Market Price, the conversion price will be adjusted
as described above but calculated as though such initial value had been the
Reference Market Price.
50
<PAGE> 53
In a Fundamental Change transaction where all or substantially all the
Common Stock is converted into securities, cash, or property and more than 50%
of the value received by the holders of Common Stock (subject to certain limited
exceptions) consists of listed or NNM traded common stock (a "Common Stock
Fundamental Change," as defined herein), the foregoing adjustments are designed
to provide in effect that (a) where Common Stock is converted partly into such
common stock and partly into other securities, cash, or property, each Preferred
Security will be convertible solely into a number of shares of such common stock
determined so that the initial value of such shares (measured as described in
the definition of Purchaser Stock Price below) equals the value of the shares of
Common Stock into which such Preferred Security was convertible immediately
before the transaction (measured as aforesaid) and (b) where Common Stock is
converted solely into such common stock, each Preferred Security will be
convertible into the same number of shares of such common stock receivable by a
holder of the number of shares of Common Stock into which such Preferred
Security was convertible before such transaction.
In determining the amount and type of consideration received by a holder of
Common Stock in the event of a Fundamental Change, consideration received by a
holder of Common Stock pursuant to a statutory right of appraisal will be
disregarded.
"Applicable Price" means (i) in the event of a Non-Stock Fundamental Change
in which the holders of Common Stock receive only cash, the amount of cash
receivable by a holder of one share of Common Stock and (ii) in the event of any
other Fundamental Change, the Current Market Price for one share of Common Stock
on the record date for the determination of the holders of Common Stock entitled
to receive cash, securities, property or other assets in connection with such
Fundamental Change or, if there is no such record date, on the date on which the
holders of the Common Stock will have the right to receive such cash,
securities, property or other assets.
"Common Stock Fundamental Change" means any Fundamental Change in which
more than 50% of the value (as determined in good faith by the Company's Board
of Directors) of the consideration received by holders of Common Stock (subject
to certain limited exceptions) pursuant to such transaction consists of shares
of common stock that, for the twenty consecutive trading days immediately prior
to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the NNM, provided, however, that a Fundamental Change will not be a
Common Stock Fundamental Change unless either (i) the Company continues to exist
after the occurrence of such Fundamental Change and the outstanding Preferred
Securities continue to exist as outstanding Preferred Securities, or (ii) the
outstanding Preferred Securities continue to exist as Preferred Securities and
are convertible into shares of common stock of the successor to the Company.
"Fundamental Change" means the occurrence of any transaction or event or
series of transactions or events pursuant to which all or substantially all of
the Common Stock is exchanged for, converted into, acquired for or constitutes
solely the right to receive cash, securities, property or other assets (whether
by means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise); provided,
however, in the case of a plan involving more than one such transaction or
event, for purposes of adjustment of the conversion price, such Fundamental
Change will be deemed to have occurred when substantially all of the Common
Stock has been exchanged for, converted into, or acquired for or constitutes
solely the right to receive cash, securities, property or other assets but the
adjustment shall be based upon the consideration that the holders of Common
Stock received in the transaction or event as a result of which more than 50% of
the Common Stock shall have been exchanged for, converted into, or acquired for,
or shall constitute solely the right to receive such cash, securities, property
or other assets.
"Non-Stock Fundamental Change" means any Fundamental Change other than a
Common Stock Fundamental Change.
"Purchaser Stock Price" means, with respect to any Common Stock Fundamental
Change, the Current Market Price of common stock received by holders of Common
Stock in such Common Stock Fundamental Change on the record date for the
determination of the holders of Common Stock entitled to receive such
51
<PAGE> 54
shares of common stock or, if there is no such record date, on the date upon
which the holders of Common Stock shall have the right to receive such shares of
common stock.
"Reference Market Price" will initially mean $ (which, unless
otherwise specified in this Prospectus, will be 66 2/3% of the last reported
sale price per share of Common Stock on the NNM on , 1997) and,
in the event of any adjustment to the conversion price other than as a result of
a Fundamental Change, the Reference Market Price will also be adjusted so that
the ratio of the Reference Market Price to the conversion price after giving
effect to any adjustment will always be the same as the ratio of the initial
Reference Market Price to the initial conversion price of the Preferred
Securities.
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, be deemed to be distributions that could be taxable
as dividends to holders of Preferred Securities or to the holders of Common
Stock. See "United States Federal Income Taxation -- Conversion of Preferred
Securities."
MANDATORY REDEMPTION OF TRUST SECURITIES
The Preferred Securities have no stated maturity date but will be redeemed
upon the maturity of the Convertible Debentures or to the extent the Convertible
Debentures are redeemed. The Convertible Debentures will mature on
, 2017. Upon redemption of the Convertible Debentures at the
option of the Company, in whole or in part, at any time on or after
, 2000 (as described under "Description of the Convertible
Debentures -- Optional Redemption"), the Institutional Trustee shall
simultaneously use the proceeds from such redemption to redeem Trust Securities
with an aggregate liquidation amount equal to the aggregate principal amount of
the Convertible Debentures redeemed by the Company at the redemption prices
(expressed as a percentage of the liquidation amount) specified below for the
twelve month period commencing , in the year indicated
( , in the case of 2000):
<TABLE>
<CAPTION>
OPTIONAL
YEAR REDEMPTION PRICE
---------------------------------------------------------- ----------------
<S> <C>
2000...................................................... %
2001...................................................... %
2002...................................................... %
2003...................................................... %
2004...................................................... %
2005...................................................... %
2006...................................................... %
2007 and thereafter....................................... 100.00%
</TABLE>
plus, in each case, accrued and unpaid distributions (including distributions
with respect to Additional Interest and Compound Interest, if any, on the
corresponding Convertible Debentures so redeemed) to the date set for
redemption.
Upon the redemption of the Convertible Debentures by the Company, in whole
or in part, at any time in certain circumstances upon the occurrence of a Tax
Event described under "-- Special Event Redemption or Distribution," the
Institutional Trustee shall simultaneously use the proceeds from such redemption
to redeem Trust Securities with an aggregate liquidation amount equal to the
aggregate principal amount of the Convertible Debentures redeemed by the Company
at a redemption price equal to 100% of the liquidation amount thereof plus
accrued and unpaid distributions (including distributions with respect to
Additional Interest and Compound Interest, if any, on the corresponding
Convertible Debentures so redeemed) to the date set for redemption (subject to
the right of holders of the relevant record date to receive distributions due on
the applicable distribution payment date that is on or prior to the redemption
date).
Holders of the Trust Securities shall be given not less than 30 nor more
than 60 days' notice of any redemption. In the event that fewer than all of the
outstanding Preferred Securities are to be redeemed, the Preferred Securities
will be redeemed pro rata as described under "-- Book-Entry Only Issuance -- The
Depository Trust Company" below.
52
<PAGE> 55
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
As used herein, "Tax Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent tax counsel experienced
in such matters (a "Dissolution Tax Opinion") to the effect that as a result of
(a) any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the date of this Prospectus), in either
case after the date of this Prospectus, there is more than an insubstantial risk
that (i) the Trust would be subject to United States federal income tax with
respect to income accrued or received on the Convertible Debentures, (ii) the
Trust would be subject to more than a de minimis amount of other taxes, duties
or other governmental charges or (iii) interest payable by the Company to the
Trust on the Convertible Debentures would not be deductible, in whole or in
part, by the Company for United States federal income tax purposes.
As used herein, "Investment Company Event" means that the Regular Trustees
shall have received an opinion of a nationally recognized independent counsel
experienced in practicing under the Investment Company Act of 1940, as amended
(the "1940 Act"), to the effect that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk
that the Trust is or will be considered an "investment company" which is
required to be registered under the 1940 Act, which Change in 1940 Act Law
becomes effective on or after the date of this Prospectus.
If, at any time, a Tax Event or an Investment Company Event shall occur and
be continuing, the Trust shall, except in the limited circumstances described
below, be dissolved with the result that Convertible Debentures, with an
aggregate principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the distribution rate of, with accrued and
unpaid interest equal to accrued and unpaid distributions on, and having the
same record date for payment as, the Preferred Securities outstanding at such
time, would be distributed to the holders of the Trust Securities in liquidation
of such holders' interests in the Trust, on a pro rata basis within 90 days
following the occurrence of such Special Event; provided, however, that in the
case of the occurrence of a Tax Event, such dissolution and distribution shall
be conditioned on the Regular Trustees receipt of an opinion of nationally
recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on, among other things, published
revenue rulings of the Internal Revenue Service, to the effect that the holders
of the Preferred Securities will not recognize any gain or loss for United
States federal income tax purposes as a result of such dissolution and
distribution of Convertible Debentures; and, provided, further, that if at the
time there is available to the Company or the Trust the opportunity to
eliminate, within such 90-day period, the Special Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure that, in the sole judgment of the Company,
has or will cause no adverse effect on the Trust, the Company or the holders of
the Trust Securities, the Company or the Trust will pursue such measure in lieu
of dissolution. Furthermore, if in the case of the occurrence of a Tax Event,
(i) the Company has received an opinion (a "Redemption Tax Opinion") of
nationally recognized independent tax counsel experienced in such matters that,
as a result of such Tax Event, there is more than an insubstantial risk that the
Company would be precluded from deducting the interest on the Convertible
Debentures for United States federal income tax purposes, even after the
Convertible Debentures were distributed to the holders of Preferred Securities
in liquidation of such holders' interests in the Trust as described above, or
(ii) the Regular Trustees shall have been informed by such tax counsel that it
cannot deliver a No Recognition Opinion to the Regular Trustees, the Company
shall have the right, upon not less than 30 nor more than 60 days' notice to the
holders of the Preferred Securities, to redeem the Convertible Debentures, in
whole or in part, for cash within 90 days following the occurrence of such Tax
Event, and following such redemption, Preferred Securities with an aggregate
liquidation amount equal to the aggregate principal amount of Convertible
Debentures so redeemed shall be redeemed by the Trust at the Redemption Price on
a pro rata basis; provided, however, that if at the
53
<PAGE> 56
time there is available to the Company or the Trust the opportunity to
eliminate, within such 90-day period, the Tax Event by taking some ministerial
action, such as filing a form or making an election, or pursuing some other
similar reasonable measure that, in the sole judgment of the Company, will have
no adverse effect on the Trust, the Company or the holders of the Trust
Securities, the Company or the Trust will pursue such measure in lieu of
redemption.
If the Convertible Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to cause the
Convertible Debentures to be quoted on the NNM or on such other exchange as the
Preferred Securities are then listed.
After the date fixed for any distribution of Convertible Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be deemed
to be outstanding, (ii) the securities depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global certificate
or certificates representing the Convertible Debentures to be delivered to the
holders of the Preferred Securities upon such distribution and (iii) any
certificates representing Preferred Securities not held by the securities
depositary or its nominee will be deemed to represent Convertible Debentures
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and with
accrued and unpaid interest equal to accrued and unpaid distributions on, such
Preferred Securities until such certificates are presented to the Company or its
agent for transfer or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Convertible Debentures that may be distributed in exchange for
Trust Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, whether
pursuant to the offer made hereby or in the secondary market, or the Convertible
Debentures that the investor may receive if a dissolution and liquidation of the
Trust were to occur, may trade at a discount to the price the investor paid to
purchase Preferred Securities.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods occurring on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, if the Company has paid to
the Institutional Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Convertible Debentures by 12:00 noon New
York City time on the redemption date, the Preferred Securities represented by
the Global Certificates will irrevocably deposit (i) with DTC, funds sufficient
to pay the applicable Redemption Price on redemption of all Preferred Securities
represented by the Global Certificates and will give DTC irrevocable
instructions and authority to pay such amount in respect of Preferred Securities
represented by the Global Certificates (as defined herein) and (ii) with the
paying agent for the Preferred Securities, funds sufficient to pay such amount
in respect of any Certificated Securities and will give such paying agent
irrevocable instructions and authority to pay such amount to the holders of
Certificated Securities upon surrender of their certificates. If notice of
redemption shall have been given and funds are deposited as required, then
immediately prior to the close of business on the date of such deposit
distributions will cease to accrue and all rights of holders of Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the Redemption Price, but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
applicable Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust or
by the Company pursuant to the Guarantee, distributions on such Preferred
Securities will continue to accrue at the then applicable rate from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating the
Redemption Price.
54
<PAGE> 57
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed in accordance with
DTC's standard procedures. See "-- Book-Entry Only Issuance -- The Depository
Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made pro rata based on the liquidation
amount of the Trust Securities; provided, however, that, if on any distribution
date or redemption date a Declaration Event of Default shall have occurred and
be continuing, no payment of any distribution on, or amount payable upon
redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid distributions on
all outstanding Preferred Securities for all distribution periods terminating on
or prior thereto, or in the case of payment of the amount payable upon
redemption of the Preferred Securities, all of such amount in respect of all
outstanding Preferred Securities shall have been made or provided for, and all
funds available to the Institutional Trustee shall first be applied to the
payment in full in cash of all distributions on, or the amount payable upon
redemption of, Preferred Securities then due and payable.
In the case of any Declaration Event of Default, the holders of Common
Securities will be deemed to have waived any such Declaration Event of Default
with respect to the Common Securities until all such Declaration Events of
Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Declaration Events of Default with respect
to the Preferred Securities have been so cured, waived or otherwise eliminated,
the Institutional Trustee will act solely on behalf of the holders of the
Preferred Securities and not the holders of the Common Securities, and only the
holders of the Preferred Securities will have the right to direct the
Institutional Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each, a "Liquidation"), the holders of
the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $25 per
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Convertible Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, the Preferred Securities outstanding at
such time have been distributed on a pro rata basis to the holders of the
Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the holders of
the Common Securities shall not be permitted to receive such distributions until
such Declaration Event of Default has been cured.
Pursuant to the Declaration, the Trust shall terminate (i) upon the
bankruptcy of the Company or the holder of the Common Securities; (ii) upon the
filing of a certificate of dissolution or its equivalent with respect to the
holder of the Common Securities or the Company, the filing of a certificate of
cancellation with respect to the Trust after having obtained the consent of at
least a majority in liquidation amount of the Trust Securities, voting together
as a single class, to file such certificate of cancellation, or the revocation
of the charter of the Company or the holder of the Common Securities and the
expiration of 90 days after the date of
55
<PAGE> 58
revocation without a reinstatement thereof; (iii) upon the entry of a decree of
judicial dissolution of the holder of the Common Securities, the Company or the
Trust; (iv) when all of the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
Additional Interest, shall have been paid to the holders thereof in accordance
with the terms of the Trust Securities; (v) upon the distribution of Convertible
Debentures upon the occurrence of a Special Event; or (vi) the expiration of the
term of the Trust.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Institutional Trustee will be deemed to be acting solely on
behalf of the holders of the Preferred Securities, and only the holders of the
Preferred Securities will have the right to direct the Institutional Trustee
with respect to certain matters under the Declaration and, therefore, the
Indenture. In the event any Declaration Event of Default with respect to the
Preferred Securities is waived by the holders of the Preferred Securities as
provided in the Declaration, the holders of Common Securities pursuant to the
Declaration have agreed that such waiver also constitutes a waiver of such
Declaration Event of Default with respect to the Common Securities for all
purposes under the Declaration without any further act, vote or consent of the
holders of Common Securities. See "-- Voting Rights." The Institutional Trustee
shall notify all holders of the Preferred Securities of any notice of default
received from the Indenture Trustee with respect to the Convertible Debentures.
Such notice shall state that such Indenture Event of Default also constitutes a
Declaration Event of Default.
If the Institutional Trustee fails to enforce its rights under the
Convertible Debentures, to the fullest extent permitted by law, any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. If a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, the redemption date), then a holder of Preferred
Securities may also directly institute a proceeding for enforcement of payment
to such holder of the principal of or interest on the Convertible Debentures
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures without first (i) directing the
Institutional Trustee to enforce the terms of the Convertible Debentures or (ii)
instituting a legal proceeding against the Company to enforce the Institutional
Trustee's rights under the Convertible Debentures. In connection with such
Direct Action, the Company will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of any payment made by
the Company to such holder of Preferred Securities in such Direct Action.
Consequently, the Company will be entitled to payment of amounts that a holder
of Preferred Securities receives in respect of an unpaid distribution that
resulted in the bringing of a Direct Action to the extent that such holder
receives or has already received full payment with respect to such unpaid
distribution from the Trust. The holders of Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Convertible Debentures.
Upon the occurrence of an Indenture Event of Default, the Institutional
Trustee as the sole holder of the Convertible Debentures will have the right
under the Indenture to declare the principal of and interest on the Convertible
Debentures to be immediately due and payable. The Company and the Trust are each
required to file annually with the Institutional Trustee an officers'
certificate as to its compliance with all conditions and covenants under the
Declaration.
56
<PAGE> 59
VOTING RIGHTS
Except as described in this Prospectus under "Description of the Guarantee
- -- Modification of the Guarantee; Assignment," and except as provided under the
Trust Act and the Trust Indenture Act and as otherwise required by law and the
Declaration, the holders of the Preferred Securities will have no voting rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration, including the right to direct the Institutional
Trustee, as holder of the Convertible Debentures, to (i) direct the time, method
and place of conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture Trustee
with respect to the Convertible Debentures, (ii) waive any past Indenture Event
of Default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Convertible
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Convertible Debentures where
such consent shall be required; provided, however, that where a consent or
action under the Indenture would require the consent or act of the holders of
more than a majority in principal amount of Convertible Debentures (a "Super
Majority") affected thereby, only the holders of at least such Super Majority in
aggregate liquidation amount of the Preferred Securities may direct the
Institutional Trustee to give such consent or take such action. If the
Institutional Trustee fails to enforce its rights under the Convertible
Debentures, any record holder of Preferred Securities may directly institute a
legal proceeding against the Company to enforce the Institutional Trustee's
rights under the Convertible Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity. The
Institutional Trustee shall notify all holders of the Preferred Securities of
any notice of default received from the Indenture Trustee with respect to the
Convertible Debentures. Such notice shall state that such Indenture Event of
Default also constitutes a Declaration Event of Default. Except with respect to
directing the time, method and place of conducting a proceeding for a remedy
available to the Institutional Trustee, the Institutional Trustee, as holder of
the Convertible Debentures, shall not take any of the actions described in
clauses (i), (ii), (iii) or (iv) above unless the Institutional Trustee has
obtained an opinion of independent tax counsel experienced in such matters to
the effect that as a result of such action, the Trust will not fail to be
classified as a grantor trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the written direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a majority in liquidation amount of the Trust Securities voting together as a
single class; provided, however, that where any amendment, modification or
termination under the Indenture would require the consent of a Super Majority,
the Institutional Trustee may only give such consent at the direction of the
holders of at least the proportion in aggregate stated liquidation amount of the
Trust Securities which the relevant Super Majority represents of the aggregate
principal amount of the Convertible Debentures outstanding. The Institutional
Trustee shall be under no obligation to take any such action in accordance with
the direction of the holders of the Trust Securities unless the Institutional
Trustee has obtained an opinion of a nationally recognized independent tax
counsel experienced in such matters to the effect that for United States federal
income tax purposes the Trust will not be classified as other than a grantor
trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of
57
<PAGE> 60
such holders is to be taken, to be mailed to each holder of record of Preferred
Securities. Each such notice will include a statement setting forth the
following information: (i) the date of such meeting or the date by which such
action is to be taken; (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of Preferred
Securities will be required for the Trust to redeem and cancel Preferred
Securities or distribute Convertible Debentures in accordance with the
Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities represented by the
Global Certificates may exercise their voting rights are described below. See
"-- Book-Entry Only Issuance -- The Depository Trust Company."
Holders of the Preferred Securities will have no right to appoint or remove
any of the Trustees, who may be appointed, removed or replaced solely by the
Company as the holder of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and, in certain circumstances, the Institutional Trustee and the
Delaware Trustee), provided, that if any proposed amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the holders of the
Trust Securities, whether by way of amendment to the Declaration or otherwise or
(ii) the dissolution, winding-up or termination of the Trust other than pursuant
to the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of holders of at least a majority in liquidation amount of the Trust
Securities affected thereby; provided, that if any amendment or proposal
referred to in clause (i) above would adversely affect only the Preferred
Securities or the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a majority in liquidation
amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for United States federal income tax purposes as other than a
grantor trust, (ii) reduce or otherwise adversely affect the powers of the
Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" that is required to be registered under the 1940 Act.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below or as otherwise set forth in the Declaration. The Trust may,
with the consent of the Regular Trustees and without the consent of the holders
of the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State provided, that
(i) such successor entity either (x) expressly assumes all of the obligations of
the Trust under the Trust Securities or (y) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities"), so long as the Successor Securities
rank the same as the Preferred Securities rank with respect to distributions,
assets and payments upon liquidation, redemption and otherwise, (ii) the Company
expressly acknowledges a trustee of such successor entity possessing the same
powers and duties as the Institutional Trustee, in its capacity as the holder of
the Convertible Debentures, (iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of
58
<PAGE> 61
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect (other than with respect to
any dilution of the holders' interest in the new entity), (vi) such successor
entity has a purpose substantially identical to that of the Trust, (vii) the
Company guarantees the obligations of such successor entity under the Successor
Securities to the same extent as provided by the Guarantee and (viii) prior to
such merger, consolidation, amalgamation or replacement, the Company has
received an opinion of a nationally recognized independent counsel to the Trust
and experienced in such matters to the effect that: (A) such merger,
consolidation, amalgamation or replacement will not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity) and (B) following such
merger, consolidation, amalgamation or replacement, neither the Trust nor such
successor entity will be required to register as an "investment company" under
the 1940 Act. Notwithstanding the foregoing, the Trust shall not, except with
the consent of holders of 100% in liquidation amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if, in the opinion of a nationally recognized independent tax
counsel experienced in such matters, such consolidation, amalgamation, merger or
replacement would cause the Trust or the successor entity to be classified as
other than a grantor trust for United States federal income tax purposes. In
addition, so long as any Preferred Securities remain outstanding and are not
held entirely by the Company, the Trust may not voluntarily liquidate, dissolve,
wind-up or terminate except as described above under "-- Special Event
Redemption or Distribution."
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities certificates
(the "Global Certificates"), representing the total aggregate number of
Preferred Securities, will be issued and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Preferred
Securities as represented by a Global Certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
in DTC include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations (the "Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. (the "NASD"). Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct
and
59
<PAGE> 62
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written conformations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owners purchased Preferred Securities. Transfers of
ownership interests in the Preferred Securities are to be accomplished by
entries made on the books of Direct Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in the Preferred Securities, except in the event that use of
the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all Preferred Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to the Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distributions on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants and Indirect Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"Street name," and such payments will be the responsibility of such Participants
and not of DTC, the Trust or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of distributions to
DTC is the responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with the consent of
the Company) may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
60
<PAGE> 63
The information in this Section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with
respect to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such a default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his own affairs. Subject to such provisions, the Institutional
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. Notwithstanding the foregoing, the holders of
Preferred Securities will not be required to offer such indemnity in the event
such holders, by exercising their voting rights, direct the Institutional
Trustee to take any action following a Declaration Event of Default.
PAYING AGENT
Payments in respect of the Preferred Securities represented by the Global
Certificates will be made to DTC, which will credit the relevant accounts at DTC
on the applicable distribution dates or, in the case of Certificated Securities,
such payments shall be made by check mailed to the address of the holder
entitled thereto as such address shall appear on the Register. The Paying Agent
initially will be the Institutional Trustee. The Paying Agent will be permitted
to resign as Paying Agent upon 30 days' written notice to the Trustees. In the
event that the Institutional Trustee will no longer be the Paying Agent, the
Regular Trustees shall appoint a successor to act as Paying Agent (which shall
be a bank or trust company).
REGISTRAR, TRANSFER AGENT AND CONVERSION AGENT
The Institutional Trustee will act as Registrar, Transfer Agent and
Conversion Agent for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes. In this connection,
the Company and the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Declaration
that each of the Company and the Regular Trustees determine in their discretion
to be necessary or desirable for such purposes as long as such action does not
materially adversely affect the interests of the holders of the Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
61
<PAGE> 64
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture (the "Indenture") between the Company and Bankers Trust Company,
as trustee (the "Indenture Trustee"), the form of which is filed as an exhibit
to the Registration Statement of which this Prospectus is a part. Certain
capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Convertible Debentures may be
distributed to the holders of the Trust Securities in liquidation of the Trust.
See "Description of the Preferred Securities -- Special Event Redemption or
Distribution."
If the Convertible Debentures are distributed to the holders of Preferred
Securities, the Company will use its best efforts to have the Convertible
Debentures quoted on the NNM or on any national securities exchange or similar
organization on which the Preferred Securities are then listed or quoted (as
defined herein).
GENERAL
The Convertible Debentures will be issued as unsecured debt under the
Indenture. The Convertible Debentures will be limited in aggregate principal
amount to $50 million ($57.5 million if the Underwriters' over-allotment option
is exercised in full), such amount being the sum of the aggregate stated
liquidation amount of the Preferred Securities and the Common Securities.
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will mature and become due
and payable, together with any accrued and unpaid interest thereon, including
Compound Interest (as defined herein) and Additional Interest (as defined
herein), if any, on , 2017.
If Convertible Debentures are distributed to holders of Preferred
Securities in liquidation of such holder's interest in the Trust, such
Convertible Debentures will initially be issued in the form of one or more
Global Securities (as defined herein under "-- Book-Entry and Settlement"
below). As described herein under certain limited circumstances, Convertible
Debentures may be issued in certificated form in exchange for a Global Security.
In the event that Convertible Debentures are issued in certificated form, such
Convertible Debentures will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Convertible Debentures issued as a Global Security will be made to
DTC, a successor depositary or, in the event that no depositary is used, to a
Paying Agent for the Convertible Debentures. In the event Convertible Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Convertible Debentures will be registrable and Convertible
Debentures will be exchangeable for Convertible Debentures of other
denominations of a like aggregate principal amount at the corporate trust office
of the Indenture Trustee in New York, New York; provided, that payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto.
There are no covenants or provisions in the Indenture that afford holders
of Convertible Debentures protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect such holders.
SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinate and
junior in right of payment to all existing and future Senior Indebtedness of the
Company. No payment of principal (including redemption payments), premium, if
any, or interest (including Additional Interest and Compound Interest) on, the
Convertible Debentures may be made if (i) any Senior Indebtedness of the Company
has not been paid when due and any applicable grace period with respect to such
default has ended and such default has not been cured or waived, or ceased to
exist or (ii) the maturity of any Senior Indebtedness of the Company has been
accelerated because of a default. At September 30, 1996, after giving effect to
the application of the net proceeds of the Offering, Senior Indebtedness of the
Company aggregated approximately $272 million. Upon any distribution of assets
of the Company to creditors upon any dissolution, winding up, liquidation or
62
<PAGE> 65
reorganization, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due on, all Senior Indebtedness of the Company must be
paid in full before the holders of the Convertible Debentures are entitled to
receive or retain any payment. Upon satisfaction of all claims related to all
Senior Indebtedness of the Company then outstanding, the rights of the holders
of the Convertible Debentures will be subrogated to the rights of the holders of
Senior Indebtedness of the Company to receive payments or distributions
applicable to Senior Indebtedness until all amounts owing on the Convertible
Debentures are paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities, notes,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations in respect of
interest rate swap, cap or other similar agreements, interest rate future or
option contracts, currency swap agreements, currency future or option contracts
and other similar agreements, (vi) all obligations of the type referred to in
clauses (i) through (v) above of other persons for the payment of which such
obligor is responsible or liable as obligor, guarantor or otherwise, and (vii)
all obligations of the type referred to in clauses (i) through (vi) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Convertible Debentures and (2) any indebtedness between or among such obligor or
its affiliates, including all other debt securities and guarantees in respect of
those debt securities, issued to (a) the Trust or a trustee of such trust and
(b) any other trust, or a trustee of such trust, partnership or other entity
affiliated with the Company that is a financing vehicle of the Company (a
"financing entity") in connection with the issuance by such financing entity of
preferred securities or other securities that rank pari passu with, or junior
to, the Preferred Securities. Such Senior Indebtedness shall continue to be
Senior Indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.
In addition, a substantial portion of the Company's operations is conducted
through its subsidiaries. At September 30, 1996, indebtedness and other
liabilities of such subsidiaries aggregated, after giving effect to the
application of the net proceeds of the Offering, approximately $369 million
(including the $272 million referred to above), which liabilities are
effectively senior to the Convertible Debentures. See "Capitalization."
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Convertible Debentures, in
whole or in part, from time to time on or after , 2000, at the
redemption prices (expressed as a percentage of principal amount) specified
below (the "Redemption Prices") for the twelve month period commencing
, in the year indicated ( , in the case of 2000):
<TABLE>
<CAPTION>
OPTIONAL
YEAR REDEMPTION PRICE
--------------------------------------------------------------- ----------------
<S> <C>
2000........................................................... %
2001........................................................... %
2002........................................................... %
2003........................................................... %
2004........................................................... %
2005........................................................... %
2006........................................................... %
2007 and thereafter............................................ 100.00%
</TABLE>
plus, in each case, accrued and unpaid interest, including Additional Interest
and Compound Interest, if any, to the date set for redemption.
63
<PAGE> 66
The Company may also redeem the Convertible Debentures, in whole or in
part, at any time in certain circumstances upon the occurrence of a Tax Event as
described under "Description of the Preferred Securities -- Special Event
Redemption or Distribution" at a redemption price equal to 100% of the principal
amount to be redeemed plus accrued and unpaid interest, including Additional
Interest and Compound Interest, if any, to the date set for redemption (subject
to the right of holders of record on the relevant record date to receive
interest due on an Interest Payment Date that is on or prior to the redemption
date).
If a partial redemption of the Preferred Securities resulting from a
partial redemption of the Convertible Debentures would result in the delisting
of the Preferred Securities, the Company may only redeem Convertible Debentures
in whole.
PROPOSED TAX LEGISLATION
On March 19, 1996, the U.S. Treasury Department proposed certain tax law
changes (the "Proposed Legislation") that would, among other things, generally
deny corporate issuers a deduction for interest in respect of certain debt
obligations, with a maximum term of more than 20 years, that are not shown as
indebtedness on the consolidated balance sheet of the issuer. The Convertible
Debentures have a maximum term of 20 years, and therefore would not be adversely
affected by passage of the Proposed Legislation, even if the Proposed
Legislation has a retroactive effective date. However, there can be no assurance
that any Proposed Legislation, if enacted, would not apply to debt obligations
with a term of 20 or fewer years, including the Convertible Debentures.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr.
and House Ways and Means Committee Chairman Bill Archer issued a joint statement
(the "Joint Statement") indicating their intent that the Proposed Legislation,
if adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the
Convertible Debentures because they will be issued prior to the date of any
"appropriate Congressional action." There can be no assurance, however, that any
proposed legislation enacted after the date hereof will not otherwise adversely
affect the ability of the Company to deduct the interest payable on the
Convertible Debentures. Accordingly, there can be no assurance that a Tax Event
will not occur. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution."
INTEREST
Each Convertible Debenture will bear interest at the rate of % per annum
from the original date of issuance, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 (each, an "Interest Payment Date"),
commencing March 31, 1997, to the person in whose name such Convertible
Debenture is registered, subject to certain exceptions, at the close of business
on the March 15, June 15, September 15 and December 15, as the case may be, next
preceding such Interest Payment Date. In the event the Convertible Debentures
shall not continue to remain in book-entry only form, the Company shall have the
right to select record dates, which shall be more than 14 days but less than 60
days prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed. In the event
that any date on which interest is payable on the Convertible Debentures is not
a Business Day, then payment of the interest payable on such date will be made
on the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, then such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
INTEREST INCOME AND OPTION TO EXTEND INTEREST PAYMENT PERIODS
The Company shall have the right at any time, and from time to time, during
the term of the Convertible Debentures, to defer payments of interest by
extending the interest payment period for a period not exceeding 20 consecutive
quarters; provided, that no Extension Period may extend beyond the maturity of
the
64
<PAGE> 67
Convertible Debentures, and at the end of which Extension Period the Company
shall pay all interest then accrued and unpaid (including any Additional
Interest) together with interest thereon compounded quarterly at the rate
specified for the Convertible Debentures to the extent permitted by applicable
law ("Compound Interest"); provided, further, that during any such Extension
Period, (a) the Company shall not declare or pay dividends on, or make any
distributions or liquidation payments with respect to, or redeem, purchase or
acquire any of its capital stock (other than (i) purchases or acquisitions of
shares of Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of the Common Stock, (ii) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock, (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged or (iv) stock
dividends paid by the Company where the dividend stock is the same stock as that
on which the dividend is paid), (b) the Company shall not make any payment of
interest on or principal of (or premium, if any, on) or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company which
rank pari passu with or junior to the Convertible Debentures and (c) the Company
shall not make any guarantee payments with respect to the foregoing (other than
pursuant to the Guarantee). Prior to the termination of any such Extension
Period, the Company may further extend such Extension Period; provided, that
such Extension Period together with all previous and further extensions thereof
may not exceed 20 consecutive quarters; and provided further that no Extension
Period may extend beyond the maturity date of the Convertible Debentures. Upon
the termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension Period.
The Company has no current intention of exercising its right to defer payments
of interest by extending the interest payment period on the Convertible
Debentures. If the Institutional Trustee shall be the sole holder of the
Convertible Debentures, the Company shall give the Regular Trustees and the
Institutional Trustee notice of its selection of such Extension Period at least
one Business Day prior to the earlier of (i) the date the distributions on the
Preferred Securities would be payable, if not for such Extension Period or (ii)
the date the Regular Trustees are required to give notice to the NNM (or any
applicable self-regulatory organization) or to holders of the Preferred
Securities of the record date or the date such distribution would be payable if
not for such Extension Period, but in any event not less than one Business Day
prior to such record date. The Regular Trustees shall give notice of the
Company's selection of such Extension Period to the holders of the Preferred
Securities. If the Institutional Trustee shall not be the sole holder of the
Convertible Debentures, the Company shall give the holders of the Convertible
Debentures notice of its selection of such Extension Period at least ten
Business Days prior to the earlier of (i) the next succeeding Interest Payment
Date or (ii) the date upon which the Company is required to give notice to the
NNM (or any applicable self-regulatory organization) or to holders of the
Convertible Debentures on the record or payment date of such related interest
payment.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
on the Convertible Debentures such additional amounts as shall be required so
that the net amounts received and retained by the Trust after paying any such
taxes, duties, assessments or governmental charges will be not less than the
amounts the Trust would have received had no such taxes, duties, assessments or
governmental charges been imposed.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures will be convertible into Common Stock at the option
of the holders of the Convertible Debentures at any time on or after
, 1997 (60 days after the date of issue) and prior to 5:00 P.M.
(New York City time) on the Business Day immediately preceding the date of
repayment of such Convertible Debentures, whether at maturity or upon redemption
(either at the option of the Company
65
<PAGE> 68
or pursuant to a Tax Event), at the initial conversion price set forth on the
cover page of this Prospectus subject to the conversion price adjustments
described under "Description of the Preferred Securities -- Conversion Rights."
The Trust will covenant not to convert Convertible Debentures held by it except
pursuant to a notice of conversion delivered to the Conversion Agent by a holder
of Preferred Securities. Upon surrender of a Preferred Security to the
Conversion Agent for conversion, the Trust will distribute $25 principal amount
of the Convertible Debentures per Preferred Security to the Conversion Agent on
behalf of the holder of the Preferred Securities so converted whereupon the
Conversion Agent will convert such Convertible Debentures to Common Stock on
behalf of such holder. The Company's delivery to the holders of the Convertible
Debentures (through the Conversion Agent) of the fixed number of shares of
Common Stock into which the Convertible Debentures are convertible (together
with the cash payment, if any, in lieu of fractional shares) will be deemed to
satisfy the Company's obligation to pay the principal amount of the Convertible
Debentures so converted, and the accrued and unpaid interest thereon
attributable to the period from the last date to which interest has been paid or
duly provided for; provided, however, that if any Convertible Debenture is
converted after a record date for payment of interest, the interest payable on
the related interest payment date with respect to such Convertible Debenture
shall be paid to the Trust (which will distribute such interest to the holder of
such Preferred Security on the record date) or other holder of Convertible
Debentures, as the case may be, despite such conversion; provided, further that
if any Convertible Debentures are delivered for conversion during an Extension
Period by a holder after receiving a notice of redemption from the Institutional
Trustee, the Company shall be required to pay to the Trust all accrued and
unpaid interest, if any, on such Convertible Debentures through the date of
conversion which amount shall be simultaneously distributed to the holders of
the Preferred Securities in respect of which such Convertible Debentures were
delivered. See "-- Optional Redemption," "Description of the Preferred
Securities -- Conversion Rights" and "-- Mandatory Redemption."
CERTAIN COVENANTS
In the Indenture, so long as any Convertible Debentures are outstanding, if (i)
there shall have occurred and be continuing any event that with the giving of
notice or the lapse of time or both, would constitute an Indenture Event of
Default, (ii) the Company shall be in default with respect to its payment of any
obligations under the Guarantee, or (iii) the Company has exercised its option
to defer interest payments on the Convertible Debentures by extending the
interest payment period and such period, or any extension thereof, shall be
continuing, then (a) the Company shall not declare or pay dividends on, or make
any distributions or liquidation payments with respect to, or redeem, purchase
or acquire any of its capital stock (other than (i) purchases or acquisitions of
shares of Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of the Common Stock, (ii) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock, (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged or (iv) stock
dividends paid by the Company where the dividend stock is the same stock as that
on which the dividend is paid), (b) the Company shall not make any payment of
interest on or principal of (or premium, if any, on) or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company which
rank pari passu with or junior to the Convertible Debentures and (c) the Company
shall not make any guarantee payments with respect to the foregoing (other than
pursuant to the Guarantee).
The Company will covenant (i) to directly or indirectly maintain 100%
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities and (ii) to use its reasonable
efforts to cause the Trust (x) to remain a statutory business trust, except in
connection with the distribution of Convertible Debentures to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamation,
each as permitted by the Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States federal income tax purposes.
66
<PAGE> 69
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other corporation or convey, transfer or lease its assets substantially
as an entirety unless (a) if the Company is not the survivor, the successor is a
corporation organized under the laws of a State of the United States and
expressly assumes the due and punctual payment of the principal of (and premium,
if any) and interest on all Convertible Debentures issued thereunder and the
performance of every other covenant of the Indenture on the part of the Company
and (b) immediately thereafter no event of default under the Indenture and no
event which, after notice or lapse of time, or both, would become an event of
default under the Indenture, shall have occurred and be continuing. Upon any
such consolidation, merger, conveyance or transfer, the successor corporation
shall succeed to and be substituted for the Company under the Indenture and
thereafter the predecessor corporation shall be relieved of all obligations and
covenants under the Indenture and the Convertible Debentures.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Indenture Event of
Default" with respect to the Convertible Debentures: (i) failure for 30 days to
pay interest on the Convertible Debentures, including any Additional Interest
and Compound Interest in respect thereof, when due provided that a valid
extension of an interest payment period will not constitute a default in the
payment of interest (including any Additional Interest and Compound Interest)
for this purpose; or (ii) failure to pay principal of or premium, if any, on the
Convertible Debentures when due whether at maturity, upon redemption, by
declaration or otherwise; or (iii) failure to observe or perform any other
covenant contained in the Indenture for 90 days after notice to the Company by
the Indenture Trustee or by the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Debentures; or (iv) failure by
the Company to deliver shares of Common Stock upon an election by a holder of
Preferred Securities to convert such Preferred Securities; or (v) the
dissolution, winding up or termination of the Trust, except in connection with
the distribution of Convertible Debentures to the holders of Preferred
Securities in liquidation of the Trust, upon the redemption of all outstanding
Preferred Securities in connection with certain mergers, consolidations or
amalgamation permitted by the Declaration; or (vi) certain events of bankruptcy,
insolvency or reorganization of the Company.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Debentures may declare the
principal of and interest on the Convertible Debentures due and payable
immediately on the occurrence of an Indenture Event of Default; provided,
however, that, after such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of
outstanding Convertible Debentures may, under certain circumstances, rescind and
annul such acceleration if all Indenture Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived as provided in
the Indenture. For information as to waiver of defaults, see "-- Modifications
and Amendments of the Indenture."
Notwithstanding the foregoing, if an Indenture Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible Debentures on the date
such interest or principal is otherwise payable, the Company acknowledges that,
in such event, a holder of Preferred Securities may institute a Direct Action
for payment on or after the respective due date specified in the Convertible
Debentures. The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of all the
holders of Preferred Securities. Notwithstanding any payment made to such holder
of Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of or interest of the Trust
on the Convertible Debentures held by the Trust or the Institutional Trustee,
and the Company shall be subrogated to the rights of the holder of such
Preferred Securities with respect to payments on the Preferred Securities to the
extent of any payments made by the Company to such holder in any Direct Action.
The holders of Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Convertible Debentures.
The Holders of not less than a majority in principal amount of the
outstanding Convertible Debentures may on behalf of the holders of all the
Convertible Debentures waive any past defaults except (a) a default in
67
<PAGE> 70
payment of the principal of (or premium, if any) or interest (including
Additional Interest and Compound Interest) on any Convertible Debentures and (b)
a default in respect of a covenant or provision of the Indenture which cannot be
amended or modified without the consent of the holder of each Convertible
Debenture; provided, however, that if the Convertible Debentures are held by the
Trust or a trustee of such Trust, such waiver or modification to such waiver
shall not be effective until the holders of a majority in liquidation amount of
Trust Securities shall have consented to such waiver or modification to such
waiver; provided, further, that if the consent of the holder of each outstanding
Convertible Debenture is required, such waiver shall not be effective until each
holder of the Trust Securities shall have consented to such waiver.
A default under any other indebtedness of the Company would not constitute
an Indenture Event of Default.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, in case an Indenture Event of Default shall occur and be
continuing, the Indenture Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any
holders of Convertible Debentures, unless such holders shall have offered to the
Indenture Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Indenture Trustee, the holders of a majority in aggregate
principal amount of the Convertible Debentures then outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or exercising any trust or power
conferred on the Indenture Trustee with respect to such series.
No holder of any Convertible Debenture will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
(i) such holder shall have previously given to the Indenture Trustee written
notice of a continuing Indenture Event of Default, (ii) if the Trust is not the
sole holder of Convertible Debentures, the holders of at least 25% in aggregate
principal amount of the Convertible Debentures then outstanding shall also have
made a written request, (iii) such holder has offered reasonable indemnity to
the Indenture Trustee to institute such proceeding as Indenture Trustee, (iv)
the Indenture Trustee shall have failed to institute such proceeding within 60
days of such notice, and (v) the Indenture Trustee shall not have received from
the holders of a majority in aggregate principal amount of the outstanding
Convertible Debentures a direction inconsistent with such request. However, such
limitations do not apply to a suit instituted by a holder of a Convertible
Debenture for enforcement of payment of the principal of or interest on such
Convertible Debenture on or after the respective due dates expressed in such
Convertible Debenture.
The Company is required to file annually with the Indenture Trustee and the
Institutional Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Convertible Debentures, to modify
the Indenture or the rights of the holders of Convertible Debentures; provided,
however, that no such modification may, without the consent of the holder of
each outstanding Convertible Debenture affected thereby, (i) extend the stated
maturity of the Convertible Debentures or reduce the principal amount thereof,
or reduce the rate or extend the time of payment of interest thereon, or
adversely affect the right to convert Convertible Debentures or the
subordination provisions of the Indenture, or (ii) reduce the percentage in
aggregate principal amount of outstanding Convertible Debentures, the holders of
which are required to consent to any such supplemental indenture.
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Convertible Debentures, any supplemental indenture to
cure any ambiguities, comply with the Trust Indenture Act and for certain other
customary purposes.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust as
a result of the occurrence of a Special Event, the
68
<PAGE> 71
Convertible Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the depositary
or its nominee. Except under the limited circumstances described below,
Convertible Debentures represented by a Global Security will not be exchangeable
for, and will not otherwise be issuable as, Convertible Debentures in definitive
form. The Global Securities described above may not be transferred except by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or to a successor depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Convertible
Debentures in definitive form and will not be considered the holders thereof for
any purpose under the Indenture, and no Global Security representing Convertible
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
beneficial owner must rely on the procedures of the depositary or if such person
is not a Participant, on the procedures of the Participant through which such
person owns its interest to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Convertible Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interest in the Trust, DTC will act
as securities depositary for the Convertible Debentures. For a description of
DTC and the specific terms of the depositary arrangements, see "Description of
the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company." As of the date of this Prospectus, the description therein of DTC's
book-entry system and DTC's practices as they relate to purchases, transfers,
notices and payments with respect to the Preferred Securities apply in all
material respects to any debt obligations represented by one or more Global
Securities held by DTC. The Company may appoint a successor to DTC or any
successor depositary in the event DTC or such successor depositary is unable or
unwilling to continue as a depositary for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture 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 a Global Security
for such Convertible Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than the depositary or its nominee only
if (i) the depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed, (iii) the Company, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Indenture Event of Default with respect to such
Convertible Debentures. Any Global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for Convertible Debentures registered
in such names as the depositary shall direct. It is expected that such
instructions will be based upon directions received by the depositary from its
Participants with respect to ownership of beneficial interests in such Global
Security.
GOVERNING LAW
The Indenture and the Convertible Debentures will be governed by, and
construed in accordance with, the internal laws of the State of New York.
69
<PAGE> 72
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Convertible Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
The Indenture will provide that the Company will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Convertible
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the Preferred Securities.
70
<PAGE> 73
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities. The summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the Guarantee, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Guarantee
incorporates by reference the terms of the Trust Indenture Act. The Guarantee
will be qualified under the Trust Indenture Act. Bankers Trust Company, as the
Guarantee Trustee, will hold the Guarantee for the benefit of the holders of the
Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company will
irrevocably and unconditionally agree to pay in full to the holders of the
Preferred Securities (except to the extent paid by such Trust), as and when due,
regardless of any defense, right of set off or counterclaim which the Trust may
have or assert, the following payments (the "Guarantee Payments"), without
duplication: (i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities, to the extent the Trust has funds available
therefor, (ii) the Redemption Price with respect to any Preferred Securities
called for redemption by the Trust, to the extent the Trust has funds available
therefor and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Convertible Debentures to the holders of Preferred Securities or the redemption
of all the Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Preferred
Securities to the date of payment and (b) the amount of assets of the Trust
remaining available for distribution to holders of Preferred Securities upon the
liquidation of the Trust. The Company's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amount by the Company to the
holders of Preferred Securities or by causing the Trust to pay such amounts to
such holders.
The Guarantee will be a guarantee on a subordinated basis with respect to
the Preferred Securities from the time of issuance of such Preferred Securities
but will not apply to any payment of distributions or Redemption Price, or to
payments upon the dissolution, winding-up or termination of the Trust, except to
the extent the Trust shall have funds available therefor. If the Company does
not make interest payments on the Convertible Debentures, the Trust will not pay
distributions on the Preferred Securities and will not have funds available
therefor. See "Description of the Convertible Debentures." The Guarantee, when
taken together with the Company's obligations under the Convertible Debentures,
the Indenture and the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Preferred Securities.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that so long as any Preferred
Securities remain outstanding, if (i) the Company has exercised its option to
defer interest payments on the Convertible Debentures by extending the interest
payment period and such extension shall be continuing, (ii) the Company shall be
in default with respect to its payment or other obligations under the Guarantee
or (iii) there shall have occurred and be continuing any event that, with the
giving of notice or the lapse of time or both, would constitute an Indenture
Event of Default, then the Company has agreed (a) not to declare or pay
dividends on, or make a distribution with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase shares of
Common Stock, (ii) as a result of a reclassification of the Company's capital
stock or the exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock or
(iii) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged), (b) not to make any payment of
interest, principal or premium, if
71
<PAGE> 74
any, on or repay, repurchase or redeem any debt securities of the Company
(including guarantees) that rank pari passu with or junior to the Convertible
Debentures and (c) not to make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee).
As part of the Guarantee, the Company will agree that it will honor all
obligations described therein relating to the conversion of the Preferred
Securities into Common Stock as described in "Description of the Preferred
Securities -- Conversion Rights."
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of at least a majority in aggregate liquidation amount of all the
outstanding Preferred Securities. All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding. Except in connection with any
permitted merger or consolidation of the Company with or into another entity or
any permitted sale, transfer or lease of the Company's assets to another entity
as described under "Description of the Convertible Debentures -- Consolidation,
Merger and Sale of Assets," the Company may not assign its rights or delegate
its obligations under the Guarantee without the prior approval of the holders of
at least a majority of the aggregate stated liquidation amount of the Preferred
Securities then outstanding. All guarantees and agreements contained in the
Guarantee shall bind the permitted successors, assigns and transferees of the
Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
EVENTS OF DEFAULT
An Event of Default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce
the Guarantee Trustee's rights under the Guarantee, any holder of related
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity. A holder of Preferred Securities may also directly
institute a legal proceeding against the Company to enforce such holder's right
to receive payment under the Guarantee without first (i) directing the Guarantee
Trustee to enforce the terms of the Guarantee or (ii) instituting a legal
proceeding against the Trust or any other person or entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with
respect to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of his
own affairs. Subject to such provisions, the Institutional Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The holders of Preferred Securities will not be required to
offer such indemnity in the event such holders, by exercising their voting
rights, direct the Institutional Trustee to take any action following a
Declaration Event of Default.
72
<PAGE> 75
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the Preferred Securities upon (i) full
payment of the Redemption Price of all Preferred Securities; or (ii)
distribution of the Convertible Debentures held by the Trust to the holders of
the Preferred Securities; or (iii) liquidation of the Trust; or (iv)
distribution of Common Stock to such holder in respect of conversion of such
holder's Preferred Securities into Common Stock. The Guarantee also will
terminate completely upon full payment of the amounts payable in accordance with
the Declaration. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sum paid under such Preferred Securities
or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior to all other liabilities of the Company
except any liabilities that may be pari passu expressly by their terms, (ii)
pari passu with the most senior preferred or preference stock, if any, issued
from time to time by the Company and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock or preferred
securities of any affiliate of the Company and (iii) senior to the Common Stock.
The terms of the Preferred Securities provide that each holder of Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may directly institute a legal proceeding against
the Company to enforce its rights under a Guarantee without instituting a legal
proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
73
<PAGE> 76
EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the
Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors: (i)
the aggregate principal amount of Convertible Debentures will be equal to the
sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and the interest and other payment dates on the Convertible
Debentures will match the distribution rate and distribution and other payment
dates for the Preferred Securities; (iii) pursuant to the Indenture, the Company
shall pay all, and the Trust shall not be obligated to pay, directly or
indirectly, any, costs, expenses, debts and liabilities of the Trust other than
with respect to the Trust Securities; and (iv) the Declaration further provides
that the Trustees will not cause or permit the Trust to, among other things,
engage in any activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." If the Company does not make interest payments
on the Convertible Debentures purchased by the Trust, it is expected that the
Trust will not have sufficient funds to pay distributions on the Preferred
Securities. The Guarantee is a guarantee on a subordinated basis with respect to
the Preferred Securities from the time of its issuance but does not apply to any
payment of distributions unless and until the Trust has sufficient funds for the
payment of such distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures held by the Trust
as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Convertible Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), will provide a full and unconditional guarantee of amounts on
the Preferred Securities.
If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities -- Voting
Rights" and "-- Book-Entry Only Issuance -- The Depository Trust Company," may
direct the Institutional Trustee to enforce its rights under the Convertible
Debentures. If the Institutional Trustee fails to enforce its rights under the
Convertible Debentures, to the fullest extent permitted by law, any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. If a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may institute a Direct Action for payment on or after the respective
due date specified in the Convertible Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
Company, under the Guarantee, acknowledges that the Guarantee Trustee shall
enforce the Guarantee on behalf of the holders of the Preferred Securities. If
the Company fails to make payments under the Guarantee, the Guarantee provides a
mechanism whereby the holders of the Preferred Securities may direct the
Guarantee Trustee to enforce its rights thereunder. If the Guarantee Trustee
fails to enforce the Guarantee, any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the Guarantee
Trustee's rights under the Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee, or any other person or
entity.
The Company and the Trust believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by the Company of payments due on the Preferred Securities. See
"Description of Guarantee -- General."
74
<PAGE> 77
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership, disposition and conversion
of Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance. This summary addresses the United
States federal income tax considerations to holders of Preferred Securities who
are citizens or residents of the United States, corporations, partnerships or
other entities created or organized in or under the laws of the United States or
any political subdivision thereof or therein, or estates or trusts the income of
which is subject to United States federal income taxation regardless of its
source or other holders who are otherwise subject to United States federal
income taxation on a net income basis with respect to Preferred Securities
("U.S. Holders") and does not address the tax consequences to holders of
Preferred Securities who are not U.S. Holders. This summary does not deal with
special classes of holders such as banks, thrift institutions, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, or persons that will hold the
Preferred Securities as part of a straddle, hedge or conversion transaction, or
as other than a capital asset. This summary also does not address tax
consequences to persons that have a functional currency other than the U.S.
Dollar or the tax consequences to shareholders, partners or beneficiaries of a
holder of Preferred Securities. Further, it does not include any description of
any alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
The Company intends to take the position that the Convertible Debentures
will be classified for United States federal income tax purposes as indebtedness
of the Company under current law, and, by acceptance of a Preferred Security,
each holder covenants to treat the Convertible Debentures as indebtedness and
the Preferred Securities as evidence of an indirect beneficial ownership
interest in the Convertible Debentures. No assurance can be given, however, that
such position of the Company will not be challenged by the Internal Revenue
Service or, if challenged, that such a challenge would not be successful. The
remainder of this discussion assumes that the Convertible Debentures will be
classified as indebtedness of the Company for United States federal income tax
purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Katten Muchin
& Zavis, tax counsel to the Company and the Trust, will render its opinion
generally to the effect that, under then current law and assuming full
compliance with the terms of the Declaration and the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Convertible Debentures, and each holder will be required to
include in its gross income any OID accrued with respect to its allocable share
of those Convertible Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Convertible
Debentures, to defer payments of interest by extending interest payment periods
for up to 20 quarters, all of the stated interest payments on the Convertible
Debentures will be treated as "original issue discount." Holders of debt
instruments issued with OID must include that discount in income on an economic
accrual basis before the receipt of cash attributable to the interest,
regardless of their method of tax accounting. Generally, all of a holder's
taxable interest income with respect to the Convertible Debentures will be
accounted for as OID, and actual distributions of stated interest will not be
separately reported as taxable income. The amount of OID that
75
<PAGE> 78
accrues in any month will approximately equal the amount of the interest that
accrues on the Convertible Debentures in that month at the stated interest rate.
In the event that the interest payment period is extended, holders will continue
to accrue OID approximately equal to the amount of the interest payment due at
the end of the extended interest payment period on an economic accrual basis
over the length of the extended interest period.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution," the
Convertible Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of the Trust. Under current law, such a
distribution, for United States federal income tax purposes, would be treated as
a non-taxable event to each holder, and each holder would receive an aggregate
tax basis in the Convertible Debentures equal to such holder's aggregate tax
basis in its Preferred Securities. A holder's holding period in the Convertible
Debentures so received in liquidation of the Trust would include the period
during which the Preferred Securities were held by such holder.
Under certain circumstances described under "Description of the Preferred
Securities -- Special Event Redemption or Distribution," the Convertible
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Preferred Securities. Under
current law, such a redemption of the Convertible Debentures would, for United
States federal income tax purposes, constitute a taxable disposition of the
redeemed Preferred Securities, and a holder could recognize gain or loss as if
it sold such redeemed Preferred Securities for cash. See "-- Sales of Preferred
Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale of such Preferred Securities. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by OID previously includible in such holder's gross
income to the date of disposition and decreased by payments received on the
Preferred Securities. Such gain or loss generally will be a capital gain or loss
and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Convertible Debentures. A holder who disposes of his Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Convertible Debentures through the
date of disposition in income as ordinary income and to add such amount to his
adjusted tax basis in his pro rata share of the underlying Convertible
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all accrued
but unpaid interest) a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
Because income on the Preferred Securities will constitute interest (in the
form of OID) for federal income tax purposes, corporate holders of Preferred
Securities will not be entitled to a dividends received deduction with respect
to any income recognized with respect to the Preferred Securities.
CONVERSION OF PREFERRED SECURITIES
A holder generally will not recognize income, gain or loss upon the
conversion, through the Conversion Agent, of its Preferred Securities into
Common Stock. A holder will, however, recognize gain upon the receipt of cash in
lieu of a fractional share of Common Stock equal to the amount of cash received
less the holder's tax basis in such fractional share. A holder's tax basis in
the Common Stock received upon exchange and conversion should generally be equal
to the holder's tax basis in the Preferred Securities delivered to the
Conversion Agent for exchange less the basis allocated to any fractional share
for which cash is received, and a holder's holding period in the Common Stock
received upon exchange and conversion should generally begin on the date the
holder acquired the Preferred Securities delivered to the Conversion Agent for
exchange.
76
<PAGE> 79
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Convertible Debentures
were adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Common Stock into or for which the Convertible
Debentures are convertible or exchangeable) of the holders of the Preferred
Securities in the assets or earnings and profits of the Company were increased,
and (ii) the adjustment was not made pursuant to a bona fide, reasonable
anti-dilution formula. An adjustment in the conversion ratio would not be
considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Common Stock.
Thus, under certain circumstances, a reduction in the conversion price for the
holders may result in deemed dividend income to holders to the extent of the
current or accumulated earnings and profits of the Company. Holders of the
Preferred Securities would be required to include their allocable share of such
deemed dividend income in gross income but would not receive any cash related
thereto.
PROPOSED TAX LEGISLATION
On March 19, 1996, the U.S. Treasury Department proposed certain tax law
changes (the "Proposed Legislation") that would, among other things, generally
deny corporate issuers a deduction for interest in respect of certain debt
obligations with a maximum term of more than 20 years, that are not shown as
indebtedness on the consolidated balance sheet of the issuer. The Convertible
Debentures have a maximum term of 20 years, and therefore would not be adversely
affected by passage of the Proposed Legislation, even if the Proposed
Legislation has a retroactive effective date. However, there can be no assurance
that any Proposed Legislation, if enacted, would not apply to debt obligations
with a term of 20 or fewer years, including the Convertible Debentures.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr.
and House Ways and Means Committee Chairman Bill Archer issued a joint statement
(the "Joint Statement") indicating their intent that the Proposed Legislation,
if adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the
Convertible Debentures because they will be issued prior to the date of any
"appropriate Congressional action." There can be no assurance, however, that any
proposed legislation enacted after the date hereof will not otherwise adversely
affect the ability of the Company to deduct the interest payable on the
Convertible Debentures. Accordingly, there can be no assurance that a Tax Event
will not occur. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution."
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, income on the Preferred Securities will be reported to holders
on Forms 1099, which forms should be mailed to holders of Preferred Securities
by January 31 following each calendar year. Payments made on, and proceeds from
the sale of, the Preferred Securities may be subject to a "backup" withholding
tax of 31% unless the holder complies with certain identification requirements.
Any withheld amounts will be allowed as a credit against the holder's United
States federal income tax, provided the required information is provided to the
Internal Revenue Service on a timely basis.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
77
<PAGE> 80
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, $.50 par value, and 1,000,000 shares of Preferred Stock, $1.00
par value ("Preferred Stock").
COMMON STOCK
Subject to preferences that may be applicable to any outstanding Preferred
Stock, holders of Common Stock are entitled to (a) receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor, (b) cast one vote per share on all matters to be voted upon
by the stockholders, and (c) in the event of a liquidation, dissolution or
winding up of the Company, share ratably in all assets remaining after payment
of the Company's liabilities and the liquidation preference of any outstanding
Preferred Stock. Holders of Common Stock have no cumulative voting rights or
preemptive rights nor any rights to convert their Common Stock into any other
securities, and there are no redemption provisions with respect to such shares.
All of the outstanding shares of Common Stock are, and the Shares issuable upon
conversion of the Preferred Securities will be, fully paid and non-assessable.
The rights, preferences and privileges of holders of Common Stock are subject
to, and may be adversely affected by, the rights of the holders of shares of
Preferred Stock currently outstanding, described below, and of any series of
Preferred Stock which the Company may designate and issue in the future.
Additional shares of Common Stock may be issued without stockholder approval.
Each share of Common Stock also represents a preferred stock purchase right, as
described below.
PREFERRED STOCK
The Company has an authorized class of undesignated Preferred Stock consisting
of 1,000,000 shares. The Company's Board of Directors has authority, without any
further vote or action by the stockholders, to provide for the issuance of the
shares of Preferred Stock in series, to establish from time to time the number
of shares to be included in each such series and to fix the designations,
preferences and relative, participating, optional or other special rights, and
qualifications or restrictions of the shares of each such series and to
determine the voting powers, if any, of such shares. The issuance of Preferred
Stock can, among other things, (a) adversely affect the rights of existing
stockholders and the amount of earnings and assets available for distribution to
holders of Common Stock, (b) delay, defer or prevent a change in control of the
Company, and (c) make the removal of the present management of the Company more
difficult. As of December 11, 1996, no shares of Preferred Stock were
outstanding.
DELAWARE LAW AND CERTAIN CORPORATE PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, this statute prohibits a publicly held
Delaware corporation from engaging, under certain circumstances, in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless either (a) prior to the date at which the stockholder became
an interested stockholder, the Board of Directors approved either the business
combination or the transaction in which the person becomes an interested
stockholder, (b) the stockholder acquires more than 85% of the outstanding
voting stock of the corporation (excluding shares held by directors who are
officers or held in certain employee stock plans) upon consummation of the
transaction in which the stockholder becomes an interested stockholder or (c)
the business combination is approved by the Board of Directors and by two-thirds
of the outstanding voting stock of the corporation (excluding shares held by the
interested stockholder) at a meeting of stockholders (and not by written
consent) held on or subsequent to the date of the business combination. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or at any time within the prior three years did own) 15% or
more of the corporation's voting stock. Section 203 defines a "business
combination" to include, without limitation, mergers, consolidations, stock
sales and asset based transactions and other transactions resulting in a
financial benefit to the interested stockholder.
78
<PAGE> 81
The Company's Restated Certificate of Incorporation (the "Certificate") and
By-laws contain a number of provisions relating to corporate governance and to
the rights of stockholders. Certain of these provisions may be deemed to have a
potential "anti-takeover" effect in that such provisions may delay, defer or
prevent a change of control of the Company. These provisions include (a) the
classification of the Board of Directors into three classes, such classes
serving for staggered three year terms; (b) restrictions on the removal of
directors; (c) a requirement that special meetings of stockholders may be called
only by the Board of Directors or by unanimous written stockholder consent and
that stockholder action may be taken only at stockholder meetings or by
unanimous written stockholder consent; (d) the authority of the Board to issue
series of Preferred Stock with such voting rights and other powers as the Board
of Directors may determine without further stockholder approval; (e) a
requirement for certain business combinations of (i) approval by the affirmative
vote of at least 66 2/3% of the voting power of the then outstanding capital
stock of the Company, (ii) approval by a majority of disinterested directors and
(iii) fair consideration to the stockholders; (f) a requirement that the vote of
greater than 66 2/3% of the voting power of the then outstanding capital stock
of the Company is required to amend, alter, repeal provisions, or adopt
inconsistent provisions, of the Certificate relating to (i) the classification
of the Board, (ii) the removal of directors, (iii) the inability of stockholders
to call special meetings and to take action outside of a special meeting other
than by unanimous written consent, and (iv) the stockholder vote and fair price
required for certain business combinations.
In December, 1988, the Company initially designated 40,878 shares of
Preferred Stock for possible future issuance pursuant to the terms of a
Shareholder Rights Plan (the "Rights Plan"). In December 1988, pursuant to the
Rights Plan, the Company issued a dividend of one preferred stock purchase right
on each outstanding share of Common Stock. Each right entitles the holder, upon
the occurrence of certain events (such as an acquisition, or announcement of
intent to acquire, by certain persons or groups of 15% or more of the Company's
Common Stock), to purchase one one-hundredth of a share of a new series of
preferred stock for $75. If a person, entity or group becomes the beneficial
owner of 15% or more of the Company's Common Stock (other than pursuant to
certain limited exceptions), then each holder of a right, other than the 15%
holder, will be entitled to buy the number of shares of Common Stock having a
market value of twice the then exercise price of each right. 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 above shareholder rights may be deemed
to have a potential "anti-takeover" effect in that such rights may delay, defer
or prevent a change in control of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Harris
Trust and Savings Bank, Chicago, Illinois.
79
<PAGE> 82
DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT FACILITY
In July 1995, the Company entered into a credit facility (the "Credit
Facility") among the Company, certain of its subsidiaries, Comerica Bank, as
agent, and the other lenders named therein. The 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 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 Credit Facility, the
Company may convert up to $70 million of revolving loans under the Credit
Facility to term loans in minimum amounts of $15 million and with maturities not
exceeding seven years from the closing of the Credit Facility.
Borrowings under the 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 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 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 Credit Facility and the Company's wholly-owned foreign
subsidiaries guarantee payment of foreign borrowings under the Credit Facility.
The 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 2005
In July 1995, the Company sold $110,000,000 in aggregate principal amount
of 9.875% senior notes due 2005 (the "2005 Notes"). The 2005 Notes are general
unsecured obligations of the Company with interest payable semi-annually. The
2005 Notes are 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. Except as noted below, the
2005 Notes are not redeemable at the Company's option prior to July 15, 2000.
Thereafter, the 2005 Notes will be redeemable, in whole or part, at the option
of the Company at various redemption prices as set forth in the 2005 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 2005 Notes originally issued
with the net proceeds from one or more public equity offerings at the redemption
price specified of 109.875% plus accrued interest to the date of redemption.
Also, in the event of a change in control, the Company will be obligated to make
any offer to purchase all of the outstanding 2005 Notes at a redemption price of
101% of the principal amount thereof plus accrued interest to the date of
repurchase. Further, in certain circumstances, the Company will be required to
make an offer to repurchase the 2005 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.
80
<PAGE> 83
The 2005 Note Indenture contains customary events of default and covenants
which limit (i) the incurrence of additional indebtedness; (ii) the issuance of
preferred stock by subsidiaries; (iii) the creation of liens; and (iv)
restrictions on sales of assets and subsidiary stock, mergers and
consolidations, payments to subsidiaries and transactions with affiliates.
SENIOR NOTES DUE 2004
In October 1994, the Company sold $45 million in principal amount of 7.68%
senior notes due 2004 (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 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 are secured equally and ratably with
the 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.
81
<PAGE> 84
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated January , 1997 (the "Underwriting Agreement"), each Underwriter named
below (the "Underwriters") has severally agreed to purchase from the Trust, and
the Trust has agreed to sell to such Underwriters, the number of Preferred
Securities set forth opposite the name of such Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS PREFERRED SECURITIES
------------------------------------------------------------- --------------------
<S> <C>
Smith Barney Inc.............................................
Interstate/Johnson Lane Corporation..........................
---------
Total................................................... 2,000,000
=========
</TABLE>
The Underwriters are obligated to take and pay for the total number of
Preferred Securities offered hereby if any such Preferred Securities are
purchased. In the event of default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Underwriting Agreement provides that the Trust and the Company will
indemnify the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and to make certain
contributions in respect thereof.
The Trust and the Company have agreed, during the period beginning on the
date of the Underwriting Agreement and continuing to and including the date that
is 90 days after the closing date of the purchase of the Preferred Securities,
not to offer, sell, contract to sell or otherwise dispose of any preferred
securities, any preferred stock or any other securities (including any backup
undertakings of such preferred stock or other securities) of the Company or of
the Trust, in each case that are substantially similar to the Preferred
Securities, or any securities convertible into or exchangeable for the Preferred
Securities or such substantially similar securities of either the Trust or the
Company without the prior written consent of Smith Barney Inc.
In view of the fact that the proceeds of the sale of the Preferred
Securities will ultimately be used to purchase the Convertible Debentures of the
Company, the Underwriting Agreement provides that the Company will pay as
compensation to the Underwriters $ per Preferred Security for the accounts
of the several Underwriters.
The Underwriters propose to offer the Preferred Securities, in part,
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and to certain dealers at a price that represents
a concession not in excess of $ . The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per Preferred
Security to certain brokers and dealers. After Preferred Securities are released
for sale to the public, the offering price and other selling terms may from time
to time be varied by the Underwriters.
Application has been made to have the Preferred Securities approved for
listing on the NNM subject to official notice of issuance. Trading of the
Preferred Securities on the NNM is expected to commence within a 30-day period
after the date of this Prospectus.
82
<PAGE> 85
LEGAL MATTERS
Certain legal matters for the Company and the Trust with respect to the
Convertible Debentures and the validity of the Guarantee will be passed upon for
the Company and the Trust by Katten Muchin & Zavis, a partnership including
professional corporations, Chicago, Illinois. Certain matters of Delaware law
relating to the validity of the Preferred Securities, the enforceability of the
Declaration and the formation of the Trust will be passed upon by Richards,
Layton & Finger, special Delaware counsel to the Company and the Trust. Certain
legal matters will be passed upon for the Underwriters by Cahill Gordon &
Reindel (a partnership including a professional corporation), New York, New
York.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995,
1994 and 1993 and the consolidated statements of income, stockholders' equity
and cash flows for the years ended December 31, 1995, 1994 and 1993 included in
this Prospectus, have been included or incorporated by reference herein in
reliance on the report of Arthur Andersen LLP, independent public accountants,
given on the authority of that firm as experts in accounting and auditing.
The combined balance sheet of the Fuel Tank System 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, incorporated by reference in this Prospectus, have been incorporated by
reference herein in reliance upon the report of Arthur Andersen, independent
public accountants, given on the authority of that firm as experts in accounting
and auditing.
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 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, incorporated by reference
in this Prospectus, have been incorporated by reference herein in reliance upon
the report of Deloitte & Touche, independent auditors, given upon their
authority as experts in accounting and auditing.
83
<PAGE> 86
INDEX TO FINANCIAL STATEMENTS
WALBRO CORPORATION
As of December 31, 1995, 1994 and 1993 and for the years ended December 31,
1995, 1994 and 1993
<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 September 30, 1996 and for the nine months ended September 30, 1996
and 1995
<TABLE>
<S> <C>
Unaudited Consolidated Balance Sheet as of September 30, 1996 and Audited Consolidated
Balance Sheet as of December 31, 1995............................................... F-28
Consolidated Statements of Income (Unaudited)......................................... F-29
Consolidated Statements of Cash Flows (Unaudited)..................................... F-30
Notes to Consolidated Financial Statements (Unaudited)................................ F-31
</TABLE>
F-1
<PAGE> 87
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, 1995,
1994 and 1993, and the related consolidated statements of income, stockholders'
equity and cash flows for each of 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, 1995, 1994 and 1993, and the results of their
operations and their cash flows for each of 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 12 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 13, 1996
F-2
<PAGE> 88
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash............................................................ $ 19,792 $ 4,540 $ 4,605
Accounts receivable, net........................................ 113,346 66,333 44,676
Inventories..................................................... 50,723 31,439 26,898
Prepaid expenses and other...................................... 10,966 4,001 7,266
Deferred and refundable income taxes............................ 4,877 3,663 4,871
-------- -------- --------
Total Current Assets.......................................... 199,704 109,976 88,316
-------- -------- --------
Plant and Equipment, at cost:
Land............................................................ 3,870 1,234 426
Buildings and improvements...................................... 54,116 44,668 43,689
Machinery and equipment......................................... 211,707 93,127 71,727
-------- -------- --------
269,693 139,029 115,842
Less -- Accumulated depreciation................................ 63,928 50,737 41,666
-------- -------- --------
Net Plant and Equipment....................................... 205,765 88,292 74,176
-------- -------- --------
Other Assets:
Funds held for construction..................................... 1,102 1,061 2,710
Joint ventures.................................................. 23,466 16,518 11,278
Investments..................................................... 9,224 10,797 8,057
Goodwill, net................................................... 33,299 16,905 16,937
Notes receivable................................................ 460 4,366 3,616
Deferred income taxes........................................... 2,805 871 41
Other........................................................... 17,648 8,580 10,164
-------- -------- --------
Total Other Assets............................................ 88,004 59,098 52,803
-------- -------- --------
Total Assets.................................................. $493,473 $257,366 $215,295
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............................... $ 1,086 $ 8,442 $ 408
Bank and other borrowings....................................... 14,921 6,970 5,375
Accounts payable................................................ 52,774 23,252 19,991
Accrued liabilities............................................. 34,352 12,077 11,500
Dividends payable............................................... 858 857 855
-------- -------- --------
Total Current Liabilities..................................... 103,991 51,598 38,129
-------- -------- --------
Long-Term Liabilities:
Long-term debt, less current portion............................ 233,389 66,136 52,392
Pension obligations and other................................... 15,102 8,153 8,071
Deferred income taxes........................................... 3,927 2,439 2,557
Minority interest............................................... 1,637 1,125 --
-------- -------- --------
Total Long-Term Liabilities................................... 254,055 77,853 63,020
-------- -------- --------
Stockholders' Equity:
Common stock, $.50 par value; authorized 25,000,000; outstanding
8,579,976 in 1995, 8,564,576 in 1994, and 8,551,782 in 1993... 4,290 4,282 4,276
Paid-in capital................................................. 64,381 64,221 63,997
Retained earnings............................................... 66,256 55,855 44,686
Deferred compensation........................................... (817) (1,225) (1,634)
Minimum pension liability adjustment............................ (63) -- (520)
Unrealized gain on securities available for sale................ 827 1,428 --
Cumulative translation adjustments.............................. 553 3,354 3,341
-------- -------- --------
Total Stockholders' Equity.................................... 135,427 127,915 114,146
-------- -------- --------
Total Liabilities and Stockholders' Equity.................... $493,473 $257,366 $215,295
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 89
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net Sales................................................... $459,272 $325,205 $273,463
Costs and Expenses:
Cost of sales............................................. 377,755 261,501 216,804
Selling and administrative expenses....................... 57,495 39,318 33,043
Reorganization and restructuring charges.................. -- -- 1,760
-------- -------- --------
Operating Income............................................ 24,022 24,386 21,856
Other Expense (Income):
Interest expense, net of capitalized interest of $518,000
in 1995................................................ 12,071 3,862 2,594
Interest income........................................... (960) (91) (35)
Foreign currency exchange loss............................ 1,483 2,602 1,495
Other..................................................... (255) 111 572
-------- -------- --------
Income before provision for income taxes, minority
interest, equity in (income) loss of joint ventures and
cumulative effect of accounting change................. 11,683 17,902 17,230
Provision for income taxes.................................. 1,258 5,824 4,574
Minority interest........................................... 472 92 --
Equity in (income) loss of joint ventures................... (3,877) (2,609) 89
-------- -------- --------
Income before cumulative effect of accounting change........ 13,830 14,595 12,567
Cumulative effect of accounting change, net of tax benefit
of $1,494................................................. -- -- 2,900
-------- -------- --------
Net income............................................. $ 13,830 $ 14,595 $ 9,667
======== ======== ========
Income Per Share:
Income before cumulative effect of accounting change...... $ 1.61 $ 1.70 $ 1.47
Cumulative effect of accounting change, net of tax
benefit................................................ -- -- (.34)
-------- -------- --------
Net income per share................................... $ 1.61 $ 1.70 $ 1.13
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 90
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<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, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
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
($.40 per
share).......... -- -- (3,403) -- -- -- --
Translation
adjustments..... -- -- -- -- -- -- 628
------ ------- ------- ------- ----- ------ -------
Balance --
December 31,
1993.............. 4,276 63,997 44,686 (1,634) (520) -- 3,341
Change in
accounting for
securities
available for
sale -- January
1, 1994......... -- -- -- -- -- 2,096 --
Exercise of stock
options......... 6 224 -- -- -- -- --
ESOP debt
payments........ -- -- -- 409 -- -- --
Net income........ -- -- 14,595 -- -- -- --
Adjust additional
minimum pension
liability....... -- -- -- -- 520 --
Cash dividends
($.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
Exercise of stock
options......... 8 160 -- -- -- -- --
ESOP debt
payments........ -- -- -- 408 -- -- --
Net income........ -- -- 13,830 -- -- -- --
Additional minimum
pension
liability....... -- -- -- -- (63) -- --
Cash dividends
($.40 per
share).......... -- -- (3,429) -- -- -- --
Change in market
value of
securities
available for
sale............ -- -- -- -- -- (601) --
Translation
adjustments..... -- -- -- -- -- -- (2,801)
------ ------- ------- ------- ----- ------ -------
Balance --
December 31,
1995.............. $4,290 $64,381 $66,256 $ (817) $ (63) $ 827 $ 553
====== ======= ======= ======= ===== ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 91
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income................................................. $ 13,830 $ 14,595 $ 9,667
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization......................... 22,451 14,672 11,339
Cumulative effect of accounting change................ -- -- 2,900
(Gain)loss on disposition of assets................... (29) 449 372
Minority interest..................................... 472 92 --
(Income) loss of joint ventures....................... (3,877) (2,609) 89
Reorganization and restructuring charges.............. -- -- 754
Change in assets and liabilities, net of effects of
acquisitions-
Deferred income taxes.............................. 1,721 (681) (1,324)
Deferred pension obligations and other............. 3,327 519 544
Accounts payable and accrued liabilities........... 4,870 704 4,220
Accounts receivable, net........................... (3,236) (18,463) (3,449)
Inventories........................................ (2,034) (3,752) (2,752)
Prepaid expenses and other......................... (6,607) 4,951 (6,979)
--------- -------- --------
Total adjustments................................ 17,058 (4,118) 5,714
--------- -------- --------
Net cash provided by operating activities............. 30,888 10,477 15,381
--------- -------- --------
Cash Flows From Investing Activities:
Purchase of plant and equipment............................ (46,240) (18,844) (20,260)
Acquisitions, net of cash acquired......................... (116,238) (1,480) 1,312
Purchase of other assets................................... (7,263) (2,615) (2,047)
Investment in joint ventures and other..................... (2,054) (1,508) (1,333)
Proceeds from disposal of assets........................... 4,127 1,463 3,149
--------- -------- --------
Net cash used in investing activities................. (167,668) (22,984) (19,179)
--------- -------- --------
Cash Flows From Financing Activities:
Net borrowings (repayments) under revolving line-of-credit
agreements.............................................. 63,797 (27,739) (3,691)
Debt repayments............................................ (13,541) (824) (2,617)
Proceeds from issuance of long-term debt................... 110,550 45,000 9,000
Proceeds from issuance of common stock and options......... 168 230 610
Financing Fees Paid........................................ (4,778) -- --
Cash dividends paid........................................ (3,428) (3,424) (3,359)
--------- -------- --------
Net cash provided by (used in) financing activities... 152,768 13,243 (57)
--------- -------- --------
Effect of exchange rate changes on cash.................... (736) (801) 212
--------- -------- --------
Net increase (decrease) in cash............................ 15,252 (65) (3,643)
Cash at beginning of year.................................. 4,540 4,605 8,248
--------- -------- --------
Cash at end of year........................................ $ 19,792 $ 4,540 $ 4,605
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 92
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
$978,000, $822,000 and $413,000 as of December 31, 1995, 1994 and 1993,
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 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components........................... $29,769 $19,310
Work-in-process........................................ 7,666 6,915
Finished products...................................... 13,288 5,214
------- -------
$50,723 $31,439
======= =======
</TABLE>
Amounts included in work-in-process and finished products in 1993 was 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 - 10 to 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, the carrying value of
marketable equity securities was based on the lower of cost or quoted
F-7
<PAGE> 93
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill...................................... $36,365 $19,367 $18,943
Less: Accumulated amortization................ (3,066) (2,462) (2,006)
------- ------- -------
$33,299 $16,905 $16,937
======= ======= =======
</TABLE>
Income Taxes:
The consolidated financial statements 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.
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 $16,742,000, $12,199,000 and $9,484,000 for 1995, 1994 and 1993,
respectively.
Financial Instruments:
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.
Per Share Information:
Income per share is based on the weighted average number of shares
outstanding during each period. Shares used in the per share calculations were
8,609,431 in 1995, 8,602,077 in 1994 and 8,537,375 in 1993.
F-8
<PAGE> 94
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications:
Certain amounts in prior years' consolidated financial statements have been
reclassified to conform with the presentation used in 1995.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates.
NOTE 2. JOINT VENTURES.
The investments in joint ventures as of December 31 are as follows:
<TABLE>
<CAPTION>
PERCENT BENEFICIAL
OWNERSHIP
--------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Marwal Systems, S.A..................................... 49% 49% 49%
Mitsuba-Walbro, Inc..................................... 50% 50% 50%
Marwal do Brasil, Ltda.................................. 49% 49% 49%
Korea Automotive Fuel Systems, Ltd...................... 49% 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. 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, 1995 and 1994, the cumulative
effect of these adjustments was to increase the Company's equity in its joint
ventures by approximately $2,102,000 and $1,300,000, respectively. At December
31, 1995, the amount included in retained earnings as undistributed earnings of
foreign joint ventures was approximately $4,380,000.
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.
F-9
<PAGE> 95
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,
------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Balance sheet data:
Current assets............................. $60,504 $53,160 $35,773
Non-current assets......................... 36,629 26,069 20,140
Current liabilities........................ 49,081 48,160 36,672
Non-current liabilities.................... 1,657 786 882
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Income statement data:
Net sales................................. $170,902 $137,873 $80,722
Gross margin.............................. 20,500 29,283 15,063
Income before provision for income
taxes.................................. 11,641 8,136 962
Net income................................ 7,366 5,164 466
</TABLE>
Dividends from joint ventures of approximately $415,000, $38,000 and
$45,000 were received by the Company during 1995, 1994 and 1993, respectively.
The Company had sales to joint ventures of approximately $29,280,000,
$20,407,000 and $20,456,000 for 1995, 1994 and 1993, respectively. Included in
accounts receivable are trade receivables from joint ventures of approximately
$9,583,000, $7,349,000 and $1,882,000 for 1995, 1994 and 1993, respectively. The
Company had purchases from joint ventures of approximately $22,977,000,
$15,329,000 and $11,820,000 for 1995, 1994 and 1993, respectively. Included in
accounts payable are trade payables to joint ventures of approximately
$3,995,000, $782,000 and $1,120,000 for 1995, 1994 and 1993, respectively.
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 classified its investments in common stock
securities as "available-for-sale" which required 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, 1995 and 1994, the fair market value of the Company's
investments classified as "available-for-sale" was approximately $5,456,000 and
$6,256,000, respectively, including gross unrealized holding gains of
approximately $1,272,000 ($827,000 after-tax) and $2,197,000 ($1,428,000
after-tax), respectively. At December 31, 1995 and 1994, the fair market value
of the Company's investments classified as "trading" was $2,641,000 and
$3,304,000, respectively. The change in net unrealized holding gain included in
earnings was not significant.
NOTE 4. DYNO ACQUISITION.
On July 27, 1995, the Company acquired the plastic fuel tank business of
Dyno Industrier A.S (Dyno), Oslo, Norway for $129,758,000 in cash which is
subject to certain subsequent adjustments as defined in the Purchase Agreement.
Dyno is a leading designer, manufacturer and marketer of plastic fuel tank
systems and
F-10
<PAGE> 96
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
components to many European vehicle manufacturers and has operations in Belgium,
France, Germany, Norway, Spain and the United Kingdom.
The acquisition was accounted for under the purchase method, and
accordingly, the assets purchased and liabilities assumed in the acquisition are
reflected in the accompanying consolidated balance sheet as of December 31, 1995
and the operations since the date of acquisition are included in the
accompanying consolidated statement of income and cash flows for the year ended
December 31, 1995. Goodwill resulting from this transaction is being amortized
over 40 years using the straight-line method. The purchase price was allocated
to the purchased assets and liabilities as follows (in thousands):
<TABLE>
<S> <C>
Cash consideration paid to seller, net of cash acquired of
$15,669...................................................... $114,089
Fees and expenses.............................................. 2,194
--------
Cost of acquisition, net of cash acquired...................... $116,283
========
Accounts receivable............................................ $ 42,237
Inventory...................................................... 16,330
Property, plant and equipment.................................. 90,792
Accounts payable and accrued liabilities....................... (43,709)
Notes payable.................................................. (5,663)
Other assets purchased and liabilities assumed, net............ 1,636
Goodwill....................................................... 14,660
--------
Total cost allocation.......................................... $116,283
========
</TABLE>
In connection with the acquisition, the Company will be required to
relocate certain facilities. The Company anticipates it will incur costs to move
to the new facilities and involuntarily terminate or relocate employees in
addition to other costs directly associated with the acquisition. The Company
has recorded a liability of approximately $7,758,000 related to these costs in
purchase accounting. The Company expects the relocation of these facilities and
employees to be substantially completed during 1996.
The purchase price and related allocation may be revised within one year
from the acquisition based on revisions of preliminary estimates of fair values
and final working capital acquired made at the date of purchase. Such changes
are not expected to be significant.
Assuming the acquisition had taken place as of the beginning of 1995 and
1994, the consolidated pro forma results of operations of the Company would have
been as follows, after giving effect to certain adjustments, including
depreciation and amortization adjustments, increased interest expense,
elimination of certain costs assumed by the seller and the related income tax
effects:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Net sales.......................................... $581,291 $472,352
Net income......................................... $ 12,336 $ 6,297
Net income per common share........................ $1.43 $.73
</TABLE>
The pro forma information above does not purport to be indicative of the
results that actually would have been achieved if the operations were combined
during the periods presented, and is not intended to be a projection of future
results or trends.
F-11
<PAGE> 97
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. OTHER ACQUISITIONS.
In January 1995, the Company acquired an 80% interest in U.S. CoEXCELL,
Inc. for $60,000 in cash plus the forgiveness of debt owed to Walbro of
$3,113,000. U.S. CoEXCELL, Inc. manufactures and markets blow molded plastic
drums. The acquisition was accounted for under the purchase method, and
accordingly, the assets purchased and liabilities assumed in the acquisition
have been reflected in the accompanying consolidated balance sheet as of
December 31, 1995 and the operations since the acquisition are included in the
accompanying consolidated statement of income and cash flows for the year ended
December 31, 1995. Goodwill resulting from this transaction is being amortized
over 40 years using the straight-line method. The purchase price was allocated
to the purchased assets and liabilities as follows (in thousands):
<TABLE>
<S> <C>
Cash consideration paid to seller, net of cash acquired of
$105.......................................................... $ 3,068
Fees and expenses............................................... --
------
Cost of acquisition, net of cash acquired....................... $ 3,068
======
Accounts receivable............................................. $ 146
Inventory....................................................... 429
Property, plant and equipment................................... 2,643
Accounts payable and accrued liabilities........................ (1,614)
Long-term debt.................................................. (874)
Goodwill........................................................ 2,338
------
Total cost allocation........................................... $ 3,068
======
</TABLE>
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. Fujian is included in the Company's
consolidated financial statements from the date of purchase. In November 1995,
the Company acquired an additional 10% of Fujian for $250,000.
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 is being amortized over 15 years. Walbro Canada is included in the
Company's consolidated financial statements from the date of purchase.
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 and
is being amortized over 40 years. Walbro Korea Ltd. is 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 6. LONG LIVED ASSETS AND INTANGIBLES.
As of January 1, 1996, the Company will adopt SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," which requires a review of long-lived assets
F-12
<PAGE> 98
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and identifiable intangibles for impairment whenever circumstances indicate that
the carrying amount of the assets may not be realizable. The impact of adoption
is not anticipated to be material.
NOTE 7. 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.
NOTE 8. LONG-TERM DEBT AND LINES OF CREDIT.
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Senior notes due 2005, unsecured, stated interest at 9.875%
(9.92% effective interest rate) net of unamortized discount of
$369,000...................................................... $109,631 $ -- $ --
Revolving credit facility, secured, interest at the agent's base
rate plus an additional margin (see below).................... 57,258 -- --
Term loan from the State of Connecticut, secured, interest at 6%
per annum, payable in monthly amounts from 1997 to 2005....... 800 -- --
Senior notes, secured, interest at 7.68%, payable in annual
amounts from 1998 to 2004..................................... 45,000 45,000 --
Revolving credit loan, interest rate from LIBOR plus 5/8% to
prime, unsecured.............................................. -- -- 28,750
Industrial revenue bond, issued by Town of Ossian, Indiana,
interest at a variable municipal bond rate, due in 2023....... 9,000 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
Foreign bank note, payable in Japanese yen, interest at Japanese
prime......................................................... -- 7,519 6,708
Foreign bank note, payable in Chinese renminbi, interest at
9.8%, repaid in 1995.......................................... -- 348 --
ESOP credit agreement, interest rate which approximates 86% of
prime, payable in annual installments of $408,000............. 1,225 1,634 2,042
Capital lease obligations, interest at 7.5%, payable in monthly
amounts through February 2002................................. 4,195 4,710 --
Term loan, unsecured, interest at 6%, payable in monthly amounts
through 2005.................................................. 563 -- --
Note payable to the City of Maumee, Ohio, interest at 4%,
payable in monthly amounts through 2004....................... 302 -- --
Other........................................................... 201 67 --
-------- ------- -------
234,475 74,578 52,800
Less -- current portion......................................... 1,086 8,442 408
-------- ------- -------
$233,389 $66,136 $52,392
======== ======= =======
</TABLE>
F-13
<PAGE> 99
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In July 1995, the Company sold $110,000,000 in aggregate principal amount
of 9.875% senior notes due 2005 (the "2005 Notes"). The 2005 Notes are general
unsecured obligations of the Company with interest payable semi-annually. The
2005 Notes are 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. Except as noted below, the
2005 Notes are not redeemable at the Company's option prior to July 15, 2000.
Thereafter, the 2005 Notes will be redeemable, in whole or part, at the option
of the Company at various redemption prices as set forth in the 2005 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 2005 Notes originally issued
with the net proceeds from one or more public equity offerings at the redemption
price specified in the 2005 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 2005 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 2005 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.
In July 1995, the Company executed a new $135,000,000 credit facility (the
"Credit Facility"). The 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 Credit Facility
has an initial term of five years, with annual one year extensions of the
revolving credit portion of the facility available at the lender's discretion.
At any time within three years after closing of the Credit Facility, the Company
may convert up to $70,000,000 of revolving credit loans under the Credit
Facility to term loans in minimum amounts of $15,000,000 with maturities not
exceeding seven years from the closing of the Credit Facility. Borrowings under
the 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
the specific financial ratios of the Company. Borrowings under the Credit
Facility bore interest at rates ranging from 7.5% to 8.5% as of December 31,
1995. The Company will also be required to pay a quarterly unused facility fee
of 0.08% to 0.5%, based on the Company's funded debt ratio. Borrowings under the
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 wholly-owned foreign subsidiaries.
Collateral for the Credit Facility secures the Senior Notes on an equal and
ratable basis. The Company and its wholly-owned domestic subsidiaries guarantee
payment of domestic and foreign borrowings under the Credit Facility. The
Company's wholly-owned foreign subsidiaries guarantee payment of foreign
borrowings under the Credit Facility.
In November 1995, the Company executed with the State of Connecticut, a
ten-year provisional term loan, in the original principal amount of $3,400,000,
to be used exclusively for the purchase of equipment and certain construction
costs. The loan requires payment of interest only for the first two years at a
fixed rate equal to 6% per annum and then repayment in equal monthly
installments of principal and interest over the remaining eight years with a
balloon payment of $1,387,000 at the end of the ten year contractual agreement.
However, if the Company meets certain employment targets and other measures,
some or all of this loan is forgivable during this ten year period.
In October 1994, the Company sold $45,000,000 of 7.68% senior notes (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 a
funded debt to total capital ratio not greater than .65 to 1 among other
measures.
F-14
<PAGE> 100
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Credit Facility contains 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 which become
increasingly restrictive with the passage of time; (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. The
Company received waivers and amendments to certain financial covenants from its
lenders at December 31, 1995 due to non-compliance with such covenants.
During 1994, the Company entered into an agreement to lease certain
machinery under terms which qualified as a capital lease. As of December 31,
1995 and 1994, assets recorded under this capital lease were approximately
$5,032,000 and $5,109,000, respectively, net of accumulated amortization of
approximately $95,000 and $18,000, respectively.
Aggregate minimum principal payment requirements on long-term debt,
including capital lease obligations, in each of the five years subsequent to
December 31, 1995 are as follows: 1996 -- $1,086,000; 1997 -- $1,252,000; 1998
- -- $7,949,000; 1999 -- $7,596,000; 2000 -- $64,603,000, and thereafter --
$151,989,000.
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 $17,191,000, $11,919,000 and $7,200,000 at December 31, 1995, 1994
and 1993, respectively. The weighted average interest rate on short-term bank
borrowings outstanding under these arrangements was 6.1%, 6.7% and 5.6% as of
December 31, 1995, 1994 and 1993, respectively.
NOTE 9. 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 significant insurance coverage is available to protect against
potential product recall/warranty liability. The Company provides for warranty
claims on its products on a specific identification 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.
F-15
<PAGE> 101
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. INCOME TAXES.
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:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<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................................. $ 4,268 $12,873 $12,765
Foreign.................................. 7,415 5,029 4,465
------- ------- -------
$11,683 $17,902 $17,230
======= ======= =======
Provision for income taxes:
Currently payable --
Domestic................................. $ 843 $ 3,313 $ 4,923
Foreign.................................. 2,977 1,674 1,931
Utilization of tax credits............... (3,182) (605) (1,075)
------- ------- -------
638 4,382 5,779
------- ------- -------
Deferred --
Domestic................................. 945 1,067 (1,161)
Foreign.................................. (325) (14) (309)
Effect of change in U.S. statutory
rate................................... -- -- (90)
Change in beginning of year valuation
allowance.............................. -- 389 355
------- ------- -------
620 1,442 (1,205)
------- ------- -------
$ 1,258 $ 5,824 $ 4,574
======= ======= =======
</TABLE>
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>
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory income tax rate........... 35.0% 35.0% 35.0%
Increase (decrease) in effective income tax rate
resulting from --
Differences between U.S. and foreign
income tax rates....................... 2.1 (1.2) .3
Utilization of tax credits................ (27.2) (3.4) (6.3)
Increase in valuation allowance........... -- 2.2 2.1
Goodwill amortization..................... 1.4 .9 .9
Other, net................................ (.5) (1.0) (5.5)
----- ---- ----
Effective income tax rates....................... 10.8% 32.5% 26.5%
===== ==== ====
</TABLE>
F-16
<PAGE> 102
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net deferred income tax (asset) liability at December
31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred income tax liabilities:
Depreciation and basis difference.......... $ 9,534 $ 5,342 $ 4,958
Employee benefits.......................... 57 1,470 1,535
Income of joint ventures................... -- -- 556
Basis difference on foreign currency
contracts............................... 193 910 999
Unrealized gain on securities available for
sale.................................... 416 739 --
Other...................................... 80 483 660
-------- ------- -------
10,280 8,944 8,708
-------- ------- -------
Deferred income tax assets:
Estimated net operating loss
carryforwards........................... (4,231) (585) (585)
Employee benefits.......................... (3,609) (3,552) (3,135)
Accruals................................... (208) (238) (1,276)
Minimum pension liability adjustment....... (32) -- (274)
Inventory.................................. (585) (613) (611)
Accounts and notes receivable reserve...... (36) (159) (179)
Write-down of investment................... (368) (368) (368)
Loss of joint ventures..................... (1,032) (2,072) (2,646)
Other...................................... (803) (207) (150)
-------- ------- -------
(10,904) (7,794) (9,224)
Valuation allowance........................ 744 744 355
-------- ------- -------
(10,160) (7,050) (8,869)
-------- ------- -------
Net deferred income tax (asset) liability.... $ 120 $ 1,894 $ (161)
======== ======= =======
</TABLE>
At December 31, 1995, the cumulative amount of undistributed earnings of
foreign subsidiaries was approximately $21,300,000. 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.
As of December 31, 1995, the Company has net operating loss carryforwards
of approximately $13,832,000, which expire in varying amounts between 2003 and
2010, available from certain of its subsidiaries. The Company has recorded a
deferred tax asset of $4,231,000 associated with these carryforwards.
Realization is dependent on generating sufficient taxable income in specific
countries prior to the expiration of the loss carryforwards. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
Provisions for state income taxes are included in selling and
administrative expenses and amounted to $1,369,000 in 1995, $1,203,000 in 1994
and $722,000 in 1993.
NOTE 11. 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.
F-17
<PAGE> 103
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 1991, the Company adopted an incentive stock option plan, the Walbro
Corporation Equity Based Long Term Incentive Plan (Incentive Plan) under which
856,457 shares of common stock are reserved for issuance to officers, directors
and key employees. Options are granted yearly based on certain financial
performance criteria as compared to the annual business plan and other factors.
In addition, Stock Performance Award Grants (Grants) are awarded annually when
the common stock price appreciates and Grants are exchanged for common stock at
the end of the five-year term. If the Company's common stock price appreciates
at a 17% compounded rate over the 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. The number of
grants outstanding was 33,294, 30,915 and 31,912 as of December 31, 1995, 1994
and 1993, respectively.
A summary of the stock option transactions of the 1983 Plan and the
Incentive Plan for the years ended December 31, 1995, 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------------- OPTION PRICE
EXERCISABLE OUTSTANDING (PER SHARE)
----------- ----------- ------------
<S> <C> <C> <C>
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
-------
December 31, 1993....................................... 152,132 203,012 9.25-33.25
Granted............................................... 88,701 17.00
Exercised............................................. (12,794) 10.88-26.00
Canceled.............................................. (5,808) 10.88-33.25
-------
December 31, 1994....................................... 184,410 273,111 9.25-33.25
Granted............................................... 174,881 18.00-25.25
Exercised............................................. (15,400) 10.88
Canceled.............................................. (500) 33.25
-------
December 31, 1995....................................... 321,695 432,092 $ 9.25-33.25
=======
</TABLE>
In 1991, the Company approved the Walbro Engine Management Corporation
(EMC) Incentive Compensation Plan (EMC 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 EMC 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 $5,044,000,
$3,100,000 and $1,480,000 as of December 31, 1995, 1994 and 1993, respectively,
under this plan.
F-18
<PAGE> 104
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. POSTRETIREMENT HEALTH BENEFITS.
The Company provides postretirement health care, dental benefit and
prescription drug coverage to a limited number of current retirees.
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.
The following table reconciles the status of the accrued postretirement
benefit obligation at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Retirees........................................ $4,587 $4,687 $ 5,572
Fully eligible active plan participants......... -- -- --
Other active plan participants.................. -- -- --
------ ------ -------
4,587 4,687 5,572
Plan assets at fair value....................... -- -- --
Accumulated postretirement benefit obligation in
excess of plan assets......................... 4,587 4,687 5,572
Unrecognized net loss........................... (81) (190) (1,120)
------ ------ -------
Accrued postretirement benefit obligation....... $4,506 $4,497 $ 4,452
====== ====== =======
</TABLE>
The discount rates used in 1995, 1994 and 1993 were 7.25%, 8.5% and 7.0%,
respectively.
Net periodic postretirement benefit cost consisted of the following for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Interest cost.................................. $350 $378 $321
Amortization of unrecognized net loss.......... -- 35 --
---- ---- ----
$350 $413 $321
==== ==== ====
</TABLE>
For measurement purposes, an 8% annual rate of increase was assumed in per
capita cost of covered health and dental care benefits for 1995. 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, 1995 by $407,000 and the interest cost component of net periodic
postretirement benefit cost for the year ended December 31, 1996 by $30,000.
NOTE 13. PENSION PLANS.
The Company sponsors pension plans covering substantially all domestic
collectively bargained employees 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 plans covering domestic employees and
certain foreign employees amounts which are actuarially determined to provide
the plan with sufficient assets to meet future benefit payment requirements. The
plans covering foreign employees in certain countries are not funded.
F-19
<PAGE> 105
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total pension expense amounted to $251,000 in 1995, $239,000 in 1994 and
$280,000 in 1993. The Company recognizes currently the amount which would be
payable if employees covered by certain foreign plans terminated voluntarily.
Pension expense for the other plans is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................. $ 136 $ 165 $ 157
Interest on projected benefit obligation...... 263 219 197
Actual return on assets....................... (240) (182) (297)
Net amortization and deferral................. 12 16 171
----- ----- -----
$ 171 $ 218 $ 228
===== ===== =====
</TABLE>
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts recognized in the Company's
consolidated balance sheets as of December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligation
--
Vested...................................... $(4,022) $(2,319) $(3,134)
Nonvested................................... (767) (314) (282)
------- ------- -------
Accumulated benefit obligation.............. (4,789) (2,633) (3,416)
Effects of salary progression............... -- -- --
------- ------- -------
Projected benefit obligation................ (4,789) (2,633) (3,416)
------- ------- -------
Plan assets --
Cash equivalents............................ 270 321 344
Equity securities........................... 3,435 2,438 2,350
------- ------- -------
3,705 2,759 2,694
------- ------- -------
Projected benefit obligation under (over) plan
assets...................................... (1,084) 126 (722)
Unamortized net asset at transition......... (53) (75) (97)
Unamortized net (gain) loss................. 227 (74) 891
Adjustment to recognize minimum liability... (1,038) -- (1,108)
Unrecognized prior service cost............. 864 498 314
------- ------- -------
Pension asset (liability) recorded in the
consolidated balance sheets................. $(1,084) $ 475 $ (722)
======= ======= =======
</TABLE>
The assumptions used in determining the funded status information shown
above were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---- ----
<S> <C> <C> <C>
Discount rate............................... 7.25 - 7.5% 8.5% 6.5%
Long-term rate of return on assets.......... 8.5% 8.5% 6.5%
</TABLE>
The Company also sponsors a defined contribution plan for non-union
domestic employees 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 1995, 1994 and 1993 was approximately
$2,255,000, $1,431,000 and $1,416,000, respectively.
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,
F-20
<PAGE> 106
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $515,000, $365,000 and $302,000 in 1995, 1994
and 1993, respectively. Contribution expense is net of dividends of $105,000,
$210,000 and $106,000 in 1995, 1994 and 1993, respectively. As of December 31,
1995, 1994 and 1993, the following are held by the ESOP: 194,000, 170,000 and
152,000 allocated shares, respectively, and 56,000, 82,000 and 109,000 suspense
(unallocated) shares, respectively, which are all committed-to-be-released.
NOTE 14. 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 forward currency exchange contracts to manage its
foreign currency exchange risk. There were no contracts outstanding as of
December 31, 1995. As of December 31, 1994 and 1993, the notional amounts of
contracts outstanding were $14,000,000 and $30,000,000, respectively.
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 had one forward currency exchange contract
which matured in 1995 and exchanged 86,332,000 French francs. Total losses on
this contract of approximately $1,800,000 were recorded as a deferred asset
during 1994. This asset is being recognized based on actual purchases of the
related commitments. 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, 1995 and 1994 is approximately
$720,000 and $600,000, respectively. The balance remaining to be amortized at
December 31, 1995 and 1994 is $480,000 and $1,200,000, respectively.
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 1995,
the Company had twenty-one forward currency exchange contracts which matured
during 1995, which exchanged 1,015,000,000 Japanese yen and 15,300,000 Singapore
dollars. 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 were a gain of $929,000 for the year ending
December 31, 1995 and a loss of $1,200,000 for the year ending December 31,
1994.
F-21
<PAGE> 107
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Long-term debt
The fair value of the Company's public debt is estimated using quoted
market prices. The fair value of the Company's other 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:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- ------------------- -------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
-------- -------- -------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Notes receivable.................... $ 460 $ 460 $ 4,366 $ 4,860 $ 3,616 $ 4,049
Long-term debt...................... 234,475 232,865 74,578 73,513 52,800 52,542
Forward currency exchange
contracts......................... (1,200) (1,200) (1,800) (1,800) -- (73)
</TABLE>
NOTE 15. 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 $4,761,000, $3,324,000 and $2,655,000 in 1995, 1994
and 1993, respectively.
F-22
<PAGE> 108
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate minimum future rentals under noncancellable leases are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ -------
(IN THOUSANDS)
<S> <C> <C>
1996.................................................... $ 850 $ 6,318
1997.................................................... 850 4,480
1998.................................................... 850 3,683
1999.................................................... 850 3,516
2000.................................................... 850 1,952
Thereafter.............................................. 1,000 234
------ -------
Total minimum lease payments............................ 5,250 $20,183
=======
Amount representing interest............................ 1,055
------
Present value of net future minimum lease payments...... $4,195
======
</TABLE>
NOTE 16. ACCRUED LIABILITIES.
Accrued liabilities consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Compensation.................................. $ 4,680 $ 5,123 $ 3,941
Income taxes.................................. 6,690 2,239 1,498
Reorganization and restructuring.............. 7,664 -- 754
Interest...................................... 5,352 147 407
Other......................................... 9,966 4,568 4,900
------- ------- -------
$34,352 $12,077 $11,500
======= ======= =======
</TABLE>
NOTE 17. 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.
F-23
<PAGE> 109
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18. 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.
F-24
<PAGE> 110
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Selected financial information about the Company's business and geographic
segments are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Financial Information by Business Segment
Net sales to customers:
Automotive............................... $324,963 $204,563 $173,510
Small Engine............................. 144,273 134,483 112,660
Corporate................................ 4,430 1,022 1,456
-------- -------- --------
473,666 340,068 287,626
Eliminations............................... (14,394) (14,863) (14,163)
-------- -------- --------
Total net sales............................ $459,272 $325,205 $273,463
======== ======== ========
Operating profit (loss):
Automotive............................... $ 30,076 $ 24,883 $ 20,416
Small Engine............................. 16,607 18,522 16,025
Corporate................................ (31,595) (22,986) (19,300)
-------- -------- --------
Income before provision for income taxes
and cumulative effect of accounting
change................................... $ 15,088 $ 20,419 $ 17,141
======== ======== ========
Identifiable assets:
Automotive............................... $377,975 $155,006 $122,440
Small Engine............................. 65,485 64,494 58,121
Corporate................................ 50,013 37,866 34,734
-------- -------- --------
Total identifiable assets.................. $493,473 $257,366 $215,295
-------- -------- --------
Depreciation and amortization:
Automotive............................... $ 12,967 $ 6,320 $ 5,652
Small Engine............................. 6,090 5,841 4,908
Corporate................................ 3,394 2,511 779
-------- -------- --------
Total depreciation and amortization........ $ 22,451 $ 14,672 $ 11,339
======== ======== ========
Capital expenditures
Automotive............................... $ 35,609 $ 10,101 $ 15,439
Small Engine............................. 9,692 5,113 4,508
Corporate................................ 939 3,630 313
-------- -------- --------
Total capital expenditures................. $ 46,240 $ 18,844 $ 20,260
======== ======== ========
</TABLE>
F-25
<PAGE> 111
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Financial Information by Geographic Segment
Net sales to customers:
United States............................ $314,697 $260,710 $215,149
Europe................................... 88,736 -- --
Far East and Other Foreign............... 55,839 64,495 58,314
-------- -------- --------
459,272 325,205 273,463
Net sales between geographic areas....... 27,663 31,094 28,842
-------- -------- --------
486,935 356,299 302,305
Eliminations............................... (27,663) (31,094) (28,842)
-------- -------- --------
Total net sales............................ $459,272 $325,205 $273,463
======== ======== ========
Operating profit:
United States............................ $ 35,225 $ 37,040 $ 31,791
Europe................................... 5,352 -- --
Far East and Other Foreign............... 6,106 6,365 4,650
-------- -------- --------
46,683 43,405 36,441
Corporate, net............................. (31,595) (22,986) (19,300)
-------- -------- --------
Income before provision for income taxes
and cumulative effect of accounting
change................................... $ 15,088 $ 20,419 $ 17,141
======== ======== ========
Identifiable assets:
United States............................ $262,020 $224,369 $191,999
Europe................................... 193,876 -- --
Far East and Other Foreign............... 37,577 32,997 23,296
-------- -------- --------
Total identifiable assets.................. $493,473 $257,366 $215,295
======== ======== ========
</TABLE>
Worldwide operations are located in three geographic segments -- United
States, Europe and Far East and Other Foreign. The Europe geographic segment
includes operations in Belgium, France, Germany, Norway, Spain and the United
Kingdom. The Far East and Other Foreign geographic segment includes operations
in Japan, Singapore, Korea, China, Mexico and Canada. Sales between geographic
areas are accounted for at cost plus a margin for profit. Operating profit
consists of total sales less operating expenses excluding general corporate
expenses, interest expense and income taxes. Identifiable assets are those
assets used in the operations in each geographic area. Export sales from
domestic locations were approximately $45,485,000, $36,881,000 and $47,876,000
for 1995, 1994 and 1993, respectively.
The net assets of the Company's foreign operations were $29,137,000,
$24,598,000 and $17,240,000 at December 31, 1995, 1994 and 1993, respectively.
The Company's share of foreign net income was $4,763,000, $3,369,000 and
$2,843,000 in 1995, 1994 and 1993, 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 21%, 30% and 30% of
consolidated sales in 1995, 1994 and 1993, respectively. Sales to another such
customer amounted to 19%, 23% and 21% of consolidated sales in 1995, 1994 and
1993, respectively.
Several other factors could have a significant impact on the continuing
operations of the Company. These factors include changes in demand for
automobiles and light trucks, relationships with significant customers, price
pressures, the timing and structure of future acquisitions or dispositions, the
integration of the Dyno acquisition into Walbro's overall business, impact of
environmental regulations, continued availability of
F-26
<PAGE> 112
WALBRO CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adequate funding sources, currency and other risks inherent in international
sales, and general economic and business conditions.
NOTE 19. SUPPLEMENTAL CASH FLOW INFORMATION.
In 1995, 1994 and 1993, the Company paid $3,290,000, $6,749,000 and
$4,458,000 for income taxes and $7,191,000, $4,122,000 and $2,591,000 for
interest, respectively.
NOTE 20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
Selected quarterly financial information for the years ended December 31,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
QUARTER
------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1995 --
Net sales................................. $98,257 $90,034 $124,495 $146,486 $459,272
Cost of sales............................. 77,550 73,036 105,444 121,725 377,755
------- ------- -------- -------- --------
Gross profit........................... $20,707 $16,998 $ 19,051 $ 24,761 $ 81,517
======= ======= ======== ======== ========
Net income............................. $ 5,088 $ 3,835 $ 2,289 $ 2,618 $ 13,830
======= ======= ======== ======== ========
Net income per share................... $ .59 $ .45 $ .27 $ .30 $ 1.61
======= ======= ======== ======== ========
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
======= ======= ======== ======== ========
</TABLE>
NOTE 21. SUBSEQUENT EVENT.
In February 1996, the Company announced plans to sell its steel fuel rail
business in Ligonier, Indiana. Sales at this facility were approximately
$29,000,000 in 1995.
F-27
<PAGE> 113
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................................. $ 15,227 $ 19,792
Accounts receivable (net)......................................... 140,784 113,346
Inventories....................................................... 54,408 50,723
Other current assets.............................................. 16,565 15,843
-------- --------
Total current assets........................................... 226,984 199,704
PROPERTY, PLANT & EQUIPMENT:
Land, buildings & improvements.................................... 63,387 57,986
Machinery & equipment............................................. 272,913 211,707
-------- --------
Subtotal....................................................... 336,300 269,693
Less: accumulated depreciation.................................... (76,044) (63,928)
-------- --------
Net property, plant & equipment................................ 260,256 205,765
OTHER ASSETS:
Goodwill (net).................................................... 32,667 33,299
Joint ventures, investments & other............................... 54,951 54,705
-------- --------
Total other assets............................................. 87,618 88,004
-------- --------
Total assets................................................... $ 574,858 $493,473
======== ========
LIABILITIES
CURRENT LIABILITIES:
Current portion long-term debt.................................... $ 983 $ 1,086
Notes payable -- banks............................................ 14,385 14,921
Accounts payable.................................................. 76,396 52,774
Accrued liabilities............................................... 29,496 35,210
-------- --------
Total current liabilities...................................... 121,260 103,991
LONG-TERM LIABILITIES:
Long-term debt, net of current.................................... 295,489 233,389
Other long-term liabilities....................................... 18,126 20,666
-------- --------
Total long-term liabilities.................................... 313,615 254,055
STOCKHOLDERS' EQUITY
Common stock, $.50 par value; authorized 25,000,000; outstanding
8,601,796 in 1996 and 8,579,976 in 1995........................... 4,301 4,290
Paid-in capital..................................................... 64,762 64,381
Retained earnings................................................... 75,380 66,256
Other stockholders' equity.......................................... (4,460) 500
-------- --------
Total stockholders' equity..................................... 139,983 135,427
-------- --------
Total liabilities & stockholders' equity....................... $ 574,858 $493,473
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-28
<PAGE> 114
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales.................................. $132,545 $124,495 $440,501 $312,786
Cost of Sales & Expenses:
Cost of sales............................ 111,116 105,444 361,951 256,030
Selling and administrative expenses...... 11,078 8,438 39,415 25,604
Research & development expenses.......... 4,986 3,710 13,432 10,371
-------- -------- -------- --------
Operating Income........................... 5,365 6,903 25,703 20,781
Other Expense (Income):
Interest expense......................... 5,059 4,461 15,652 7,127
Interest income.......................... (384) (362) (1,008) (489)
Other (income) expense................... (45) 9 (28) 425
-------- -------- -------- --------
Income before income taxes, minority
interest, and joint ventures............. 735 2,795 11,087 13,718
Provision for income taxes................. 23 895 3,032 4,646
Minority interest.......................... 110 149 320 472
Equity in (income) of joint ventures....... (1,744) (538) (3,969) (2,612)
-------- -------- -------- --------
Net income................................. $ 2,346 $ 2,289 $ 11,704 $ 11,212
======== ======== ======== ========
Net income per share....................... $0.27 $0.27 $1.35 $1.30
Average shares outstanding................. 8,645,041 8,610,864 8,642,598 8,599,392
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-29
<PAGE> 115
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income....................................................... $ 11,704 $ 11,212
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation & amortization................................... 20,201 13,568
(Gain) loss on disposition of assets.......................... (94) 144
Minority interest............................................. (234) 479
(Income) of joint ventures.................................... (3,969) (2,612)
(Gain) on business interrupt insurance........................ (700)
Changes in assets and liabilities:
Deferred income taxes....................................... 175 (393)
Deferred pension obligations & other........................ (1,498) 1,450
Accounts payable and accrued liabilities.................... 14,027 13,996
Accounts receivable, net.................................... (28,597) (16,645)
Inventories................................................. (4,548) (279)
Prepaid expenses and other.................................. (5,894) (2,497)
-------- ---------
Total adjustments........................................ (10,431) 6,511
-------- ---------
Net cash provided by (used in) operating activities........... 1,273 17,723
Cash Flows From Investing Activities:
Purchase of fixed assets......................................... (70,453) (33,319)
Acquisitions, net of cash acquired............................... 0 (124,176)
Purchase of other assets......................................... (3,238) (6,665)
Investment in joint ventures & other............................. (259) (5,634)
Proceeds from disposal of assets................................. 3,533 115
-------- ---------
Net cash used in investing activities......................... (70,417) (169,679)
Cash Flows From Financing Activities:
Net borrowings under line-of-credit agreements................... 68,692 62,321
Debt repayments.................................................. 0 (1,793)
Proceeds from issuance of debt................................... 110,526
Proceeds from issuance of common stock & options................. 392 157
Cash dividends paid.............................................. (2,578) (2,569)
-------- ---------
Net cash provided by (used in) financing activities........... 66,506 168,642
Effect of exchange rate changes on cash.......................... (1,927) (904)
-------- ---------
Net increase (decrease) in cash.................................. (4,565) 15,782
Cash beginning balance........................................... 19,792 4,540
-------- ---------
Cash ending balance.............................................. $ 15,227 $ 20,322
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-30
<PAGE> 116
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ACQUISITION OF DYNO INDUSTRIER FUEL SYSTEMS BUSINESS
On July 27, 1995, the Company, through certain of its wholly-owned
subsidiaries, acquired the Fuel Systems Business of Dyno Industrier A.S, Oslo,
Norway ("Dyno"). Dyno supplies plastic fuel tanks to most European vehicle
manufacturers through production facilities in Belgium, France, Germany, Norway,
Spain and the United Kingdom.
This acquisition was accounted for as a purchase and, accordingly, the
operating results of Dyno have been included in the accompanying financial
statements since the date of the acquisition. The results of operations for the
three months and nine months ended September 30, 1996 include the results of
Dyno, while the results of operations for the three months and nine months ended
September 30, 1995 only include the results of Dyno after July 27, 1995.
Assuming the acquisition had taken place as of the beginning of 1995, the
consolidated pro forma results of operations of the Company for the three months
and nine months ended September 30, 1995 would have been as follows, after
giving effect to certain adjustments consisting principally of management's
estimates of depreciation and amortization expense resulting from the market
valuation of Dyno net assets acquired, interest expense on acquisition debt and
related tax adjustments (Unaudited; in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED 9/30/95 ENDED 9/30/95
------------- -------------
<S> <C> <C>
Net Sales........................................... $ 138,338 $ 434,461
Net Income.......................................... 1,681 9,725
Net Income Per Share................................ .19 1.13
</TABLE>
F-31
<PAGE> 117
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 118
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 119
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 120
[WALBRO CORPORATION LOGO]
Walbro's Global Presence
[MAP]
[LEGEND TO THE MAP]
[PHOTO]
Multi-layer plastic fuel tank produc-
tion at Walbro's recently-expanded
Ossian, Indiana facility.
[PHOTO]
Electronic ignition systems are
produced at Walbro Engine
Management's facility in Nogales,
Mexico.
[PHOTO]
A fuel storage and delivery system
undergoes evaporative emissions testing
at Walbro's Caro, Michigan Test Center.
<PAGE> 121
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE SPECIFICALLY
OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY OR OF ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................... 4
Incorporation of Certain Documents by
Reference............................... 4
Forward-Looking Statements................ 5
Prospectus Summary........................ 6
Risk Factors.............................. 13
Walbro Capital Trust...................... 20
Accounting Treatment...................... 21
Price Range of Common Stock and
Dividends............................... 21
Use of Proceeds........................... 22
Capitalization............................ 22
Selected Financial Information............ 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 24
Business.................................. 30
Management................................ 42
Security Ownership of Certain Beneficial
Owners and Management................... 44
Description of the Preferred Securities... 46
Description of the Convertible
Debentures.............................. 62
Description of the Guarantee.............. 71
Effect of Obligations Under the
Convertible Debentures and the
Guarantee............................... 74
United States Federal Income Taxation..... 75
Description of Capital Stock.............. 78
Description of Certain Indebtedness....... 80
Underwriting.............................. 82
Legal Matters............................. 83
Experts................................... 83
Index to Consolidated Financial
Statements.............................. F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$50,000,000
2,000,000
CONVERTIBLE TRUST
PREFERRED SECURITIES
WALBRO CAPITAL TRUST
LOGO
% CONVERTIBLE TRUST
PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER CONVERTIBLE TRUST PREFERRED SECURITY) GUARANTEED TO
THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO COMMON STOCK OF,
WALBRO CORPORATION
------------
PROSPECTUS
------------
Smith Barney Inc.
Interstate/Johnson Lane
Corporation
, 1997
------------------------------------------------------
------------------------------------------------------
<PAGE> 122
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions) payable by the Company in
connection with the issuance and distribution of the Preferred Securities
pursuant to the Prospectus contained in this Registration Statement. The Company
will pay all of these expenses.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 17,424
NASD Filing Fee.................................................... 6,250
Nasdaq Listing Application Fee..................................... 12,500
Accounting Fees and Expenses....................................... 100,000
Legal Fees and Expenses............................................ 200,000
Blue Sky Fees and Expenses......................................... 7,000
Printing Expenses.................................................. 125,000
Miscellaneous Expenses............................................. 31,826
--------
Total............................................................ $500,000
========
</TABLE>
All expenses other than the Securities and Exchange Commission Registration
Fee and NASD Filing Fee are estimated.
ITEM 15. 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 his conduct was unlawful. A 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.
Under the Trust Agreement, the Company will agree to indemnify each of the
Trustees of Walbro Capital Trust or any predecessor Trustee for Walbro Capital
Trust, and to hold each Trustee harmless against, any loss, damage, claims,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
Trust Agreement, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties under the Trust Agreement.
II-1
<PAGE> 123
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1* Restated Certificate of Incorporation of the Company, as amended.
3.2 By-Laws of the Company, as amended, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989 (the "Form 10-K"),
incorporated herein by reference.
3.3 Amendment to Section 2.9 of the By-laws of the Company, filed as Exhibit 3.3 to the
Company's 1994 Annual Report on Form 10-K, incorporated herein by reference.
4.1 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, incorporated herein by reference.
4.2 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, incorporated herein by reference.
4.3 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, incorporated herein by reference.
4.4 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, incorporated herein by reference.
4.5 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, incorporated herein by
reference.
4.6 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 July 27, 1995 (the
"Form 8-K"), incorporated herein by reference.
4.7 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, filed as Exhibit 4.2 to the Company's Registration Statement on Form S-4,
filed September 27, 1995, incorporated herein by reference.
4.8 First Amendment, dated March 8, 1996, to the Amended and Restated Credit Agreement
among the Company, certain of its subsidiaries, Comerica Bank, as agent, and Harris
Bank, as co-agent, filed as Exhibit 4.8 to the Company's 1995 Annual Report on Form
Form 10-K, incorporated herein by reference.
4.9 First Amendment, dated as of July 26, 1995, to the Note Agreement among the Company
and the purchasers named therein, relating to the 7.68% Senior Notes of the Company,
filed as Exhibit 4.9 to the Company's 1995 Annual Report on Form 10-K, incorporated
herein by reference.
4.10* Certificate of Trust of Walbro Capital Trust.
4.11 Form of Amended and Restated Declaration of Trust of Walbro Capital Trust among
Walbro Corporation, as Sponsor, Bankers Trust (Delaware), as Delaware Trustee and
Lambert E. Althaver, Daniel L. Hittler and Michael A. Shope, as Regular Trustees.
4.12 Form of Indenture between Walbro Corporation and Bankers Trust Company, as Indenture
Trustee.
4.13 Form of Preferred Security (included in Exhibit A-1 to Exhibit 4.11 above).
</TABLE>
II-2
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
4.14 Form of Convertible Debenture (included in Exhibit A to Exhibit 4.12 above).
4.15 Form of Preferred Securities Guarantee Agreement between Walbro Corporation, as
Guarantor, and Bankers Trust Company, as Guarantee Trustee with respect to the
Preferred Securities of Walbro Capital Trust.
5.1 Opinion of Katten Muchin & Zavis as to the validity of the issuance of the
Convertible Debentures and the Guarantee to be issued by the Company (including
consent).
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the validity
of the issuance of the Preferred Securities to be issued by Walbro Capital Trust
(including consent).
8.1 Opinion of Katten Muchin & Zavis as to certain tax matters (including consent).
12.1* Computation of ratio of earnings to fixed charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen.
23.3 Consent of Deloitte & Touche.
23.4 Consent of Katten Muchin & Zavis (included in Exhibits 5.1 and 8.1).
23.5 Consent of Richards, Layton & Finger (included in Exhibit 5.2).
24.1* Power of Attorney (set forth on signature page of the Registration Statement).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended,
of Bankers Trust Company, as Indenture Trustee under the Indenture, Institutional
Trustee under the Declaration of Trust, and Guarantee Trustee under the Guarantee.
</TABLE>
- -------------------------
* Previously filed.
II-3
<PAGE> 125
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions referred to in Item 15 (other than the
insurance policies referred to therein), or otherwise, the Registrants have 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 Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
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 Registrants will, unless in the opinion of their 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 Registrants hereby
undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 126
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Detroit, State of Michigan on the 6th day of
January, 1997.
WALBRO CORPORATION
By: /s/ LAMBERT E. ALTHAVER
------------------------------------
Lambert E. Althaver
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed by the following persons, in the
capacities indicated, on January 6, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ---------------------------------------------------
<C> <S>
/s/ LAMBERT E. ALTHAVER Chairman of the Board, Chief Executive Officer and
- ---------------------------------------- Director (Principal Executive Officer)
Lambert E. Althaver
/s/ FRANK E. BAUCHIERO* President, Chief Operating Officer and Director
- ----------------------------------------
Frank E. Bauchiero
/s/ ROBERT H. WALPOLE* Vice President and Director
- ----------------------------------------
Robert H. Walpole
/s/ MICHAEL A. SHOPE* Chief Financial Officer and Treasurer (Principal
- ---------------------------------------- Financial and Accounting Officer)
Michael A. Shope
/s/ WILLIAM T. BACON, JR.* Director
- ----------------------------------------
William T. Bacon, Jr.
/s/ HERBERT M. KENNEDY* Director
- ----------------------------------------
Herbert M. Kennedy
/s/ VERNON E. OECHSLE* Director
- ----------------------------------------
Vernon E. Oechsle
/s/ ROBERT D. TUTTLE* Director
- ----------------------------------------
Robert D. Tuttle
/s/ JOHN E. UTLEY* Director
- ----------------------------------------
John E. Utley
</TABLE>
*By: /s/ LAMBERT E. ALTHAVER
----------------------------
Lambert E. Althaver
Attorney-in-Fact, pursuant
to Power of Attorney
II-5
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Detroit, State of Michigan on the 6th day of
January, 1997.
WALBRO CAPITAL TRUST
By: Walbro Corporation
By: /s/ LAMBERT E. ALTHAVER
-------------------------------------
Name: Lambert E. Althaver
Title: Chief Executive Officer
II-6
<PAGE> 128
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1* Restated Certificate of Incorporation of the Company, as amended.
3.2 By-Laws of the Company, as amended, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989 (the "Form 10-K"),
incorporated herein by reference.
3.3 Amendment to Section 2.9 of the By-laws of the Company, filed as Exhibit 3.3 to the
Company's 1994 Annual Report on Form 10-K, incorporated herein by reference.
4.1 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, incorporated herein by reference.
4.2 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, incorporated herein by reference.
4.3 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, incorporated herein by reference.
4.4 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, incorporated herein by reference.
4.5 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, incorporated herein by
reference.
4.6 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 July 27, 1995 (the
"Form 8-K"), incorporated herein by reference.
4.7 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, filed as Exhibit 4.2 to the Company's Registration Statement on Form S-4,
filed September 27, 1995, incorporated herein by reference.
4.8 First Amendment, dated March 8, 1996, to the Amended and Restated Credit Agreement
among the Company, certain of its subsidiaries, Comerica Bank, as agent, and Harris
Bank, as co-agent, filed as Exhibit 4.8 to the Company's 1995 Annual Report on Form
Form 10-K, incorporated herein by reference.
4.9 First Amendment, dated as of July 26, 1995, to the Note Agreement among the Company
and the purchasers named therein, relating to the 7.68% Senior Notes of the Company,
filed as Exhibit 4.9 to the Company's 1995 Annual Report on Form 10-K, incorporated
herein by reference.
4.10* Certificate of Trust of Walbro Capital Trust.
4.11 Form of Amended and Restated Declaration of Trust of Walbro Capital Trust among
Walbro Corporation, as Sponsor, Bankers Trust (Delaware), as Delaware Trustee and
Lambert E. Althaver, Daniel L. Hittler and Michael A. Shope, as Regular Trustees.
4.12 Form of Indenture between Walbro Corporation and Bankers Trust Company, as Indenture
Trustee.
4.13 Form of Preferred Security (included in Exhibit A-1 to Exhibit 4.11 above).
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
4.14 Form of Convertible Debenture (included in Exhibit A to Exhibit 4.12 above).
4.15 Form of Preferred Securities Guarantee Agreement between Walbro Corporation, as
Guarantor, and Bankers Trust Company, as Guarantee Trustee with respect to the
Preferred Securities of Walbro Capital Trust.
5.1 Opinion of Katten Muchin & Zavis as to the validity of the issuance of the
Convertible Debentures and the Guarantee to be issued by the Company (including
consent).
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the validity
of the issuance of the Preferred Securities to be issued by Walbro Capital Trust
(including consent).
8.1 Opinion of Katten Muchin & Zavis as to certain tax matters (including consent).
12.1* Computation of ratio of earnings to fixed charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen.
23.3 Consent of Deloitte & Touche.
23.4 Consent of Katten Muchin & Zavis (included in Exhibits 5.1 and 8.1).
23.5 Consent of Richards, Layton & Finger (included in Exhibit 5.2).
24.1* Power of Attorney (set forth on signature page of the Registration Statement).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended,
of Bankers Trust Company, as Indenture Trustee under the Indenture, Institutional
Trustee under the Declaration of Trust, and Guarantee Trustee under the Guarantee.
</TABLE>
- -------------------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
2,000,000 CONVERTIBLE TRUST PREFERRED SECURITIES
WALBRO CAPITAL TRUST
and
WALBRO CORPORATION
[ ]% Convertible Trust Preferred Securities
(Liquidation amount $25 per Convertible
Trust Preferred Security)
Guaranteed by and Convertible
into Common Stock of
WALBRO CORPORATION
FORM OF UNDERWRITING AGREEMENT
January [ ], 1997
SMITH BARNEY INC.
INTERSTATE/JOHNSON LANE CORPORATION
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Walbro Capital Trust (the "Trust"), a statutory business trust
created under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Section 3801 et
seq.), proposes, upon the terms and conditions set forth herein, to issue and
sell 2,000,000 [ ]% Convertible Trust Preferred Securities, liquidation
amount $25 per security (the "Firm Preferred Securities"), to the several
Underwriters named in Schedule I hereto (the "Underwriters"). The Trust also
proposes, upon the terms and conditions set forth herein and solely for the
purpose of covering over-allotments, to issue and sell to the Underwriters up to
an additional 300,000 [ ]% Convertible Trust Preferred Securities,
liquidation amount $25 per security (the "Additional Preferred Securities"). The
Firm Preferred Securities and the Additional Preferred Securities
<PAGE> 2
-2-
are hereinafter collectively referred to as the "Preferred Securities."
Each Preferred Security is convertible at the option of the holder
thereof into shares of common stock, par value $.50 per share (the "Conversion
Shares"), of Walbro Corporation (the "Company" and together with the Trust, the
"Offerors") at a conversion rate of [ ] Conversion Shares for each Preferred
Security, subject to adjustment in certain circumstances. The Preferred
Securities will be guaranteed by the Company, to the extent set forth in the
Prospectus (as defined below), with respect to distributions and amounts payable
upon liquidation or redemption (the "Preferred Securities Guarantee") pursuant
to the Preferred Securities Guarantee Agreement (the "Preferred Securities
Guarantee Agreement") to be dated as of the Closing Date (as defined below)
executed and delivered by the Company and Bankers Trust Company (the "Guarantee
Trustee"), a New York banking corporation, not in its individual capacity
but solely as trustee, for the benefit of the holders from time to time of the
Preferred Securities. The entire proceeds from the sale of the Preferred
Securities will be combined with the entire proceeds from the sale by the Trust
to the Company of its common securities (the "Common Securities") which will be
guaranteed by the Company, to the extent set forth in the Prospectus, with
respect to distributions and amounts payable upon liquidation or redemption (the
"Common Securities Guarantee" and, together with the Preferred Securities
Guarantee, the "Guarantees") pursuant to the Common Securities Guarantee
Agreement (the "Common Securities Guarantee Agreement" and, together with the
Preferred Securities Guarantee Agreement, the "Guarantee Agreements"), to be
dated as of the Closing Date, executed and delivered by the Company for the
benefit of the holders from time to time of the Common Securities, and will be
used by the Trust to purchase the [ ]% Convertible Subordinated Debentures
due 2017 (the "Convertible Debentures") issued by the Company. The Preferred
Securities and the Common Securities will be issued pursuant to the Amended and
Restated Declaration of Trust of the Trust, to be dated as of Closing Date (the
"Declaration"), among the Company, as Sponsor, Bankers Trust Company, as
institutional trustee (the "Institutional Trustee"), Bankers Trust (Delaware),
as Delaware trustee (the "Delaware Trustee"), and Lambert E. Althaver, Daniel
L. Hittler and Michael A. Shope as regular trustees (the "Regular Trustees"
and together with the Institutional Trustee and the Delaware Trustee, the
"Trustees"), and the holders from time to time of undivided beneficial
interests in the assets of the Trust. The Convertible Debentures will be
issued pursuant to an Indenture, to be dated
<PAGE> 3
-3-
as of the Closing Date (the "Indenture"), between the Company and Bankers Trust
Company, as trustee (the "Indenture Trustee"). The Preferred Securities, the
Preferred Securities Guarantee, the Convertible Debentures and the Conversion
Shares are collectively referred to herein as the "Securities." Capitalized
terms used herein without definition have the respective meanings specified in
the Prospectus.
The Offerors wish to confirm as follows their agreement with you and
the other several Underwriters on whose behalf you are acting, in connection
with the several purchases of the Preferred Securities by the Underwriters.
1. Registration Statement and Prospectus. The Offerors have
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Securities Act"), a registration statement on Form S-3 (File
No. 333-18317) under the Securities Act (the "registration statement"),
including a prospectus subject to completion relating to the Securities. The
term "Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective, or, if the registration statement became effective
prior to the execution of this Agreement, as supplemented or amended prior to
the execution of this Agreement. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the registration
statement will be filed and must be declared effective before the offering of
the Preferred Securities may commence, the term "Registration Statement" as used
in this Agreement means the registration statement as amended by said
post-effective amendment. If an additional registration statement is prepared
and filed with the Commission in accordance with Rule 462(b) under the
Securities Act (an "Additional Registration Statement"), the term "Registration
Statement" as used in this Agreement includes the Additional Registration
Statement. The term "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement as supplemented by the
addition of Rule 430A information contained in the prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act. The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion relating to the Preferred Securities in the form included in the
registration statement at the time of the initial filing of the registration
statement
<PAGE> 4
-4-
with the Commission, and as such prospectus shall have been amended from time
to time prior to the date of the Prospectus. Any reference in this Agreement to
the registration statement, the Registration Statement, any Prepricing
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Form S-3 under the
Securities Act, as of the date of the registration statement, the Registration
Statement, such Prepricing Prospectus or the Prospectus, as the case may be, and
any reference to any amendment or supplement to the registration statement, the
Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act") which, upon filing,
are incorporated by reference therein, as required by Form S-3. As used herein,
the term "Incorporated Documents" means the documents which at the time are
incorporated by reference in the registration statement, the Registration
Statement, any Prepricing Prospectus, the Prospectus, or any amendment or
supplement thereto.
2. Agreements to Sell and Purchase. The Trust hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Offerors herein contained and subject to all the terms and
conditions set forth herein each Underwriter agrees, severally and not jointly,
to purchase from the Trust, at a purchase price of $[ ] per Firm Preferred
Security, plus accrued distributions, if any from [ ], 1997, the number
of Firm Preferred Securities set forth opposite the name of such Underwriter in
Schedule I hereto (or such number of Firm Preferred Securities increased as set
forth in Section 10 hereof).
The Company agrees that, in view of the fact that the proceeds of the
sale of the Preferred Securities will be invested in the Convertible Debentures,
it shall pay to the Underwriters as compensation ("Underwriters' Compensation")
for their arranging the investment of the proceeds therein, on the Closing Date,
$[ ] per Firm Preferred Security. The Underwriters shall inform the
Company in writing on the Closing Date of the aggregate number of Firm Preferred
Securities so sold.
The Trust also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and upon the basis of the
representations, warranties and
<PAGE> 5
-5-
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, the Underwriters shall have the right to purchase
from the Trust pursuant to an option (the "over-allotment option") which may be
exercised at any one time prior to 9:00 P.M., New York City time, on the 30th
day after the date of the Prospectus (or, if such 30th day shall be a Saturday
or Sunday or a holiday, on the next business day thereafter when the NASDAQ
National Market ("NASDAQ") is open for trading), up to 300,000 Additional
Preferred Securities at the same purchase price as the Firm Preferred
Securities, plus accrued distributions, if any, from [ ], 1997. Upon
exercise of the over-allotment option, each Underwriter, severally and not
jointly, agrees to purchase that number of Additional Preferred Securities
(subject to such adjustments as you may determine in order to avoid fractional
securities) which bears the same proportion to the aggregate number of
Additional Preferred Securities to be purchased by the Underwriters as the
number of Firm Preferred Securities set forth opposite the name of such
Underwriter bears in Schedule I hereto (or such number of Firm Preferred
Securities increased as set forth in Section 10 hereof) to the aggregate number
of Firm Preferred Securities. The Company agrees that it will pay Underwriters'
Compensation on the Option Closing Date (as hereinafter defined) in the amounts
per Preferred Security set forth in the immediately preceding paragraph with
respect to any Additional Preferred Securities purchased by the Underwriters.
3. Terms of Public Offering. The Offerors have been advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Preferred Securities as soon as the Underwriters deem advisable
after the Registration Statement has become effective, this Agreement has been
executed and delivered, and the Declaration, the Preferred Securities Guarantee
Agreement and the Indenture have been qualified under the Trust Indenture Act of
1939, as amended (the "1939 Act"). The entire proceeds from the sale of the
Preferred Securities will be combined with the entire proceeds from the sale by
the Trust to the Company of its Common Securities, and will be used by the Trust
to purchase an equivalent amount of the Convertible Debentures.
4. Delivery of the Preferred Securities and Payment Therefor.
Delivery to the Underwriters of and payment for the Firm Preferred Securities
shall be made at the office of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, at 8:30 A.M., New York City time, on [ ], 1997 (the
"Closing Date"). The place of closing for the Preferred Securities
<PAGE> 6
-6-
and the Closing Date may be varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional
Preferred Securities to be purchased by the Underwriters shall be made at the
aforementioned office of Smith Barney Inc. at such time and on such date (the
"Option Closing Date"), which may be the same as the Closing Date but shall in
no event be earlier than the Closing Date nor earlier than two nor later than
ten business days after the giving of the notice hereinafter referred to, as
shall be specified in a written notice from you to the Offerors of the
Underwriters' determination to purchase the number of Additional Preferred
Securities specified in such notice. The place of closing for any Additional
Preferred Securities and the Option Closing Date for such Additional Preferred
Securities may be varied by agreement between you and the Offerors.
The Firm Preferred Securities and any Additional Preferred Securities
which the Underwriters may elect to purchase shall be delivered to you for the
accounts of the several Underwriters registered in the name of Cede & Co., as
nominee for the Depository Trust Company, against payment of the purchase price
therefor in immediately available funds. The Preferred Securities to be
delivered to the Underwriters shall be made available to you 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 or the Option Closing Date, as
the case may be.
5. Agreements of the Offerors. The Company and the Trust, jointly
and severally, agree with the several Underwriters as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-
effective amendment thereto (or any Additional Registration Statement)
to be declared or to become effective before the offering of the
Securities may commence, the Offerors will endeavor to cause the
Registration Statement or such post-effective amendment to become
effective as soon as possible and will advise you promptly and, if
requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment (or any
Additional Registration Statement) has become effective.
<PAGE> 7
-7-
(b) The Offerors will advise you promptly and, if requested
by you, will confirm such advice in writing: (i) of any request by
the Commission for amendment of or a supplement to the Registration
Statement, any Prepricing Prospectus or the Prospectus or for
additional information; (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Securities for offering
or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in
paragraph (f) below, of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires
the making of any additions to or changes in the Registration
Statement or the Prospectus (as then then amended or supplemented) in
order to state a material fact required by the Securities Act or the
regulations thereunder to be stated therein or necessary in order to
make the statements therein not misleading, or of the necessity to
amend or supplement the Prospectus (as then amended or supplemented)
to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness
of the Registration Statement, the Offerors will make every reasonable
effort to obtain the withdrawal of such order at the earliest possible
time.
(c) The Offerors will furnish to you, without charge, (i) 3
copies of the registration statement as originally filed with the
Commission via EDGAR and of each amendment thereto so filed, including
financial statements and all exhibits to the registration statement,
and will furnish you with an equal number of copies of executed
signature pages regarding the same, (ii) such number of conformed
copies of the registration statement as originally filed and of each
amendment thereto, but without exhibits, as you may reasonably request
and (iii) such number of copies of the Declaration, the Preferred
Securities Guarantee Agreement, the Common Securities Guarantee
Agreement and the Indenture and of the Incorporated Documents, as you
may reasonably request.
(d) Prior to the end of the period of time referred to in
the first sentence in subsection (f) below, the Offerors will not file
any amendment to the Registration Statement or any Additional
Registration Statement or make
<PAGE> 8
-8-
any amendment or supplement to the Prospectus to which you shall reasonably
object or file with the Commission any document which upon filing becomes
an Incorporated Document and of which you shall not previously have been
advised.
(e) Prior to the execution and delivery of this Agreement, the
Offerors have delivered to you, without charge, in such quantities as you
have reasonably requested, copies of each Prepricing Prospectus. The
Offerors consent to the use, in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the
jurisdictions in which the Preferred Securities are offered by the several
Underwriters and by dealers, prior to the date of the Prospectus, of each
Prepricing Prospectus so furnished by the Offerors.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion
of counsel for the Underwriters a Prospectus is required by the Securities
Act to be delivered in connection with sales by any Underwriter or dealer,
the Offerors will expeditiously deliver to each Underwriter and each
dealer, without charge, as many copies of the Prospectus (and of any
amendment or supplement thereto) as you may reasonably request. The
Offerors' consent to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Securities Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Preferred Securities are offered by the several Underwriters and by all
dealers to whom Preferred Securities may be sold, both in connection with
the offering and sale of the Preferred Securities and for such period of
time thereafter as the Prospectus is required by the Securities Act to be
delivered in connection with sales by any Underwriter or dealer. If during
such period of time any event shall occur that in the judgment of the
Offerors or in the opinion of counsel for the Underwriters is required to
be set forth in the Prospectus (as then amended or supplemented) or should
be set forth therein in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus (or to file under the
Exchange Act any document which upon filing, becomes an Incorporated
Document) in order to comply with the Securities Act or any other law, the
Offerors will forthwith prepare and, subject to the provisions of
<PAGE> 9
-9-
paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto (or to such document), and will expeditiously furnish to
the Underwriters and dealers a reasonable number of copies thereof. In the
event that the Offerors and you, as Representatives of the several
Underwriters, agree that the Prospectus should be amended or supplemented,
the Offerors or the Company, if requested by you, will promptly issue a
press release announcing or disclosing the matters to be covered by the
proposed amendment or supplement.
(g) The Offerors will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the
Securities for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky Laws of such jurisdictions as you may
designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such registration or
qualification; provided that in no event shall the Company or the Trust 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 taxation or
service of process in suits, other than those arising out of the offering
or sale of the Preferred Securities, in any jurisdiction where it is not
now so subject.
(h) The Offerors will make generally available to the Trust's
security holders a consolidated earnings statement of the Company, which
need not be audited, covering a twelve-month period commencing after the
effective date of the Registration Statement and ending not later than 15
months thereafter, as soon as practicable after the end of such period,
which consolidated earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
(i) So long as any of the Securities are outstanding, the Company
will furnish to you, (i) as soon as available, a copy of all reports and
other communications (financial or otherwise) of the Company mailed to
stockholders or filed by the Company with the Commission or any national
securities exchange on which any security of the Company may be listed or
quoted and a copy of each Annual Report on Form 10-K, each quarterly report
on Form 10-Q and each current report on Form 8-K filed by the Company with
the Commission under the Exchange Act, and (ii) from time to
<PAGE> 10
-10-
time such other information concerning the Company as you may reasonably
request and the Trust will furnish to you, upon your request, a copy of
each report of the Trust mailed to holders of Preferred Securities or
Common Securities.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant
to the second paragraph of Section 10 hereof or by notice given by you
terminating this Agreement pursuant to Section 10 hereof) or if this
Agreement shall be terminated by the Underwriters because of any failure or
refusal on the part of the Offerors to comply with the terms or fulfill any
of the conditions of this Agreement, the Company agrees to reimburse the
Underwriters for all reasonable out-of-pocket expenses (including
reasonable fees and expenses of counsel for the Underwriters) incurred by
you in connection herewith.
(k) The Trust will apply the net proceeds from the sale of the
Preferred Securities, and the Company will apply the net proceeds from the
sale of the Convertible Debentures, substantially in accordance with the
description set forth in the Prospectus under "Use of Proceeds".
(l) If required by the rules of the Commission, the Offerors
will timely file the Prospectus pursuant to Rule 424(b) under the
Securities Act and will advise you of the time and manner of such filing.
(m) Each of the Trust and the Company agree, during the period
beginning on the date of this Agreement and continuing to and including the
date that is 90 days after the Closing Date, not to offer, sell,
contract to offer, sell or otherwise dispose of any preferred securities,
any preferred stock, any common stock or any other securities (including
any backup undertakings for such preferred stock or other securities) of
the Company or of the Trust, in each case that are substantially similar
to the Preferred Securities, or any securities convertible into or
exchangeable for the Preferred Securities or such substantially similar
securities of either the Trust or the Company, without the prior written
consent of Smith Barney Inc.
(n) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not
<PAGE> 11
-11-
taken, nor will it 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 Preferred Securities to facilitate the
sale or resale of the Preferred Securities.
(o) The Company will use its best efforts to effect the quotation
of the Preferred Securities on the NASDAQ. If the Convertible Debentures
are distributed on the occurrence of a Tax Event (as defined in the
Prospectus), the Company will use its best efforts to effect the quotation
of such Convertible Debentures on the NASDAQ or such other exchange where
the Preferred Securities are listed.
6. Representations and Warranties of the Offerors. The Company
and the Trust, jointly and severally, represent and warrant to, and agree with,
each Underwriter that as of the date hereof, as of the Closing Date referred to
in Section 4 hereof, and as of each Option Closing Date if any, as referred to
in Section 4 hereof:
(a) Each Prepricing Prospectus complied in all material respects
with the provisions of the Securities Act. The Commission has not issued
any order preventing or suspending the use of any Prepricing Prospectus.
(b) Each of the Offerors and the transactions contemplated by
this Agreement meet the requirements for using Form S-3 under the
Securities Act. The registration statement in the form in which it became
or becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective, any Additional
Registration statement when filed with the Commission pursuant to Rule
462(b) under the Securities Act and the Prospectus and any supplement and
amendment thereto when filed with the Commission under Rule 424(b) under
the Securities Act complied or will comply in all material respects with
the provisions of the Securities Act and will not at any such times
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 registration statement or
the Prospectus made in reliance upon and in conformity with
<PAGE> 12
-12-
information relating to any Underwriter furnished to the Offerors in
writing by or on behalf of any Underwriter through you expressly for use
therein.
(c) The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
any further Incorporated Documents so filed will, when they are filed,
conform in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder; no such document when it was
filed (or, if an amendment with respect to any such document was filed,
when such amendment was filed), contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and no
such further document, when it is filed, will contain an untrue statement
of a material fact or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
(d) The execution and delivery of, and the performance by the
Company and the Trust of their respective obligations under this Agreement
have been duly and validly authorized by the Company and the Trust,
respectively, and this Agreement has been duly executed and delivered by
the Company and the Trust, respectively, and is enforceable in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and subject to the
applicability of general principles of equity and except as rights
to indemnity hereunder may be limited by federal securities laws.
(e) The Offerors have not distributed and, prior to the later to
occur of (i) the Closing Date and (ii) completion of the distribution of
the Preferred Securities, will not distribute any offering materials in
connection with the offering and sale of the Preferred Securities other
than the Registration Statement, the Prepricing Prospectus, the Prospectus
or other materials, if any, permitted by the Securities Act.
<PAGE> 13
-13-
(f) Arthur Andersen, LLP, the accountants who certified the
financial statements and supporting schedules of the Company, Dyno and
[Marwal] included in the Registration Statement, are independent public
accountants as required by the Securities Act and Securities Act
regulations.
(g) The financial statements included in the Registration
Statement and the Prospectus, together with the related schedules and
notes, present fairly the financial position of the Company and its
consolidated subsidiaries, Dyno and [Marwal] at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries, Dyno and [Marwal] for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The selected financial
data and the summary financial information included in the Prospectus
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements included in
the Registration Statement.
(h) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect") and (B) there have been no transactions entered
into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the Company
and its subsidiaries considered as one enterprise, and (C) there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock except as is described in the
Prospectus.
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of
Delaware and has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
<PAGE> 14
-14-
Statement and the Prospectus and to enter into and perform its obligations
under this Agreement, the Declaration, the Indenture, the Guarantees and
the Convertible Debentures and to purchase, own and hold the Common
Securities issued by the Trust; and the Company is duly registered and
qualified as a foreign corporation to conduct its business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(j) Each Significant Subsidiary of the Company as defined in
Rule 1-02 of Regulation S-X under the Securities Act (a "Significant
Subsidiary") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation (which is listed opposite the name of each subsidiary in
Schedule II hereto), has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus and is duly registered and
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement and the Prospectus, all of the issued and
outstanding capital stock of each such Significant Subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable
and is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage pledge, lien, encumbrance, claim
or equity; none of the outstanding shares of capital stock of any
subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such subsidiary. The only Significant Subsidiaries
of the Company are the subsidiaries listed in Schedule II hereto.
(k) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus as of the respective dates
presented; and the Preferred Securities, the Common Securities, the
Conversion Shares, the Convertible Debentures, the Declaration, the
Preferred Securities Guarantee Agreement and the Indenture conform in all
material respects to
<PAGE> 15
-15-
the descriptions thereof in the Prospectus under the captions "Description
of the Preferred Securities," "Description of the Guarantee," "Description
of the Convertible Debentures," "Effect of Obligations Under the
Convertible Debentures and the Guarantee" and "Description of Capital
Stock".
(l) The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act with the power and
authority to own property and to conduct its business as described in the
Registration Statement and the Prospectus, and any amendment or supplement
thereto, and to enter into and perform its obligations under this
Agreement, the Preferred Securities, the Common Securities and the
Declaration; the Trust is duly qualified to transact business as a foreign
corporation in good standing in each jurisdiction in which such
qualification is necessary, except to the extent that the failure to so
qualify would not have a Material Adverse Effect on the Trust; and the
Trust is not a party to or otherwise bound by any agreement other than
those described in the Prospectus, and any amendment or supplement thereto.
(m) The Common Securities have been duly authorized by the
Declaration and, when issued and delivered by the Trust to the Company in
accordance with the terms of the Declaration and against payment therefor
as described in the Prospectus, will be validly issued and (subject to the
terms of the Declaration) fully paid and nonassessable undivided beneficial
interests in the assets of the Trust; the issuance of the Common Securities
is not subject to preemptive or other similar rights; no holder thereof
will be subject to personal liability by reason of being such a holder; and
at the Closing Time, all of the issued and outstanding Common Securities of
the Trust will be directly owned by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity.
(n) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable; no holder
<PAGE> 16
-16-
thereof is or will be subject to personal liability by reason of being such
a holder; and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights
of any stockholder of the Company.
(o) The Declaration has been duly and validly authorized by the
Company and, when validly executed and delivered by the Company and the
Regular Trustees, and assuming the due authorization, execution and
delivery of the Declaration by the Delaware Trustee and the Institutional
Trustee, the Declaration will be a valid and legally binding obligation of
the Company and the Regular Trustees, enforceable against the Company and
the Regular Trustees in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally; and the Declaration has been duly qualified under the 1939 Act
and conforms to the description thereof in the Registration Statement and
the Prospectus and any amendment or supplement thereto;
(p) The Regular Trustees of the Trust are officers of the Company
and have been duly authorized by the Company to execute and deliver the
Declaration.
(q) The Preferred Securities Guarantee Agreement has been duly
and validly authorized by the Company and, when validly executed and
delivered by the Company, and assuming due authorization, execution and
delivery of the Preferred Securities Guarantee Agreement by the Guarantee
Trustee, will constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to the fraudulent transfers),
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally; and the Preferred Securities Guarantee
Agreement has been duly qualified under the 1939 Act and conforms to the
description thereof in the Registration Statement and the Prospectus and
any amendment or supplement thereto;
<PAGE> 17
-17-
(r) The Preferred Securities have been duly and validly
authorized by the Declaration and, when authenticated in the manner
provided for in the Declaration and issued and delivered pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and (subject to the terms of the Declaration) fully paid and
nonassessable undivided beneficial interests in the assets of the Trust;
the issuance of the Preferred Securities is not subject to preemptive or
other similar rights; and holders of Preferred Securities will be entitled
to the same limitation of personal liability extended to stockholders of
private corporations for profit incorporated under the General Corporation
Law of the State of Delaware and the Preferred Securities have been
registered under the Exchange Act and authorization for quoting the
Preferred Securities on the NASDAQ has been given, subject only to official
notice of issuance.
(s) The Indenture has been duly and validly authorized by the
Company, and, when validly executed and delivered by the Company, and
assuming the due authorization, execution and delivery of the Indenture by
the Indenture Trustee, will be a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally; and the Indenture has been (or will have been)
duly qualified under the 1939 Act and conforms to the description thereof
in the Registration Statement and the Prospectus, and any amendment or
supplement thereto.
(t) The Convertible Debentures have been duly and validly
authorized by the Company, and when validly executed, authenticated, issued
and delivered in the manner provided for in the Indenture and sold and paid
for as provided in this Agreement, the Convertible Debentures will be valid
and binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally; and the Indenture conforms to
the description
<PAGE> 18
-18-
thereof in the Registration Statement and the Prospectus, and any amendment
or supplement thereto.
(u) The Company's obligations under the Preferred Security
Guarantee are (i) subordinated and junior to all other liabilities of the
Company except any liabilities that may be pari passu expressly by their
terms, (ii) pari passu with the most senior preferred or preference stock,
if any, issued from time to time by the Company and with any guarantee now
or hereafter entered into by the Company in respect of any preferred or
preference stock or preferred securities of any affiliate of the Company
and (iii) senior to the Common Stock.
(v) The Convertible Debentures are subordinate in right of
payment to all existing and future Senior Indebtedness (as defined in the
Indenture) of the Company.
(w) To the knowledge of the Offerors neither the Company nor any
of its subsidiaries is in violation of its charter, by-laws or other
organizational documents; the Trust is not in violation of the Declaration
or its Certificate of Trust filed with the State of Delaware on December
17, 1996; and neither the Company, any Significant Subsidiaries of the
Company or the Trust is in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company, any of
its subsidiaries or the Trust is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company, any
subsidiary or the Trust is subject (collectively, "Agreements and
Instruments"), except for such defaults that would not result in a
Material Adverse Effect.
<PAGE> 19
-19-
(x) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or any subsidiary's principal suppliers,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(y) Except as described in the Registration Statement and the
Prospectus, there is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company, threatened,
against or affecting the Company, any Significant Subsidiary of the
Company or the Trust, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which could
reasonably be expected to result in a Material Adverse Effect, or which
could reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company or the
Trust of their respective obligations hereunder; the aggregate of all
pending legal or governmental proceedings to which the Company or any
<PAGE> 20
-20-
subsidiary of the Company or the Trust is a party or of which any of their
respective property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material
Adverse Effect.
(z) There are not contracts or documents which are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits thereto which have not been so described and filed as required.
(aa) Neither the issuance and sale of the Preferred Securities by the
Trust, the extension of the Guarantee by the Company, the issuance and
sale of the Convertible Debentures by the Company, the execution, delivery
or performance of the Declaration, the Indenture and the Guarantees by the
Offerors, nor the consummation by the Offerors of the transactions
contemplated hereby and thereby and compliance by the Offerors with their
respective obligations hereunder and thereunder (A) 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 be required for the
registration of the Securities under the Securities Act and the Exchange
Act and compliance with the securities or Blue Sky laws of various
jurisdictions, all of which have been or will be effected in accordance
with this Agreement) or conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, the certificate or
articles of incorporation or bylaws, or other organizational documents,
of the Company or any of its Significant Subsidiaries or the Declaration
or Certificate of Trust of the Trust or (B) conflicts or will conflict
with, in any material respect, or constitutes or will constitute a breach
of, or a default, in any material respect, under, any material agreement,
indenture, lease or other instrument to which the Company, any of its
Significant Subsidiaries or the Trust is a party or by which any of them
or any of their respective properties may be bound, except any such
conflict or conflicts that in the aggregate would not result in a
Material Adverse Effect or (C) violates or will violate, in any material
respect, any statute, law, regulation or filing or judgment, injunction,
order or decree of any government, government instrumentality or court,
domestic or foreign, applicable to the Company, any of its Significant
Subsidiaries or the Trust or any of their respective properties, except
any such violation or violations that in the aggregate would not result
in a Material Adverse Effect or (D) will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company, any of its Significant Subsidiaries or the
<PAGE> 21
-21-
Trust 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.
(bb) The Company and its Significant Subsidiaries possess such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by them; the Company and its Significant
Subsidiaries are in material compliance with the terms and conditions of
all such Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, have a Material Adverse Effect;
all of the Governmental Licenses are valid and in full force and effect;
and neither the Company nor any of its Significant Subsidiaries has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
(cc) The Company and its Significant Subsidiaries have good and
marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in
each case, free and clear of all material liens, security interests,
claims, restrictions mortgages, pledges, or encumbrances of any kind
except such as (A) are described in the Prospectus of (B) do not, singly
or in the aggregate, materially affect the value of such property and do
not interfere with the use made and currently proposed to be made of such
property by the Company or any of its Significant Subsidiaries; and all of
the leases and subleases material to the business of the Company and its
Significant Subsidiaries, considered as one enterprise, and under which
the Company or any of its Significant Subsidiaries holds properties
described in the Prospectus, are in full force and effect, and neither the
Company nor any Significant Subsidiary has any notice of any material
claim of any sort that has been asserted by anyone adverse to the rights
of the Company or any Significant Subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the
Company or such Significant Subsidiaries to the continued possession of
the leased or subleased premises under any such lease or sublease except
as such would not in the aggregate result in a Material Adverse Effect.
<PAGE> 22
-22-
(dd) Neither the Company nor the Trust is, and upon the issuance and
sale of the Preferred Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectus neither will
be, an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940,
as amended (the "1940 Act").
(ee) Except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of its
Significant Subsidiaries is in violation of any federal, state, local
or foreign statute, law, rule, regulation, ordinance, code, policy or rule
of common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
ground-water, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its Significant Subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or, to the
knowledge of the Company, threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices
of noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company or any of its Significant
Subsidiaries and (D) there are no events or circumstances to the knowledge
of the Company that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its Significant Subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(ff) There are no persons with registrations rights or other similar
rights to have any security registered
<PAGE> 23
-23-
pursuant to the Registration Statement.
(gg) The Company and each of its Significant Subsidiaries have filed
all federal or state income and franchise tax returns required to be filed
and have paid all taxes shown thereon as due, and there is no material tax
deficiency which has been or is reasonably likely to be asserted against
the Company or any of its Significant Subsidiaries, except where the
failure to file such returns or pay such taxes would not have a Material
Adverse Effect; all material tax liabilities of the Company and its
Significant Subsidiaries are adequately provided for on the books of the
Company and its Significant Subsidiaries.
(hh) The Company and each of the Company's Significant Subsidiaries
own or possess all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in the Prospectus
or Registration Statement as being owned by them or any of them and owns,
possesses or has the right to use all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights necessary for
the conduct of their respective businesses, and the Company is not aware
of any claim to the contrary or any challenge by any other person to the
rights of the Company and its Significant Subsidiaries with respect to the
foregoing.
(ii) Each of the Company and its Significant Subsidiaries has
fulfilled its obligations, if any, under the minimum funding standards of
Section 302 of the United States Employee Retirement Income Security Act
of 1974 ("ERISA") and such regulations and published interpretations
thereunder with respect to each "plan" (as defined in ERISA and such
regulations and published interpretations) in which employees of the
Company and its Significant Subsidiaries are eligible to participate and
each such plan is in compliance in all material respects with the
presently applicable provisions of ERISA and such regulations and
published interpretations, and has not incurred any unpaid liability to
the Pension Benefit Guaranty Corporation (other than for the payment of
premiums in the ordinary course) or to any such plan under Title IV of
ERISA.
<PAGE> 24
-24-
7. Indemnification and Contribution. (a) Each of the Trust and
the Company, jointly and severally, agrees to indemnify and hold harmless each
of you and each other Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities 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 untruestatement or alleged untrue statement of a
material fact contained in any Prepricing Prospectus or in the Registration
Statement or the Prospectus 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 not misleading, except 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 made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to such reliance upon and in conformity with the information relating
to such Underwriter furnished in writing to the Offerors by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to any Prepricing Prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) to the extent
that any such loss, claim, damage, liability or expense arises from the sale of
the Preferred Securities by such Underwriter to any person if it shall be
established that a copy of the Prospectus shall not have been delivered or sent
to such person within the time
<PAGE> 25
-25-
required by the Securities Act and the regulations thereunder, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Prepricing Prospectus was corrected in the
Prospectus and such correction would have cured the defect giving rise to such
loss, claim, damage, liability or expense, provided that the Offerors have
delivered the Prospectus to the several Underwriters in such quantity as the
Underwriters reasonably request on a timely basis to permit such delivery or
sending. The foregoing indemnity agreement shall be in addition to any
liability which the Trust or the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against
any Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Trust or the Company, such underwriter or
such controlling person shall promptly notify the Trust and the Company, and the
Trust or the Company shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person 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 Underwriter or
such controlling person unless (i) the Trust or the Company has agreed in
writing to pay such fees and expenses, (ii) the Trust or the Company has failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the Trust or the Company, and such
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and the Trust or the Company by
thesame 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 Trust or the Company shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the Trust and the Company
together shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or 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 expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons
<PAGE> 26
-26-
not having actual or potential differing interests with you or among themselves,
which firm shall be designated in writing by Smith Barney Inc., and that all
such fees and expenses shall be reimbursed as they are incurred. The Trust and
the Company shall not be liable for any settlement of any such action, suit or
proceeding effected without the Company's 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 Trust and the Company agree to indemnify
and hold harmless any Underwriter, to the extent provided in the preceding
paragraph, and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Trust, the Company, the Company's directors,
the Company's officers and the Regular Trustees who sign the Registration
Statement, and any person who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Trust and the Company to each
Underwriter, but only with respect to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter through you expressly
for use in the Registration Statement, the Prospectus or any Prepricing
Prospectus, or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against the Trust, the Company, any of the
Company's directors, any such officer or Regular Trustee, or any such
controlling person, based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect
of which indemnity may be sought against any Underwriter pursuant to this
paragraph (c), such Underwriter shall have the rights and duties given to the
Trust or the Company by paragraph (b) above (except that if the Trust or the
Company shall have assumed the defense thereof, such Underwriter 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
Underwriter's expense), Regular Trustee and the Trust, the Company, the
Company's directors, any such officer or trustee, and any such controlling
person shall have the rights and duties given to the Underwriters by paragraph
(b) above. The foregoing indemnity agreement shall be in addition to any
liability which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under
<PAGE> 27
-27-
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 expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Trust and the Company on the one hand and the
Underwriters on the other hand from the offering of the Preferred 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 Trust and the Company on the one hand and the Underwriters 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 Trust and the
Company on the one hand and the Underwriters 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 Trust bear to the total compensation
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Trust and the
Company on the one hand and the Underwriters 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 Offerors on the one hand
or by the Underwriters 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 Trust, the Company and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by a pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in 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 defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Underwriter
shall be
<PAGE> 28
-28-
required to contribute any amount in excess of the amount by which the total
price ofthe Preferred Securities underwritten by it and distributed to the
public exceeds the amount of any damages which such Underwriter 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 Underwriters' obligations to contribute pursuant to this
Section 7 are several in proportion to the respective numbers of Preferred
Securities set forth opposite their names in Schedule I hereto (or such numbers
of Preferred Securities increased as set forth in Section 10 hereof) and not
joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
relating to 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,
compromise or consent (i) includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding and (ii) does not include a statement as to or an admission
of fault or culpability by or on behalf of any indemnified party.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 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 7 and the
representations and warranties of the Trust and the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Trust, the Company, the Company's directors or
officers, the Regular Trustees, or any person controlling the Company, (ii)
acceptance of any Preferred Securities and payment therefor hereunder, and (iii)
any termination of this Agreement. A successor to any Underwriter or any
person controlling any Underwriter, or to the Trust, the Company, the Company's
directors or officers, the Regular Trustees, or any person controlling the
Company, shall be entitled to the
<PAGE> 29
-29-
benefits of the indemnity, contribution, and reimbursement agreements contained
in this Section 7.
8. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters to purchase and pay for the Preferred Securities as
provided herein shall be subject to the accuracy, as of the date of this
Agreement and the Closing Date (as if made at the Closing Date), of the
representations and warranties of the Offerors herein, to the performance by
theOfferors of their obligations hereunder, and to the following additional
conditions:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the registration statement or a post- effective amendment
thereto (or an Additional Registration Statement) to be declared or to become
effective before the offering of the Preferred Securities may commence, the
registration statement or such post-effective amendment or Additional
Registration Statement shall have become effective not later than 5:30 P.M., New
York City time, on the date hereof, or at such later date and time as shall be
consented to in writing by you, and all filings, if any, required by Rules 424
and 430A under the Securities Act shall have been timely made; and no stop order
suspending the effectiveness of the registration statement shall have been
issued and no proceeding for that purpose shall have been instituted or, to the
knowledge of the Offerors or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
registration statement or the Prospectus or otherwise) shall have been complied
with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth or results of operations of the Company or its
subsidiaries which, in your opinion as Representatives of the several
Underwriters, would materially adversely affect the market for the Preferred
Securities, or (ii) any event or development relating to or involving the
Company or any officer of director of the Company which makes any statement made
in the Prospectus untrue or which, in the opinion of the Company and its counsel
or the Underwriters and their counsel, requires the making of any addition to or
change in the Prospectus in order to state a material fact required by the
Securities Act or any other law to be stated therein or necessary in order to
make the
<PAGE> 30
-30-
statements therein not misleading, if amending or supplementing the Prospectus
to reflect such event or development would, in your opinion, as Representatives
of the several Underwriters, materially adversely affect the market for the
Preferred Securities.
(c) You shall have received an opinion, dated the Closing Date,
of Katten Muchin & Zavis, counsel to the Offerors, substantially in the form
attached hereto as Exhibit A.
(d) You shall have received an opinion, dated the Closing Date,
of Richards Layton & Finger, special Delaware counsel to the Offerors,
substantially in the form attached hereto as Exhibit B.
(e) You shall have received an opinion, dated the Closing Date,
of Cahill Gordon & Reindel, counsel for the Underwriters, with respect to such
matters regarding the Offering of the Preferred Securities as you shall
reasonably request.
(f) The Company and the Trust shall each have furnished the
Underwriters with a certificate, dated the Closing Date, and, in the case of the
Company, signed by the Chairman of the Board, any Vice Chairman, the President,
any Executive Vice President, any Vice President, or the Treasurer, and the
principal financial or accounting officer of the Company and, in the case of the
Trust, signed by one of the Regular Trustees to the effect that the signers of
such certificate have carefully examined the Registration Statement, the
Prospectus and this Agreement and that:
<PAGE> 31
-31-
(i) the representations and warranties of the Company or the Trust,
as the case may be, in this Agreement are true and correct on and as of the
Closing Date with the same effect as if made on the Closing Date, and the
Company or the Trust, as the case may be, has complied in all material
respects with all the agreements and satisfied all the conditions on its
part to be performed or satisfied by it hereunder at or prior to the
Closing Date; and
(ii) no stop order suspending the effectiveness of Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or, to their knowledge, threatened.
(g) You shall have received on the date hereof and on the Closing
Date a letter from Arthur Andersen LLP, dated as
<PAGE> 32
-32-
of the date hereof and the Closing Date, substantially in the form heretofore
approved by you.
(h) On or after the date of this Agreement no downgrading shall have
occurred in the rating accorded the Preferred Securities or the Company's debt
securities by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Securities Act).
(i) The Preferred Securities shall have been registered under the
Exchange Act and shall have been approved for quotation on the NASDAQ.
(j) Prior to the Closing Date, the Company shall have furnished to
you such further information, certificates and documents as you may reasonably
request.
The obligations of the Underwriters to purchase any Additional
Preferred Securities hereunder are subject to the satisfaction on and as of any
Option Closing Date of the conditions set forth in this Section 8, except that,
if any Option Closing Date is other than the Closing Date, thecertificates,
opinions and letters referred to in this Section 8 shall be dated the Option
Closing Date and shall be revised to reflect the sale of the Additional
Preferred Securities.
9. Expenses. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it and
by the Trust of its and the Trust's respective and joint obligations hereunder:
(i) the preparation, printing or reproduction, and filing (including filing
fees) with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
each amendment or supplement to any of them and the Statement of Eligibility and
Qualification of each of the Institutional Trustee, the Guarantee Trustee and
the Indenture Trustee; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the registration statement, each Prepricing Prospectus, the
Prospectus, the documents incorporated by reference in the Registration
Statement, and all amendments or supplements to any of them, as may be
reasonably requested for use in connection with the offering and sale of the
Preferred Securities; (iii)
<PAGE> 33
-33-
the preparation, printing, authentication, issuance and delivery of the
Securities, including any stamp taxes in connection with the original issuance
and sale of the Preferred Securities; (iv) the preparation of the preliminary
and supplemental Blue Sky Memoranda in connection with offering of the
Preferred Securities; (v) the registration of the Preferred Securities under the
Exchange Act and the listing of the Preferred Securities on Nasdaq; (vi)
the registration or qualification of the Preferred Securities for offer and
sale under the securities or Blue Sky laws of the several states as provided
in Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriters relating to the preparation,
printing (or reproduction), and delivery of the preliminary and supplemental
Blue Sky Memoranda and such registration and qualification); (vii) the filing
fees and the reasonable fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.; (viii) the fees and expenses of the Institutional
Trustee, the Delaware Trustee, the Guarantee Trustee and the Indenture Trustee;
(ix) the fees and expenses associated with obtaining ratings for the Preferred
Securities from nationally recognized statistical rating organizations; (x) the
transportation and other expenses incurred by or on behalf of the Offerors and
the Underwriters in connection with presentations to prospective purchasers of
the Preferred Securities; and (xi) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including special Delaware
counsel) for the Offerors.
10. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement isexecuted and delivered, it is necessary
for the registration statement or a post- effective amendment thereto or an
Additional Registration Statement to be declared effective before the offering
of the Preferred Securities may commence, when notification of the effectiveness
of the registration statement or such post-effective amendment has been released
by the Commission or, in the case of an Additional Registration Statement, upon
the filing of such Additional Registration Statement. Until such time as this
Agreement shall have become effective, it may be terminated by the Company or
the Trust, by
<PAGE> 34
-34-
notifying you, or by you, as Representatives of the several Underwriters, by
notifying the Offerors.
If any one or more of the Underwriters shall fail or refuse to
purchase Firm Preferred Securities which it or they are obligated to purchase
hereunder, and the aggregate number of Firm Preferred Securities which such
defaulting Underwriter or Underwriters are obligated but fail or refuse to
purchase is not more than one-tenth of the aggregate number of the Firm
Preferred Securities, each non- defaulting Underwriter shall be obligated,
severally, in the proportion which the number of Firm Preferred Securities set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Firm Preferred Securities set forth opposite the names of all non-defaulting
Underwriters, to purchase the Firm Preferred Securities which such defaulting
Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If
any Underwriter or Underwriters shall fail or refuse to purchase Firm Preferred
Securities and the aggregate number of Firm Preferred Securities with respect to
which such default occurs is more than one-tenth of the aggregate number of the
Firm Preferred Securities and arrangements satisfactory to you and the Offerors
for the purchase of such Firm Preferred Securities by one or more non-defaulting
Underwriters or other party or parties approved by you and the Offerors are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Offerors. In any
such case which does not result in termination of this Agreement, either you or
the Offerors shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto, who, with your approval and the approval of the Offerors,
purchases Firm Preferred Securities which a defaulting Underwriter is obligated,
but fails or refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
<PAGE> 35
-35-
11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Offerors, by notice to the Offerors, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Preferred Securities) there shall have occurred: (i)
any suspension or limitation of trading in securities generally on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or
any setting of minimum prices for trading on any such exchange, or any
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market; (ii) any banking moratorium declared by Federal or New
York authorities; or (iii) 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 is such as to make it, in your judgment, impracticable or inadvisable to
commence or continue the offering of the Preferred Securities on the terms set
forth on the cover page of the Prospectus or to enforce contracts for the resale
of the Preferred Securities by the Underwriters. Notice of such termination may
be given to the Company by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
12. Information Furnished by the Underwriters. The statements
set forth in the last paragraph on the cover page, the stabilization legend on
the third page, and the statements in the first paragraph and the sixth
paragraph under the caption "Underwriting" in the Prospectus, constitute the
only information furnished by or on behalf of the Underwriters through you as
such information is referred to in Sections 6(b) and 7 hereof.
13. Miscellaneous. Except as otherwise provided herein, notice
given pursuant to any provision of this Agreement shall be in writing and shall
be delivered (i) if to the Offerors, to the Company or to the Trust, care of the
Company, at the office of the Company at 6242 Garfield Street, Cass City,
Michigan 48726, Attention: Lambert E. Althaver, with a copy to Katten Muchin &
Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661-3693,
Attention: Howard S. Lanznar, Esq.; or (ii) if to you, as Representatives of
the several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, Attention: Manager, Investment Banking Division, with a
copy to General Counsel, Investment
<PAGE> 36
-36-
Banking Division and to Cahill Gordon & Reindel, 80 Pine Street, New York, New
York 10005, Attention: William M. Hartnett, Esq.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Trust, the Company, the Company's directors and
officers, the Regular Trustees,, and the other controlling persons referred to
in Section 7 hereof and their respective successors and assigns, to the extent
provided herein, and no other person shall acquire or have any right underor by
virtue of this Agreement. Neither the term "successor" nor the term "successors
and assigns" as used in this Agreement shall include a purchaser from any
Underwriter of any of the Preferred Securities in his status as such purchaser.
14. 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 Sate of New York.
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> 37
-37-
Please confirm that the foregoing correctly sets forth the
agreement among the Trust, the Company and the several Underwriters.
Very truly yours,
WALBRO CAPITAL TRUST
By: Walbro Corporation, as
Sponsor
By: _______________________________
Name: Lambert E. Althaver
Title: Chairman and Chief
Executive Officer
WALBRO CORPORATION
By________________________________
Name: Lambert E. Althaver
Title: Chairman and Chief Executive
Officer
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
INTERSTATE/JOHNSON LANE CORPORATION
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By ___________________________
Name:
Title:
<PAGE> 38
SCHEDULE I
WALBRO CAPITAL TRUST
[ ]% Convertible Trust Preferred Securities
Number of Firm
Underwriters Preferred Securities
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . .
Interstate/Johnson Lane . . . . . . . . . . . . . . . . . ____________
Total . . . . . . . . . . . . . . . . . . . . . 2,000,000
<PAGE> 39
SCHEDULE II
Subsidiaries of Walbro Corporation
<PAGE> 40
EXHIBIT A
[Form of Opinion of Katten Muchin & Zavis]
<PAGE> 41
EXHIBIT B
[Form of Opinion of Richards Layton & Finger]
<PAGE> 1
EXHIBIT 4.11
FORM OF
================================
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
WALBRO CAPITAL TRUST
Dated as of [ ], 1997
================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions......................................................................
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.................................................
SECTION 2.2 Lists of Holders of Securities...................................................
SECTION 2.3 Reports by the Institutional Trustee.............................................
SECTION 2.4 Periodic Reports to the Institutional
Trustee......................................................................
SECTION 2.5 Evidence of Compliance with Conditions
Precedent....................................................................
SECTION 2.6 Event of Default; Waiver.........................................................
SECTION 2.7 Event of Default; Notice.........................................................
ARTICLE III
ORGANIZATION OF TRUST
SECTION 3.1 Name.............................................................................
SECTION 3.2 Office...........................................................................
SECTION 3.3 Purpose..........................................................................
SECTION 3.4 Prohibition of Actions by the Trust and
the Trustees.................................................................
SECTION 3.5 General Authority of the Trustees................................................
SECTION 3.6 Title to Property of the Trust...................................................
SECTION 3.7 Not Responsible for Recitals or
Issuance of Securities.......................................................
SECTION 3.8 Duration of Trust................................................................
SECTION 3.9 Mergers..........................................................................
SECTION 3.10 Termination of Trust.............................................................
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities..........................................
SECTION 4.2 Responsibilities of the Sponsor..................................................
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees...............................................................
SECTION 5.2 Delaware Trustee; Eligibility....................................................
SECTION 5.3 Institutional Trustee; Eligibility...............................................
SECTION 5.4 Qualifications of Regular Trustees
and Delaware Trustee Generally...................................................
SECTION 5.5 Initial Trustees.................................................................
SECTION 5.6 Appointment, Removal and Resignation
of Trustees..................................................................
SECTION 5.7 Vacancies among Trustees.........................................................
SECTION 5.8 Merger, Conversion, Consolidation or
Succession to Business of a Trustee..........................................
SECTION 5.9 Authority, Powers and Duties of the
Regular Trustees ............................................................
SECTION 5.10 Delegation of Powers and Duties of
the Regular Trustees.........................................................
SECTION 5.11 Powers and Duties of the Institutional
Trustee......................................................................
SECTION 5.12 Certain Duties and Responsibilities
of the Institutional Trustee.................................................
SECTION 5.13 Certain Rights of Institutional Trustee..........................................
SECTION 5.14 Delaware Trustee.................................................................
SECTION 5.15 Meetings.........................................................................
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions....................................................................
ARTICLE VII
THE SECURITIES
SECTION 7.1 Title and Terms..................................................................
SECTION 7.2 General Provisions Regarding the
Securities...................................................................
SECTION 7.3 General Form of Certificates.....................................................
SECTION 7.4 Form of Preferred Securities Certificates;
Global Certificates..........................................................
SECTION 7.5 Execution and Dating of Certificates.............................................
SECTION 7.6 Authentication of Preferred Security
Certificates.................................................................
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.7 Definitive Preferred Security Certificates.......................................
SECTION 7.8 Temporary Certificates...........................................................
SECTION 7.9 Registrar, Paying Agent and Conversion
Agent........................................................................
SECTION 7.10 Paying Agent to Hold Money in Trust..............................................
SECTION 7.11 Outstanding Preferred Securities.................................................
SECTION 7.12 Preferred Securities in Treasury.................................................
SECTION 7.13 Notices to Clearing Agency
SECTION 7.14 Appointment of Successor Clearing Agency.........................................
SECTION 7.15 Deemed Security Holders..........................................................
ARTICLE VIII
TRANSFERS, EXCHANGES AND CANCELLATIONS
OF SECURITIES
SECTION 8.1 General..........................................................................
SECTION 8.2 Transfer Procedures and Restrictions
for Global Certificates......................................................
SECTION 8.3 Mutilated, Destroyed, Lost or Stolen
Certificates; Replacement Securities.........................................
SECTION 8.4 Cancellation of Preferred Security
Certificates.................................................................
ARTICLE IX
LIMITATION OF LIABILITY OF HOLDERS
OF SECURITIES, TRUSTEES AND OTHERS
SECTION 9.1 Liability........................................................................
SECTION 9.2 Exculpation......................................................................
SECTION 9.3 Fiduciary Duty...................................................................
SECTION 9.4 Indemnification..................................................................
SECTION 9.5 Outside Businesses...............................................................
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE X
ACCOUNTING
SECTION 10.1 Fiscal Year......................................................................
SECTION 10.2 Certain Accounting Matters.......................................................
SECTION 10.3 Banking..........................................................................
SECTION 10.4 Withholding......................................................................
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 Amendments.......................................................................
SECTION 11.2 Meetings of the Holders of Securities;
Action by Written Consent....................................................
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 12.1 Representations and Warranties of
Institutional Trustee........................................................
SECTION 12.2 Representations and Warranties of
Delaware Trustee.............................................................
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices..........................................................................
SECTION 13.2 Governing Law....................................................................
SECTION 13.3 Intention of the Parties.........................................................
SECTION 13.4 Headings.........................................................................
SECTION 13.5 Successors and Assigns...........................................................
SECTION 13.6 Partial Enforceability...........................................................
SECTION 13.7 Counterparts.....................................................................
</TABLE>
-iv-
<PAGE> 6
ANNEX AND EXHIBITS
ANNEX I Terms of [ ]% Convertible Trust
Preferred Securities and [ ]%
Convertible Common Securities
Exhibit A-1 Form of Preferred Security
Exhibit A-2 Form of Common Security
Exhibit B Form of Debenture
-v-
<PAGE> 7
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<C> <C>
310(a)................................................................................. 5.3(a)
310(c)................................................................................. Inapplicable
311(c)................................................................................. Inapplicable
312(a)................................................................................. 2.2(a)
312(b)................................................................................. 2.2(b)
313.................................................................................... 2.3
314(a)................................................................................. 2.4
314(b)................................................................................. Inapplicable
314(c)................................................................................. 2.5
314(d)................................................................................. Inapplicable
314(f)................................................................................. Inapplicable
315(a)................................................................................. 5.12(b)-(e)
315(c)................................................................................. 5.12(a)
315(d)................................................................................. 5.12(a)
316(a)................................................................................. Annex I
316(c)................................................................................. 5.9(d)(v)
</TABLE>
- ----------------
* This Cross-Reference Table does not constitute part of the
Declaration and shall not affect the interpretation of any
of its terms or provisions.
-vi-
<PAGE> 8
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
WALBRO CAPITAL TRUST
[ ], 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of [ ], 1997, by the undersigned trustees (together with
all other Persons from time to time duly appointed and serving as trustees in
accordance with the provisions of this Declaration, the "Trustees"), Walbro
Corporation, a Delaware corporation, as trust sponsor (the "Sponsor"), and by
the holders, from time to time, of undivided beneficial interests in the Trust
issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established Walbro
Capital Trust (the "Trust"), a trust under the Business Trust Act (as defined
herein) pursuant to a Declaration of Trust dated as of December [ ], 1996 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on December [ ], 1996, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures (as defined herein) of the Debenture Issuer (as defined
herein);
WHEREAS, as of the date hereof, no interests in the
Trust have been issued; and
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE> 9
-2-
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration"
are to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) a reference to the masculine includes the feminine and
vice versa.
"Additional Interest" means if the Trust is required to pay
any taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States or any other taxing
authority, such amounts as shall be required so that the net amounts received
and retained by the Trust after paying such taxes, duties, assessments and
governmental charges will not be less than the amounts the Trust would have
received had no such taxes, duties, assessments or governmental charges been
imposed.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act or any successor rule thereunder.
<PAGE> 10
-3-
"Agent" means any Registrar, Paying Agent, Conversion
Agent or co-registrar.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 8.2
"Business Day" means any day other than a day on which banking
institutions in the City of New York, Detroit, Michigan or Wilmington, Delaware
are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time, or any successor legislation.
"Certificate" means a certificate in global or definitive form
representing a Common Security or a Preferred Security.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
depositary for the Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Preferred
Securities.
"Closing Date" means [ ], 1997.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor legislation.
"Commission" means the Securities and Exchange
Commission.
"Common Securities" has the meaning specified in
Section 7.1
"Common Security Certificate" means a definitive certificate
in fully registered form representing a Common Security substantially in the
form of Exhibit A-2.
<PAGE> 11
-4-
"Common Securities Guarantee" means the guarantee
agreement dated as of [ ], 1997, of the Sponsor in
respect of the Common Securities.
"Company Indemnified Person" means (i) any Regular Trustee;
(ii) any Affiliate of any Regular Trustee; (iii) any officer, director,
shareholder, member, partner, employee, representative or agent of any Regular
Trustee; or (iv) any officer, employee or agent of the Trust or its Affiliates.
"Compounded Interest" means interest compounded quarterly at
the rate specified for the Debentures to the extent permitted by applicable law
upon interest accrued and unpaid (including Additional Interest) at the end of
each Extension Period.
"Conversion Agent" has the meaning set forth in
Section 7.9
"Covered Person" means (a) any officer, director, stockholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means the Sponsor in its capacity as
issuer of the Debentures.
"Debenture Trustee" means [ ], as trustee
under the Indenture until a successor is appointed thereunder, and
thereafter means such successor trustee.
"Debentures" means the Debentures to be issued by the
Debenture Issuer under the Indenture and to be held by the Institutional
Trustee, a specimen certificate for such Debentures being Exhibit B hereto.
"Definitive Preferred Security Certificates" has the
meaning set forth in Section 7.7
"Delaware Trustee" has the meaning set forth in
Section 5.2
"Depositary" means The Depository Trust Company, the initial
Clearing Agency, until a successor shall be appointed pursuant to Section 7.14,
and thereafter means such successor Depositary.
<PAGE> 12
-5-
"Distribution" means a distribution payable to Holders
of Securities in accordance with Section 6.1
"Event of Default" in respect of the Securities means an Event
of Default (as defined in the Indenture) has occurred and is continuing in
respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder,
or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set
forth in Section 9.4(b).
"Global Certificate" has the meaning set forth in
Section 7.4(a).
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person
or a Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of [ ],
1997, between the Debenture Issuer and the Debenture Trustee, as it may
be amended from time to time.
"Institutional Trustee" means the Trustee meeting the
eligibility requirements set forth in Section 5.3
"Institutional Trustee Account" has the meaning set
forth in Section 5.11(c).
"Investment Company" means an investment company as
defined in the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, and the rules and regulations promulgated
thereunder, or any successor legislation.
"Legal Action" has the meaning set forth in Section
5.9(d)(vii).
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Preferred Securities or by the Trust
Indenture Act, Holders of outstanding
<PAGE> 13
-6-
Securities voting together as a single class or, as the context may require,
Holders of outstanding Preferred Securities or Holders of outstanding Common
Securities voting separately as a class, who are the record owners of more than
50% of the aggregate liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"Ministerial Action" has the meaning set forth in the terms of
the Securities as set forth in Annex I hereto.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(i) a statement that each officer signing the
Certificate has read the covenant or condition and the
definitions relating thereto;
(ii) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Certificate;
(iii) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 7.9
"Person" means any legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
<PAGE> 14
-7-
"Preferred Securities" has the meaning specified in
Section 7.1
"Preferred Security Certificate" means a certificate
representing a Preferred Security substantially in the form of Exhibit A-1.
"Preferred Securities Guarantee" means the Guarantee
Agreement dated as of [ ], 1997 of the Sponsor in
respect of the Preferred Securities.
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a participant or
as an indirect participant, in each case in accordance with the rules of such
Depositary).
"Purchase Agreement" means the Underwriting Agreement dated as
of [ ], 1997, between the Sponsor and the underwriters named
therein, relating to the Preferred Securities.
"Quorum" means a majority of the Regular Trustees or, if there
are only two Regular Trustees, both of them.
"Registrar" has the meaning set forth in Section 7.9
"Registration Statement" means the Registration Statement on
Form S-3 (Reg. No. 333-[ ]), including any amendments thereto relating
to, among other securities, the Preferred Securities.
"Regular Trustee" means any Trustee other than the
Institutional Trustee and the Delaware Trustee.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Institutional
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Institutional Trustee
customarily performing functions similar to those performed by
<PAGE> 15
-8-
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment
Company Act.
"Securities" means the Common Securities and the
Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation.
"Securities Guarantees" means the Common Securities
Guarantee and the Preferred Securities Guarantee.
"Special Event" has the meaning set forth in Annex I
hereto.
"Sponsor" means Walbro Corporation, a Delaware corporation, or
any successor entity in a merger, consolidation or amalgamation, in its capacity
as sponsor of the Trust.
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I
hereto.
"10% in liquidation amount of the Securities" means, except as
provided in the terms of the Preferred Securities or by the Trust Indenture Act,
Holders of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities, voting separately as a class, who are the record
owners of 10% or more of the aggregate liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such
<PAGE> 16
-9-
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, and the rules and regulations promulgated
thereunder, or any successor legislation.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration, which are
incorporated by reference in and made part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Institutional Trustee shall be the only Trustee that
is a Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Section
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of
the Trust shall provide the Institutional Trustee (i) within 14 days after each
record date for payment of
<PAGE> 17
-10-
Distributions, a list, in such form as the Institutional Trustee may reasonably
require, of the names and addresses of the Holders of the Securities ("List of
Holders") as of such record date, provided that neither the Sponsor nor the
Regular Trustees on behalf of the Trust shall be obligated to provide such List
of Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Institutional Trustee by the Sponsor and the
Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30
days of receipt by the Trust of a written request for a List of Holders as of a
date no more than 14 days before such List of Holders is given to the
Institutional Trustee. The Institutional Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in any List of
Holders given to it or which it receives in the capacity as Paying Agent (if
acting in such capacity), provided that the Institutional Trustee may destroy
any List of Holders previously given to it oh receipt of a new List of Holders.
(b) The Institutional Trustee shall comply with its
obligations under Section Section 311(a), 311(b) and 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Institutional Trustee.
(a) Within 60 days after May 15 of each year, commencing May
15, 1997, the Institutional Trustee shall transmit by mail to Holders such
reports concerning the Institutional Trustee and its actions under this
Declaration as may be required pursuant to the Trust Indenture Act in the manner
provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Institutional Trustee with each stock
exchange upon which the Securities are listed or quoted for trading, with the
Commission and with the Company. The Trust will notify the Institutional Trustee
when the Securities are listed or quoted for trading on any stock exchange.
SECTION 2.4 Periodic Reports to Institutional Trustee.
Each of the Sponsor and the Trust shall file with the
Institutional Trustee and the Commission, and transmit to Holders, such
information, documents and other reports, and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided that any such information, documents or
<PAGE> 18
-11-
reports required to be filed with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act shall be filed with the Institutional Trustee within 15 days
after the same is so required to be filed with the Commission.
Delivery of such reports, information and documents to the
Institutional Trustee is for informational purposes only and the Institutional
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Trust's compliance with any of its covenants hereunder
(as to which the Institutional Trustee is entitled to rely exclusively on
Officers' Certificates).
Each of the Sponsor and the Trust shall also provide to the
Institutional Trustee on a timely basis such information as the Institutional
Trustee requires to enable the Institutional Trustee to prepare and file any
form required to be submitted by the Company with the Internal Revenue Service
and the Holders of the Securities relating to original issue discount, if any,
including, without limitation, Form 1099-OID or any successor form.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide to the Institutional Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Declaration that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a majority in liquidation amount of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that, if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of
Default under the Declaration shall also not be waivable; or
<PAGE> 19
-12-
(ii) requires the consent or vote of greater than a majority
in principal amount of the holders of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default under
the Declaration may only be waived by the vote of the Holders of at
least the proportion in liquidation amount of the Preferred Securities
that the relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act. Upon
such waiver, any such default shall cease to exist, and any Event of Default
with respect to the Preferred Securities arising therefrom shall be deemed to
have been cured, for every purpose of this Declaration, but no such waiver shall
extend to any subsequent or other default or an Event of Default with respect to
the Preferred Securities or impair any right consequent thereon. Any waiver by
the Holders of the Preferred Securities of an Event of Default with respect to
the Preferred Securities shall also be deemed to constitute a waiver by the
Holders of the Common Securities of any such Event of Default with respect to
the Common Securities for all purposes of this Declaration without any further
act, vote, or consent of the Holders of the Common Securities.
(b) The Holders of a majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this Section
2.6(b), the Event of Default under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to
have waived such Event of Default under the Declaration as provided
below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the
<PAGE> 20
-13-
proportion in liquidation amount of the Common Securities that the
relevant Super Majority represents of the aggregate principal amount of
the Debentures outstanding;
provided further, that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated, and
until such Events of Default have been so cured, waived or otherwise eliminated,
the Institutional Trustee will be deemed to be acting solely on behalf of the
Holders of the Preferred Securities and only the Holders of the Preferred
Securities will have the right to direct the Institutional Trustee in accordance
with the terms of the Securities. The foregoing provisions of this Section
2.6(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Institutional Trustee at the direction of the Holders of the Preferred
Securities constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of
the Trust Indenture Act is hereby expressly excluded from this Declaration and
the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Institutional Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Securities, notices of all defaults with respect
to the Securities actually known to a Responsible Officer of the Institutional
Trustee, unless such defaults have been cured before the giving of such notice
(the term "defaults" for the purposes of this Section 2.7(a) being hereby
defined to be an Event of Default as
<PAGE> 21
-14-
defined in the Indenture, not including any periods of grace provided for
therein and irrespective of the giving of any notice provided therein); provided
that, except for a default in the payment of principal of (or premium, if any)
or interest on any of the Debentures or in the payment of any sinking fund
installment established for the Debentures, the Institutional Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers of the Institutional Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Securities.
(b) The Institutional Trustee shall not be deemed to
have knowledge of any default except:
(i) a default under Sections [501(1) and 501(2)] of
the Indenture; or
(ii) any default as to which the Institutional Trustee shall
have received written notice or of which a Responsible Officer of the
Institutional Trustee charged with the administration of the
Declaration shall have actual knowledge.
ARTICLE III
ORGANIZATION OF TRUST
SECTION 3.1 Name.
The Trust is named "Walbro Capital Trust," as such name may be
modified from time to time by the Regular Trustees following 10 Business Days
written notice to the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Regular Trustees.
SECITON 3.2 Office.
The address of the principal office of the Trust is c/o
Walbro Corporation, 6242 Garfield Street, Cass City, Michigan
48726, Attention: [ ]. On 10 Business Days written
notice to the Holders of Securities, the Regular Trustees may
designate another principal office.
<PAGE> 22
-15-
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only those
other activities necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, pledge any of
its assets, or otherwise undertake (or permit to be undertaken) any activity
that would cause the Trust not to be classified for United States federal income
tax purposes as a grantor trust.
SECTION 3.4 Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the
Institutional Trustee) shall not, engage in any activity other than as required
or authorized by this Declaration. In particular, the Trust shall not and the
Trustees (including the Institutional Trustee) shall not cause the Trust to:
(a) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of Securities
pursuant to the terms of this Declaration and of the Securities;
(b) acquire any assets other than as expressly provided
herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(e) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities; or
(g) other than as provided in this Declaration or Annex I
hereto, (a) direct the time, method and place of exercising any trust or power
conferred upon the Debenture Trustee with respect to the Debentures, (b) waive
any past default that
<PAGE> 23
-16-
is waivable under the Indenture, (c) exercise any right to rescind or annul any
declaration that the principal of all the Debentures shall be due and payable,
or (d) consent to any amendment, modification or termination of the Indenture or
the Debentures where such consent shall be required unless the Trust shall have
received an opinion of counsel to the effect that such amendment or modification
will not cause more than an insubstantial risk that (i) the Trust will be deemed
an Investment Company required to be registered under the Investment Company
Act, or (ii) for United States federal income tax purposes the Trust will not be
classified as a grantor trust.
SECTION 3.5 General Authority of the Trustees.
In dealing with the Trustees acting on behalf of the Trust, no
person shall be required to inquire into the authority of the Trustees to bind
the Trust. Persons dealing with the Trust are entitled to rely conclusively on
the power and authority of the Trustees as set forth in this Declaration.
SECTION 3.6 Title to Property of the Trust.
Except as provided in Section 5.11 with respect to the
Debentures and the Institutional Trustee Account or as otherwise provided in
this Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.7 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.8 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of
Section 3.10 hereof, shall exist until [ ].
<PAGE> 24
-17-
SECTION 3.9 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any Person, except as described in Sections
3.9(b) and 3.9(c).
(b) The Trust may, with the consent of the Regular Trustees
or, if there are more than two, a majority of the Regular Trustees, and without
the consent of the Holders of the Securities, the Delaware Trustee or the
Institutional Trustee, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any state of the United
States; provided that:
(i) if the Trust is not the survivor, such successor
entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of
the Trust under the Securities; or
(B) substitutes for the Preferred Securities other
securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the Preferred
Securities with respect to Distributions, assets and payments
upon liquidation, redemption and otherwise;
(ii) the Debenture Issuer expressly acknowledges a trustee of
the Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another
organization on which the Preferred Securities are then listed or
quoted;
(iv) such merger, consolidation, amalgamation or replacement
does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical
rating organization;
(v) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of the
Holders of the Preferred
<PAGE> 25
-18-
Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the Holders' interest in
the new entity);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided
by the Preferred Securities Guarantee; and
(viii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust reasonably acceptable to
the Institutional Trustee and experienced in such matters to the effect
that:
(A) such merger, consolidation, amalgamation or
replacement will not adversely affect the rights, preferences
and privileges of the Holders of the Securities (including any
Successor Securities) in any material respect (other than with
respect to any dilution of the Holders' interest in the new
entity);
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will be treated as a grantor trust for United States
federal income tax purposes.
(c) Notwithstanding Section 3.9(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the Common
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if in the opinion of a nationally recognized independent
tax counsel experienced in such matters, such consolidation, amalgamation,
merger or replacement would cause the Trust or Successor Entity to be classified
as other than a grantor trust for United States federal income tax purposes.
<PAGE> 26
-19-
SECTION 3.10 Termination of Trust.
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Sponsor or the holder
of the Common Securities;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor or the holder of the Common
Securities, the filing of a certificate of cancellation with respect to
the Trust after having obtained the consent of at least a majority in
liquidation amount of the Securities, voting together as a single
class, to file such certificate of cancellation, or the revocation of
the Certificate of Incorporation of the Sponsor and the expiration of
90 days after the date of revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution
of the holder of the Common Securities, the Sponsor or the
Trust;
(iv) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including
any Additional Interest and Compounded Interest, shall have been paid
to the Holders in accordance with the terms of the Securities;
(v) upon the occurrence and continuation of a Special Event
pursuant to which the Trust shall have been dissolved in accordance
with the terms of the Securities and all of the Debentures shall have
been distributed to the Holders of Securities in exchange for all of
the Securities;
(vi) upon the distribution of the Sponsor's common
stock to all Securities Holders upon conversion of all
outstanding Preferred Securities; or
(vii) the expiration of the term of the Trust on [ ].
(b) As soon as is practicable after the occurrence of an event
referred to in Section 3.10(a), the Regular Trustees shall pay (or make
provision for the payment of) all claims against the Trust and shall execute and
file a certificate of
<PAGE> 27
-20-
cancellation with the Secretary of State of the State of Delaware.
(c) The provisions of Article IX shall survive the
termination of the Trust.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date and on any other date Preferred Securities
and Common Securities are sold pursuant to the over-allotment option granted in
the Purchase Agreement, the Sponsor will purchase all of the Common Securities
issued by the Trust, in an aggregate amount at least equal to 3% of the capital
of the Trust, at the same time as the Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare for filing with the Commission the Registration
Statement, including any amendments thereto;
(b) to determine the states and foreign jurisdictions in which
to take appropriate action to qualify or register for sale all or part of the
Preferred Securities and to do any and all such acts, other than actions that
must be taken by the Trust, and advise the Trust of actions it must take, and
prepare for execution and filing any documents to be executed and filed by the
Trust, as the Sponsor deems necessary or advisable in order to comply with the
applicable laws of any such states and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to any
national stock exchange or the Nasdaq National Market for listing or quotation
of the Preferred Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) of the Exchange Act, including any amendments
thereto; and
<PAGE> 28
-21-
(e) to negotiate the terms of the Purchase Agreement and other
agreements, documents and instruments providing for the sale of the Preferred
Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The initial number of Trustees shall be four.
The number of Trustees may be increased or decreased by vote
of the Holders of a majority in liquidation amount of the Common Securities
voting as a class at a meeting of the Holders of the Common Securities;
provided, however, that the number of Trustees shall in no event be less than
two; provided further that (i) there shall be at least one Regular Trustee who
is an employee or officer of, or is affiliated with the Sponsor and (ii) one
Trustee shall be the Institutional Trustee for so long as this Declaration is
required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements.
SECTION 5.2 Delaware Trustee; Eligibility.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be
(a) a natural person who is resident of the State of Delaware;
or
(b) if not a natural person, an entity that has its principal
place of business in the State of Delaware, and otherwise meets the requirements
of applicable law, provided that, if the Institutional Trustee has its principal
place of business in the State of Delaware and otherwise meets the requirements
of applicable law, then the Institutional Trustee may also be the Delaware
Trustee and Section 5.14 shall have no application.
<PAGE> 29
-22-
SECTION 5.3 Institutional Trustee; Eligibility.
(a) There shall at all times be one Trustee which
shall act as Institutional Trustee and shall
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business under the
laws of the United States of America or any state or territory thereof
or of the District of Columbia, or a Person permitted by the Commission
to act as an institutional trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by federal, state, territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then for the
purposes of this Section 5.3(a)(ii), the combined capital and surplus
of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published; and
(iii) if the Trust is excluded from the definition of an
Investment Company solely by means of Rule 3a-5 and to the extent the
Investment Company Act or Trust Indenture Act requires a trustee having
certain qualifications to hold title to the "eligible assets" of the
Trust, the Institutional Trustee shall possess those qualifications.
(b) If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 5.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section
5.6(d).
(c) If the Institutional Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Institutional Trustee and the Holder of the Common Securities
(as if it were the obligor referred to in Section 310(b) of the Trust Indenture
Act) shall in all respects comply with the provisions of Section 310(b) of the
Trust Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for
<PAGE> 30
-23-
purposes of clause (i) of the first provision contained in Section 310(b) of the
Trust Indenture Act.
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally.
Each Regular Trustee and the Delaware Trustee (unless the
Institutional Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized officers.
SECTION 5.5 Initial Trustees.
(a) The initial Regular Trustees are:
Lambert E. Althaver
c/o Walbro Corporation
6242 Garfield Street
Cass City, MI 48726
Michael A. Shope
c/o Walbro Corporation
6242 Garfield Street
Cass City, MI 48726
The initial Delaware Trustee is:
[ ]
[ ]
[ ]
Attention: [ ]
The initial Institutional Trustee is:
[ ]
[ ]
[ ]
Attention: [ ]
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Sections 5.6(b) and 5.6(c), Trustees may be
appointed or removed without cause at any time by vote of the Holders of a
majority in liquidation amount of the Common Securities voting as a class.
<PAGE> 31
-24-
(b) The Trustee that acts as Institutional Trustee shall not
be removed in accordance with Section 5.6(a) until a successor possessing the
qualifications to act as a Institutional Trustee under Section 5.3 (a "Successor
Institutional Trustee") has been appointed and has accepted such appointment by
instrument executed by such Successor Institutional Trustee and delivered to the
Trust, the Sponsor and the removed Institutional Trustee.
(c) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by instrument executed by such Successor Delaware Trustee and
delivered to the Trust, the Sponsor and the removed Delaware Trustee.
(d) A Trustee appointed to office shall hold office until his,
hers or its successor shall have been appointed or until his, her or its death,
removal, resignation, dissolution or liquidation. Any Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts as the
Institutional Trustee shall be effective:
(A) until a Successor Institutional Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Institutional Trustee and delivered
to the Trust, the Sponsor and the resigning Institutional
Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof
distributed to the holders of the Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee.
<PAGE> 32
-25-
(e) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be, if the Institutional Trustee or the
Delaware Trustee delivers an instrument of resignation in accordance with
Section 5.6(d).
(f) If no Successor Institutional Trustee or Successor
Delaware Trustee shall have been appointed and accepted appointment as provided
in this Section 5.6 within 60 days after delivery pursuant to this Section 5.6
of an instrument of resignation or removal, the Institutional Trustee or
Delaware Trustee resigning or being removed, as applicable, may petition any
court of competent jurisdiction for appointment of a Successor Institutional
Trustee or Successor Delaware Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper and prescribe, appoint a
Successor Institutional Trustee or Successor Delaware Trustee, as the case may
be.
(g) No Institutional Trustee or Delaware Trustee shall be
liable for the acts or omissions to act of any Successor Institutional Trustee
or Successor Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustees or,
if there are more than two, a majority of the Regular Trustees, shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to annul the Trust. Whenever a vacancy in the number
of Regular Trustees shall occur, until such vacancy is filled by the appointment
of a Regular Trustee in accordance with this Section 5.6, the Regular Trustees
in office, regardless of their number, shall have all the powers granted to the
Regular Trustees and shall discharge all the duties imposed upon the Regular
Trustees by this Declaration.
<PAGE> 33
-26-
SECTION 5.8 Merger, Conversion, Consolidation or Succession to Business of a
Trustee.
Any corporation into which the Institutional Trustee or the
Delaware Trustee, as the case may be, may be merged or converted or with which
either may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be a party, or any corporation succeeding to
all or substantially all the corporate trust business of the Institutional
Trustee or the Delaware Trustee, as the case may be, shall be the successor of
the Institutional Trustee or the Delaware Trustee, as the case may be,
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article V, without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
SECTION 5.9 Authority, Powers and Duties of the Regular Trustees.
(a) Subject to the limitations provided in this Declaration
and to the specific duties of the Institutional Trustee, the Regular Trustees
shall have exclusive and complete authority to carry out the purposes of the
Trust. An action taken by the Regular Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Institutional Trustee on behalf of the Trust in accordance with its powers
shall constitute the act of and serve to bind the Trust.
(b) Except as expressly set forth in this Declaration and
except if a meeting of the Regular Trustees is called with respect to any matter
over which the Regular Trustees have power to act, any power of the Regular
Trustees may be exercised by, or with the consent of, any one such Regular
Trustee.
(c) Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
which the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to Section 5.9, provided that the Registration Statement,
including any amendments thereto, shall be signed by a majority of the Regular
Trustees.
<PAGE> 34
-27-
(d) The Regular Trustees shall have the exclusive power, duty
and authority to cause the Trust to engage in the following activities:
(i) to issue and sell the Preferred Securities and the
Common Securities in accordance with this Declaration; provided,
however, that the Trust may issue no more than one series of Preferred
Securities and no more than one series of Common Securities, and,
provided, further, that there shall be no interests in the Trust other
than the Securities, and the issuance of Securities shall be limited to
simultaneous issuance of both Preferred Securities and Common
Securities on the Closing Date and any other date Preferred Securities
and Common Securities are sold pursuant to the over-allotment option
granted in the Purchase Agreement;
(ii) in connection with the issue and sale of the
Preferred Securities, at the direction of the Sponsor, to:
(A) execute the Registration Statement prepared by
the Sponsor, including any amendments thereto relating to,
among other securities, the Preferred Securities;
(B) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be
necessary in order to qualify or register all or part of the
Preferred Securities in any state or foreign jurisdiction in
which the Sponsor has determined to qualify or register such
Preferred Securities for sale;
(C) execute and file an application, prepared by the
Sponsor, to any national stock exchange or the Nasdaq National
Market for listing or quotation of the Preferred Securities,
from time to time;
(D) execute and deliver letters, documents, or
instruments to the Depositary relating to the Preferred
Securities;
(E) execute and file with the Commission a
registration statement on Form 8-A, including any amendments
thereto, prepared by the Sponsor relating to the registration
of the Preferred Securities under Section 12(b) of the
Exchange Act; and
<PAGE> 35
-28-
(F) execute and perform the Purchase Agreement and
other agreements, documents and instruments providing for the
sale of the Preferred Securities;
(iii) to acquire the Debentures with the proceeds of the sale
of the Preferred Securities and the Common Securities; provided,
however, that the Regular Trustees shall cause legal title to the
Debentures to be held of record in the name of the Institutional
Trustee for the benefit of the Holders of the Preferred Securities and
the Holders of Common Securities;
(iv) to give the Sponsor and the Institutional Trustee prompt
written notice of the occurrence of a Special Event; provided that the
Regular Trustees shall consult with the Sponsor and the Institutional
Trustee before taking or refraining from taking any Ministerial Action
in relation to a Special Event;
(v) to establish a record date with respect to all actions
to be taken hereunder that require a record date be established,
including and with respect to, for the purposes of Section 316(c) of
the Trust Indenture Act, Distributions, voting rights, redemptions and
exchanges, and to issue relevant notices to the Holders of Preferred
Securities and Holders of Common Securities as to such actions and
applicable record dates;
(vi) to take all actions and perform such duties as may
be required of the Regular Trustees pursuant to the terms of
the Securities;
(vii) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or
against the Trust ("Legal Action"), unless pursuant to Section 5.11(f),
the Institutional Trustee has the exclusive power to bring such Legal
Action;
(viii) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, advisors, and
consultants and pay reasonable compensation for such services;
(ix) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
<PAGE> 36
-29-
(x) to give the certificate required by Section 314(a)(4) of
the Trust Indenture Act to the Institutional Trustee, which certificate
may be executed by any Regular Trustee;
(xi) to incur expenses that are necessary or incidental to
carry out any of the purposes of the Trust;
(xii) to act as, or appoint another Person to act as,
registrar and transfer agent for the Securities;
(xiii) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its
election to defer payments of interest on the Debentures by extending
the interest payment period under the Indenture;
(xiv) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in
all matters necessary or incidental to the foregoing;
(xv) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business
trust under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the
limited liability of the Holders of the Preferred Securities or to
enable the Trust to effect the purposes for which the Trust was
created;
(xvi) to take any action, not inconsistent with this
Declaration or with applicable law, that the Regular Trustees determine
in their discretion to be necessary or desirable in carrying out the
activities of the Trust as set out in this Section 5.9, including, but
not limited to:
(A) causing the Trust not to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(B) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust;
and
(C) cooperating with the Debenture Issuer to ensure
that the Debentures will be treated as
<PAGE> 37
-30-
indebtedness of the Debenture Issuer for United States
federal income tax purposes;
provided that such action does not adversely affect the interests
of Holders; and
(xvii) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with
respect to the Trust to be duly prepared and filed by the Regular
Trustees, on behalf of the Trust.
(e) The Regular Trustees must exercise the powers set forth in
this Section 5.9 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Regular Trustees shall not take any
action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3
(f) Subject to this Section 5.9, the Regular Trustees shall
have none of the powers or the authority of the Institutional Trustee set forth
in Section 5.11.
(g) Any expenses incurred by the Regular Trustees pursuant to
this Section 5.9 shall be reimbursed by the Debenture Issuer.
SECTION 5.10 Delegation of Powers and Duties of the Regular Trustees.
The Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein. The Regular
Trustees may, by power of attorney consistent with applicable law, delegate to
any other natural person over the age of 21 their power for the purpose of
executing any documents contemplated in Section 5.9, including the Registration
Statement or any amendment thereto or other document filed with the Commission,
or making any other governmental filing.
<PAGE> 38
-31-
SECTION 5.11 Powers and Duties of the Institutional Trustee.
(a) The legal title to the Debentures shall be owned by and
held of record in the name of the Institutional Trustee in trust for the benefit
of the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 5.6 Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Institutional Trustee shall not transfer its right,
title and interest in the Debentures to the Regular Trustees or to the Delaware
Trustee (if the Institutional Trustee does not also act as Delaware Trustee).
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Institutional Trustee Account") in the name of and
under the exclusive control of the Institutional Trustee on behalf of
the Holders of the Securities and, upon the receipt of payments of
funds made in respect of the Debentures held by the Institutional
Trustee, deposit such funds into the Institutional Trustee Account and
make payments to the Holders of the Preferred Securities and Holders of
the Common Securities from the Institutional Trustee Account in
accordance with Section 6.1. Funds in the Institutional Trustee Account
shall be held uninvested until disbursed in accordance with this
Declaration. The Institutional Trustee Account shall be an account that
is maintained with the Institutional Trustee or a banking institution
the rating on whose long-term unsecured indebtedness is at least equal
to the rating assigned to the Preferred Securities by a "nationally
recognized statistical rating organization," as that term is defined
for purposes of Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as so directed and
as shall be necessary or appropriate to effect the redemption of the
Preferred Securities and the Common Securities to the extent the
Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Regular Trustees in accordance with the terms of the
<PAGE> 39
-32-
Securities, engage in such ministerial activities as so directed as
shall be necessary or appropriate to effect the distribution of the
Debentures to Holders of Securities upon the occurrence of certain
Special Events pursuant to the terms of the Securities.
(d) The Institutional Trustee shall take all actions and
perform such duties as may be specifically required of the Institutional Trustee
pursuant to the terms of the Securities.
(e) The Institutional Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a Responsible
Officer of the Institutional Trustee occurs and is continuing, the Institutional
Trustee shall, for the benefit of Holders of the Securities, but subject to the
rights of the Holders pursuant to the terms of such Securities, enforce its
rights as holder of the Debentures, including the right to take any Legal Action
which arises out of or in connection with such an Event of Default.
(f) Subject to this Section 5.11, the Institutional Trustee
shall have none of the duties, liabilities, powers or the authority of the
Regular Trustees set forth in Section 5.9.
(g) The Institutional Trustee must exercise the powers set
forth in this Section 5.11 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Institutional Trustee
shall not take any action that is inconsistent with the purposes and functions
of the Trust set out in Section 3.3
SECTION 5.12 Certain Duties and Responsibilities of the Institutional Trustee.
(a) The Institutional Trustee, before the occurrence of any
Event of Default and after the curing or waiving of all Events of Default that
may have occurred, shall undertake to perform only such duties and obligations
as are specifically set forth in this Declaration and no implied covenants shall
be read into this Declaration against the Institutional Trustee. In case an
Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) of which a Responsible Officer of the Institutional Trustee has
actual knowledge, the Institutional Trustee shall exercise such rights and
powers vested in it by this Declaration, and use the same degree of care and
skill in its exercise, as a prudent individual would
<PAGE> 40
-33-
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to
relieve the Institutional Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that
prior to the occurrence of an Event of Default and after the curing or waiving
of all such Events of Default that may have occurred, in the absence of bad
faith on the part of the Institutional Trustee, the Institutional Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Institutional Trustee and conforming to the requirements of this Declaration;
but in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Institutional Trustee,
the Institutional Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Declaration.
(c) The Institutional Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Institutional Trustee, unless it shall be proved that the Institutional Trustee
was negligent in ascertaining the pertinent facts.
(d) The Institutional Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in liquidation
amount of the Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Institutional Trustee, or
exercising any trust or power conferred upon the Institutional Trustee under
this Declaration.
(e) The Institutional Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with their
respective duties under this Declaration, nor shall the Institutional Trustee be
liable for any default or misconduct of the Regular Trustees or the Sponsor.
(f) No provision of this Declaration shall require the
Institutional Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
<PAGE> 41
-34-
assured to it under the terms of this Declaration or indemnity reasonably
satisfactory to the Institutional Trustee against such risk or liability is not
reasonably assured to it.
(g) The Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Institutional Trustee Account shall be to deal with such property in a similar
manner as the Institutional Trustee deals with similar property for its own
account, subject to the protections and limitations on liability afforded to the
Institutional Trustee under this Declaration and the Trust Indenture Act.
(h) The Institutional Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree in writing
with the Sponsor. Money held by the Institutional Trustee need not be segregated
from other funds held by it except in relation to the Institutional Trustee
Account maintained by the Institutional Trustee pursuant to Section 5.11(c)(i)
and except to the extent otherwise required by law.
(i) The Institutional Trustee shall have no duty or liability
for or with respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith.
SECTION 5.13 Certain Rights of Institutional Trustee.
(a) Subject to the provisions of Section 5.12:
(i) the Institutional Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed, sent or presented by the proper party or
parties;
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration shall be
sufficiently evidenced by an Officers Certificate;
(iii) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved
or established
<PAGE> 42
-35-
before taking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Sponsor or the Regular Trustees;
(iv) the Institutional Trustee shall have no duty to see to
any recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(v) the Institutional Trustee may consult with counsel of
its choice or other experts and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the scope of
such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any of
its Affiliates, and may include any of its employees. The Institutional
Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Institutional Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless such
Holder shall have provided to the Institutional Trustee adequate
security and indemnity, reasonably satisfactory to the Institutional
Trustee, against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Institutional Trustee's agents,
nominees or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Institutional Trustee; provided
that, nothing contained in this Section 5.13(a)(vi) shall be taken to
relieve the Institutional Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Declaration;
<PAGE> 43
-36-
(vii) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, security, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Institutional Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit;
(viii) the Institutional Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or
by or through agents or attorneys and the Institutional Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Institutional Trustee or its
agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Institutional Trustee or its
agents alone shall be sufficient and effective to perform any such
action and no third party shall be required to inquire as to the
authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration,
both of which shall be conclusively evidenced by the Institutional
Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other
action hereunder, the Institutional Trustee (A) may request
instructions from the Holders of the Securities, which instructions may
only be given by the Holders of the same proportion in liquidation
amount of the Securities as would be entitled to direct the
Institutional Trustee under the terms of the Securities in respect of
such remedy, right or action, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (C) shall be protected in acting in accordance with such
instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Institutional Trustee shall not
<PAGE> 44
-37-
be under any obligation to take any action that is discretionary under
the provisions of this Declaration; and
(xii) the Institutional Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose
any duty or obligation on the Institutional Trustee to perform any act or acts
or exercise any right, power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in which the Institutional
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.
SECTION 5.14 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Institutional Trustee described
in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
SECTION 5.15 Meetings.
If there is more than one Regular Trustee, meetings of the
Regular Trustees shall be held from time to time upon the call of any Regular
Trustee. Regular meetings of the Regular Trustees may be held at a time and
place fixed by resolution of the Regular Trustees. Notice of any in-person
meetings of the Regular Trustees shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 48 hours before such meeting. Notice of any telephonic meetings of the
Regular Trustees or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting.
<PAGE> 45
-38-
Notices shall contain a brief statement of the time, place and anticipated
purposes of the meeting. The presence (whether in person or by telephone) of a
Regular Trustee at a meeting shall constitute a waiver of notice of such meeting
except where a Regular Trustee attends a meeting for the express purpose of
objecting to the transaction of an activity on the ground that the meeting has
not been lawfully called or convened. Unless provided otherwise in this
Declaration, any action of the Regular Trustees may be taken at a meeting by
vote of a majority of the Regular Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting by the unanimous written consent of the
Regular Trustees. In the event there is only one Regular Trustee, any and all
action of such Regular Trustee shall be evidenced by a written consent of such
Regular Trustee.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
If and to the extent that the Debenture Issuer makes a payment
of interest (including Compounded Interest), Additional Interest, premium and/or
principal on the Debentures held by the Institutional Trustee (the amount of any
such payment being a "Payment Amount"), the Institutional Trustee shall and is
directed, to the extent funds are available for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders of Preferred
Securities and Common Securities in accordance with the preferences set forth in
the respective terms of such Securities, as described it Annex I hereto.
ARTICLE VII
THE SECURITIES
SECTION 7.1 Title and Terms.
The Regular Trustees shall on behalf of the Trust issue one
class of convertible preferred securities, representing undivided beneficial
interests in the assets of the Trust (the "Preferred Securities"), and one class
of convertible common securities, representing undivided beneficial interests in
<PAGE> 46
-39-
the assets of the Trust (the "Common Securities"), each having such terms (the
"Terms") as are set forth in Annex I. The Trust shall issue no securities or
other interests in the assets of the Trust other than the Preferred Securities
and the Common Securities. The aggregate number of Preferred Securities
outstanding at any time shall not exceed the number set forth in the Terms in
Annex I hereto.
The Terms of the Securities set forth in Annex I and the forms
of Certificates set forth in Exhibits A-1 and A-2 are part of the terms of this
Declaration and to the extent applicable, the Institutional Trustee and the
Sponsor, by their execution and delivery of this Declaration, expressly agree to
such Terms and to be bound thereby.
SECTION 7.2 General Provisions Regarding the Securities.
(a) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
(b) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be validly issued, fully paid and
nonassessable.
(c) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.3 General Form of Certificates.
The Preferred Security Certificates and the Institutional
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A-1 and the Common Security Certificates shall be substantially in the
form of Exhibit A-2, each of which is hereby incorporated in and expressly made
a part of this Declaration.
The Certificates may have letters, numbers, notations or other
marks of identification or designation and such legends or endorsements required
by law, stock exchange rule, agreements to which the Trust is subject, if any,
or usage. The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Institutional Trustee in writing.
<PAGE> 47
-40-
The definitive Certificates shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Securities may be listed, all as determined by
the Regular Trustees, as evidenced by their execution thereof. The Trust shall
issue no Securities in bearer form.
SECTION 7.4 Form of Preferred Securities Certificates; Global Certificates.
(a) Unless otherwise specified in the terms of the Preferred
Securities, the Preferred Securities Certificates, on original issuance, will be
issued in the form of one or more, fully registered, global Preferred Security
Certificates (each a "Global Certificate"), to be delivered to The Depository
Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust. No
Preferred Security Beneficial Owner will receive a definitive Preferred Security
Certificate representing such Preferred Security Beneficial Owner's interests in
such Global Certificates, except as provided in Section 7.7
(b) Unless required by the Depositary, any securities exchange
on which the Preferred Securities may be listed or quoted for trading or any
rule, regulation or law, Preferred Securities issued in the form of Global
Certificates need not be printed, lithographed or engraved on steel engraved
borders, but shall be in such form as is acceptable to the Depositary.
(c) Every Global Certificate authenticated and delivered
hereunder shall bear a legend in substantially the following form, in capital
letters and bold-face type:
THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN
WHOLE OR IN PART FOR A PREFERRED SECURITY REGISTERED, AND NO TRANSFER
OF THIS PREFERRED SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN
THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION.
(d) If the Depositary is the Depository Trust Company, the
Global Certificate authenticated and delivered hereunder shall also bear a
legend in substantially the following form, in capital letters and bold-face
type:
<PAGE> 48
-41-
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SECTION 7.5 Execution and Dating of Certificates.
The Certificates shall be signed on behalf of the Trust by a
Regular Trustee. In case any Regular Trustee who shall have signed any of the
Certificates shall cease to be such Regular Trustee before the Certificates so
signed shall be delivered by the Trust, such Certificates nevertheless may be
delivered as though the person who signed such Certificates had not ceased to be
such Regular Trustee; and any Certificates may be signed on behalf of the Trust
by such persons who, at the actual date of execution of such Certificate, shall
be the Regular Trustees of the Trust, although at the date of the execution and
delivery of the Declaration any such person was not such a Regular Trustee. Each
Preferred Security shall be dated the date of its authentication.
One Regular Trustee shall sign the Preferred Security
Certificates for the Trust by manual or facsimile signature. Unless otherwise
determined by the Trust, such signature shall, in the case of Common Security
Certificates, be a manual signature.
SECTION 7.6 Authentication of Preferred Security Certificates.
Each Global Certificate shall initially be registered on the
books and records of he Trust in the name of Cede & Co., the nominee of The
Depositary Trust Company, and delivered to such Depositary or a nominee thereof
or custodian therefor, and each such Global Certificate shall constitute a
single Preferred Security for all purposes of this Declaration.
A Preferred Security Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the
Institutional Trustee. The signature shall be conclusive evidence that the
Preferred Security Certificate has been authenticated under this Declaration.
Upon a written
<PAGE> 49
-42-
order of the Trust signed by one Regular Trustee, the Institutional Trustee
shall authenticate the Preferred Security Certificates for original issue.
The Institutional Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Preferred Security Certificates. An
authenticating agent may authenticate Preferred Security Certificates whenever
the Institutional Trustee may do so. Each reference in this Declaration to
authentication by the Institutional Trustee includes authentication by such
agent. An authenticating agent has the same rights as the Institutional Trustee
to deal with the Sponsor or an Affiliate.
SECTION 7.7 Definitive Preferred Security Certificates.
(a) Upon the occurrence of an event specified in Section
8.2(a), definitive, fully registered Preferred Security Certificates
("Definitive Preferred Security Certificates") shall be prepared by the Regular
Trustees on behalf of the Trust with respect to such Preferred Securities.
(b) Upon surrender of the Global Certificates by the Clearing
Agency, accompanied by registration instructions, the Regular Trustees shall
cause Definitive Preferred Security Certificates to be delivered to Preferred
Security Beneficial Owners in accordance with the instructions of the Clearing
Agency. Neither the Trustees nor the Trust shall be liable for any delay in
delivery of such instructions and each of them may conclusively rely on and
shall be protected in relying on, said instructions of the Clearing Agency.
SECTION 7.8 Temporary Certificates.
Until definitive Certificates are ready for delivery, the
Trust may prepare and, in the case of the Preferred Securities, the
Institutional Trustee shall authenticate temporary Certificates. Temporary
Certificates shall be substantially in the form of definitive Certificates but
may have variations that the Trust considers appropriate for temporary
Certificates. Without unreasonable delay, the Trust shall prepare and, in the
case of the Preferred Securities, the Institutional Trustee shall authenticate
definitive Certificates in exchange for temporary Certificates.
<PAGE> 50
-43-
SECTION 7.9 Registrar, Paying Agent and Conversion Agent.
In the event that the Preferred Securities are not in book
entry only form, the Trust shall maintain in the Borough of Manhattan, City of
New York, State of New York, an office or agency where Preferred Securities may
be presented for registration of transfer or from exchange ("Registrar"), (ii)
an office or agency where Preferred Securities may be presented for payment
("Paying Agent"). The Trust shall maintain an office or agency where Securities
may be presented for conversion ("Conversion Agent"). The Registrar shall keep a
register of the Preferred Securities and of their transfer and exchange. The
Trust may appoint the Registrar, the Paying Agent and the Conversion Agent and
may appoint one or more coregistrars, one or more additional paying agents and
one or more additional conversion agents in such other locations as it shall
determine. The term "Paying Agent" includes any additional paying agent and the
term "Conversion Agent" includes any additional conversion agent. The Trust may
change any Paying Agent, Registrar, co-registrar or Conversion Agent without
prior notice to any Holder. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Regular Trustees. The Trust
shall notify the Institutional Trustee of the name and address of any Agent not
a party to this Declaration. If the Trust fails to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Institutional Trustee
shall act as such. The Trust or any of its Affiliates may act as Paying Agent,
Registrar, or Conversion Agent.
The Trust initially appoints the Institutional Trustee as
Registrar, Paying Agent and Conversion Agent for the Preferred Securities. The
Institutional Trustee shall be entitled to the protections of Sections 5.12 and
5.13 and Article IX in its capacity as Registrar, Paying Agent and Conversion
Agent.
SECTION 7.10 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the
Institutional Trustee to agree in writing that the Paying Agent will hold in
trust for the benefit of Holders or the Institutional Trustee all money held by
the Paying Agent for the payment of principal or distribution on the Securities,
and will notify the Institutional Trustee if there are insufficient funds. While
any such insufficiency continues, the Institutional Trustee may require a Paying
Agent to pay all money held by it to the Institutional Trustee. The Trust at any
time may
<PAGE> 51
-44-
require a Paying Agent to pay all money held by it to the Institutional Trustee
and to account for any money disbursed by it. Upon payment over to the
Institutional Trustee, the Paying Agent (if other than the Trust or an Affiliate
of the Trust) shall have no further liability for the money. If the Trust or the
Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent.
SECTION 7.11 Outstanding Preferred Securities.
The Preferred Securities outstanding at any time are all the
Preferred Securities authenticated by the Institutional Trustee except for those
cancelled by it, those delivered to it for cancellation, and those described in
this Section 7.11 as not outstanding.
If a Preferred Security is replaced or paid pursuant to
Section 8.3, it ceases to be outstanding unless the Institutional Trustee
receives proof satisfactory to it that the replaced, paid or purchased Preferred
Security is held by a bona fide purchaser.
If Preferred Securities are considered paid in accordance with
the terms of this Declaration, they cease to be outstanding and interest on them
ceases to accrue.
A Preferred Security does not cease to be outstanding because
one of the Trust, the Sponsor or an Affiliate of the Sponsor holds the Preferred
Security.
SECTION 7.12 Preferred Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Preferred
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Institutional Trustee shall be
fully protected in relying on any such direction, waiver or consent, only
Preferred Securities which the Institutional Trustee knows are so owned shall be
so disregarded.
<PAGE> 52
-45-
SECTION 7.13 Notices to Clearing Agency.
Whenever a notice or other communication to the Preferred
Security Holders is required under this Declaration, the Regular Trustees shall,
in the case of any Global Preferred Security, give all such notices and
communications specified herein to be given to the Preferred Security Holders to
the Depositary, and shall have no notice obligations to the Preferred Security
Beneficial Owners.
SECTION 7.14 Appointment of Successor Clearing Agency.
If the Depositary elects to discontinue its services as
securities depositary with respect to the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Preferred Securities.
SECTION 7.15 Deemed Security Holders.
The Trustees and any Agent may treat the Person in whose name
any Certificate shall be registered on the books and records of the Trust as the
sole holder of such Certificate and of the Securities represented by such
Certificate for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Certificate or in the Securities represented
by such Certificate on the part of any Person, whether or not the Trust shall
have actual or other notice thereof.
ARTICLE VIII
TRANSFERS, EXCHANGES AND CANCELLATIONS
OF SECURITIES
SECTION 8.1 General.
(a) Where Preferred Security Certificates are presented to the
Registrar or a co-registrar with a request to register a transfer or to exchange
them for an equal number of Preferred Securities represented by different
certificates, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Trust shall issue and the Institutional Trustee
shall authenticate Preferred Security Certificates at the Registrar's request.
<PAGE> 53
-46-
(b) Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and in
the Terms set forth in Annex I. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(c) Subject to this Article VIII, the Sponsor and any Related
Party may only transfer Common Securities to the Sponsor or a Related Party of
the Sponsor; provided that, any such transfer is subject to the condition
precedent that the transferor obtain the written opinion of nationally
recognized independent counsel experienced in such matters that such transfer
would not cause more than an insubstantial risk that:
(i) the Trust would not be classified for United
States federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
(d) The Regular Trustees shall provide for the registration of
Securities and of transfers of Securities, which will be effected without charge
but only upon payment (with such indemnity as the Regular Trustees may require)
in respect of any tax or other governmental charges that may be imposed in
relation to it. Upon surrender for registration of transfer of any Certificates,
the Regular Trustees shall cause one or more new Certificates to be issued in
the name of the designated transferee or transferees. Every Certificate
surrendered for registration of transfer shall be accompanied by a written
instrument of transfer in form satisfactory to the Regular Trustees duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Certificate surrendered for registration of transfer shall be canceled by
the Regular Trustees. A transferee of a Certificate shall be entitled to the
rights and subject to the obligations of a Holder hereunder upon the receipt by
such transferee of a Certificate. By acceptance of a Certificate, each
transferee shall be deemed to have agreed to be bound by this Declaration.
(e) The Trust shall not be required (i) to issue, register the
transfer of or exchange Preferred Security Certificates during a period
beginning at the opening of business 15 days before the day of any selection of
Preferred Securities for redemption and ending at 5:00 p.m. (New York City time)
on the day of selection, or (ii) to register the transfer or exchange of any
Preferred Security so selected for redemption
<PAGE> 54
-47-
in whole or in part, except the unredeemed portion of any Preferred Security
being redeemed in part.
SECTION 8.2 Transfer Procedures and Restrictions for Global Certificates.
(a) Notwithstanding any other provision in this Declaration,
no Global Certificate may be exchanged in whole or in part for Preferred
Securities registered, and no transfer of a Global Certificate in whole or in
part may be registered, in the name of any Person other than the Depositary for
such Global Certificate or a nominee thereof or a successor Depositary or a
nominee of such successor Depositary, unless (i) such Depositary (x) has
notified the Sponsor that it is unwilling or unable to continue as Depositary
for such Global Certificate and is not replaced by a successor Depositary
approved by the Sponsor within 90 days or (y) at any time has ceased to be a
clearing agency registered under the Exchange Act, or (ii) an Event of Default
has occurred and is continuing.
(b) The transfer and exchange of Global Certificates or
beneficial interests therein shall be effected through the Clearing Agency, in
accordance with this Declaration and the procedures of the Clearing Agency
therefor.
(c) Unless and until Definitive Preferred Security
Certificates have been issued to the Preferred Security
Beneficial owners pursuant to Section 7.7:
(i) the Trust and the Trustees shall be entitled to deal
with the Clearing Agency for all purposes of this Declaration
(including the payment of Distributions on the Global Certificates and
receiving approvals, votes or consents hereunder) as the Holder of the
Preferred Securities and the sole holder of the Global Certificates and
shall have no obligation to the Preferred Security Beneficial owners;
and
(ii) the rights of the Preferred Security Beneficial Owners
shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Clearing Agency and/or the
Clearing Agency Participants and receive and transmit payments of
Distributions on the Global Certificates to such Clearing Agency
Participants. The Depositary will make book entry transfers among the
Clearing Agency Participants.
<PAGE> 55
48
SECTION 8.3 Mutilated, Destroyed, Lost or Stolen Certificates; Replacement
Securities.
If the holder of a Security claims that the Certificate
representing such Security has been lost, destroyed or wrongfully taken or if
such Certificate is mutilated and is surrendered to the Trust or in the case of
the Preferred Securities to the Institutional Trustee, the Trust shall issue and
the Institutional Trustee shall authenticate a replacement Certificate if the
Institutional Trustee's and the Trust's requirements, as the case may be, are
met. If required by the Institutional Trustee or the Trust, an indemnity bond
must be sufficient in the judgment of both to protect the Trustees, the
Institutional Trustee, the Sponsor or any authenticating agent from any loss
which any of them may suffer if a Certificate is replaced. The Company may
charge for its expenses in replacing a Certificate.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Sponsor in its discretion
may, instead of issuing a new Certificate, pay such Security.
Every replacement Certificate is an additional obligation of
the Trust.
SECTION 8.4 Cancellation of Preferred Security Certificates.
The Trust at any time may deliver Preferred Security
Certificates to the Institutional Trustee for cancellation. The Registrar,
Paying Agent and Conversion Agent shall forward to the Institutional Trustee any
Preferred Securities surrendered to them for registration of transfer,
redemption, conversion, exchange or payment. The Institutional Trustee shall
promptly cancel all Preferred Securities surrendered for registration of
transfer, redemption, conversion, exchange, payment, replacement or cancellation
and shall dispose of cancelled Preferred Securities as the Trust directs. The
Trust may not issue new Preferred Securities to replace Preferred Securities
that it has paid or that have been delivered to the Institutional Trustee for
cancellation or that any holder has converted.
<PAGE> 56
-49-
ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES AND OTHERS
SECTION 9.1 Liability.
(a) Except as expressly set forth in this Declaration,
the Securities Guarantees and the terms of the Securities, the
Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable
for all of the debts and obligations of the Trust (other than with respect to
the Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust
Act, the Holders of the Preferred Securities shall be entitled to the same
limitation of personal liability as is extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
SECTION 9.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross negligence (or, in
the case of the Institutional Trustee, negligence) or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Trust and upon
<PAGE> 57
-50-
such information, opinions, reports or statements presented to the Trust by any
Person as to matters the Indemnified Person reasonably believes are within such
other Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions to Holders of Securities might properly be paid.
SECTION 9.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an
Indemnified Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to any other Covered Person, an Indemnified
Person acting under this Declaration shall not be liable to the Trust or to any
other Covered Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity (other than the duties imposed on the Institutional Trustee
under the Trust Indenture Act), are agreed by the parties hereto to replace such
other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between an Indemnified Person and any Covered Person or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or
<PAGE> 58
-51-
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person
is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 9.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the
full extent permitted by law, any Company Indemnified Person
who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Trust) by reason of the fact that he
is or was a Company Indemnified Person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Company
Indemnified Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
<PAGE> 59
-52-
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a
judgment in its favor by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust
unless and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or
such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 9.4(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to the full
extent permitted by law, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 9.4(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person is
proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (i) and (ii). Such determination
shall be made (1) by the Regular Trustees by a majority vote of a
quorum consisting of such Regular Trustees who were not parties to such
action, suit or proceeding, (2) if such a quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested Regular Trustees so
directs, by independent legal counsel in a written
<PAGE> 60
-53-
opinion, or (3) by the Holders of the Common Securities of the Trust.
(v) Expenses (including attorneys, fees) incurred by a Company
Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i)
and (ii) of this Section 9.4(a) shall be paid by the Debenture Issuer
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Debenture
Issuer as authorized in this Section 9.4(a). Notwithstanding the
foregoing, no advance shall be made by the Debenture Issuer if a
determination is reasonably and promptly made (i) by the Regular
Trustees by a majority vote of a quorum of disinterested Regular
Trustees, (ii) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so directs,
by independent legal counsel in a written opinion or (iii) the Holders
of the Common Securities of the Trust, that, based upon the facts known
to the Regular Trustees, counsel or the Holders of the Common
Securities at the time such determination is made, such Company
Indemnified Person acted in bad faith or in a manner that such person
did not believe to be in or not opposed to the best interests of the
Trust, or, with respect to any criminal proceeding, that such Company
Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made in
instances where the Regular Trustees, independent legal counsel or the
Holders of the Common Securities reasonably determine that such person
deliberately breached his duty to the Trust or the Holders of the
Common or Preferred Securities.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 9.4(a)
shall not be deemed exclusive of any other rights to which those
seeking indemnification and advancement of expenses may be entitled
under any agreement, vote of stockholders or disinterested directors of
the Debenture Issuer or Holders of the Preferred Securities of the
Trust or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office. All rights to
indemnification under this Section 9.4(a) shall be deemed to be
provided by a contract between the Debenture Issuer and each
<PAGE> 61
-54-
Company Indemnified Person who serves in such capacity at any time
while this Section 9.4(a) is in effect. Any repeal or modification of
this Section 9.4(a) shall not affect any rights or obligations then
existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 9.4(a).
(viii) For purposes of this Section 9.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity,
any constituent entity (including any constituent of a constituent)
absorbed in a consolidation or merger, so that any person who is or was
a director, trustee, officer or employee of such constituent entity, or
is or was serving at the request of such constituent entity as a
director, trustee, officer, employee or agent of another entity, shall
stand in the same position under the provisions of this Section 9.4(a)
with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had
continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 9.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a Company Indemnified Person and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(b) The Sponsor agrees to indemnify the (i) Institutional
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Institutional
Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Institutional Trustee and the Delaware Trustee (each
of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any and all loss, liability or expense including taxes (other than taxes based
on the income of such Fiduciary Indemnified Person) incurred without negligence
or bad faith on its part, arising out of or in connection with the acceptance or
administration or the trust or trusts
<PAGE> 62
-55-
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 9.4(b) shall
survive the satisfaction and discharge of this Declaration.
SECTION 9.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware
Trustee, or the Institutional Trustee shall be obligated to present any
particular investment or other opportunity to the Trust even if such opportunity
is of a character that, if presented to the Trust, could be taken by the Trust,
and any Covered Person, the Sponsor, the Delaware Trustee and the Institutional
Trustee shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular investment
or other opportunity. Any Covered Person, the Delaware Trustee and the
Institutional Trustee may engage or be interested in any financial or other
transaction with the Sponsor or any Affiliate of the Sponsor, or may act as
depositary for, trustee or agent for, or act on any committee or body of holders
of, securities or other obligations of the Sponsor or its Affiliates.
ARTICLE X
ACCOUNTING
SECTION 10.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be [ ],
or such other year as is required by the Code.
<PAGE> 63
-56-
SECTION 10.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Regular Trustees shall keep, or cause to be kept, full books of account, records
and supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes. The books of account
and the records of the Trust shall be examined by and reported upon as of the
end of each Fiscal Year by a firm of independent certified public accountants
selected by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss;
(c) The Regular Trustees shall cause to be duly prepared and
delivered to each of the Holders of Securities, any annual United States federal
income tax information statement required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Regular Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by the Code, and
any other annual income tax returns required to be filed by the Regular Trustees
on behalf of the Trust with any state or local taxing authority.
SECTION 10.3 Banking.
The Trust shall maintain one or more bank accounts in the name
and for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures held by the Institutional Trustee shall be
made directly to the Institutional Trustee Account and no other funds of the
Trust
<PAGE> 64
-57-
shall be deposited in the Institutional Trustee Account. The sole signatories
for such accounts shall be designated by the Regular Trustees; provided,
however, that the Institutional Trustee shall designate the signatories for the
Institutional Trustee Account.
SECTION 10.4 Withholding.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustee shall file required
forms with applicable jurisdictions and, unless an exemption from withholding is
properly established by a Holder, shall remit amounts withheld with respect to
the Holder to applicable jurisdictions. To the extent that the Trust is required
to withhold and pay over any amounts to any authority with respect to
distributions or allocations to any Holder, the amount withheld shall be deemed
to be a distribution in the amount of the withholding to the Holder. In the
event of any claimed overwithholding, Holders shall be limited to an action
against the applicable jurisdiction. If the amount required to be withheld was
not withheld from actual Distributions made, the Trust may reduce subsequent
Distributions by the amount of such withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than
two Regular Trustees, a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Institutional
Trustee, the Institutional Trustee; and
<PAGE> 65
-58-
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee.
(b) No amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Institutional Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such amendment
is permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of the
Institutional Trustee, the Institutional Trustee shall have first
received:
(A) an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust) that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(iii) to the extent the result of such amendment would
be to:
(A) cause the Trust to fail to continue to be
classified for purposes of United States federal income
taxation as a grantor trust;
(B) reduce or otherwise adversely affect the
powers of the Institutional Trustee in contravention of
the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an
Investment Company that is required to be registered
under the Investment Company Act.
(c) So long as any Securities remain outstanding, any
amendment that would adversely affect the rights, privileges or preferences of
any Holder of Securities may be
<PAGE> 66
-59-
effected only with such additional requirements as may be set forth in the terms
of such Securities.
(d) Section 8.1(c) and this Section 11.1 shall not be amended
without the consent of all of the Holders of the Securities.
(e) Article IV and the rights of the holders of the Common
Securities under Article V to increase or decrease the number of, and appoint
and remove Trustees shall not be amended without the consent of the Holders of a
majority in liquidation amount of the Common Securities.
(f) Notwithstanding Section 11.1(c), this Declaration may be
amended without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; and
(iv) conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any legislative body,
court, government agency or regulatory authority, which amendment does
not have a material adverse effect on the rights, preferences or
privileges of the Holders.
SECTION 11.2 Meetings of the Holders of Securities;
Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Preferred
Securities are listed or quoted for trading. The Regular Trustees shall call a
meeting of the Holders of such class if directed to do so by the Holders of at
least 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Regular Trustees one or more calls in a
writing stating that the signing Holders
<PAGE> 67
-60-
of Securities wish to call a meeting and indicating the general or specific
purpose for which the meeting is to be called. Any Holders of Securities calling
a meeting shall specify in writing the Certificates held by the Holders of
Securities exercising the right to call a meeting and only those Securities
represented by the Certificates so specified shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the
terms of the Securities, the following provisions shall apply to
meetings of Holders of Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least seven
days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of Securities is
permitted or required under this Declaration or the rules of any stock
exchange or over-the-counter market on which the Preferred Securities
are listed or quoted for trading, such vote, consent or approval may be
given at a meeting of the Holders of Securities. Any action that may be
taken at a meeting of the Holders of Securities may be taken without a
meeting if a consent in writing setting forth the action so taken is
signed by the Holders of Securities owning not less than the minimum
amount of Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders of
Securities having a right to vote thereon were present and voting.
Prompt notice of the taking of action without a meeting shall be given
to the Holders of Securities entitled to vote who have not consented in
writing. The Regular Trustees may specify that any written ballot
submitted to the Security Holders for the purpose of taking any action
without a meeting shall be returned to the Trust within the time
specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to
act for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
Holder of Securities executing it. Except as otherwise provided herein,
all matters relating to the giving, voting or validity of proxies shall
be
<PAGE> 68
-61-
governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the
Trust were a Delaware corporation and the Holders of the Securities
were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the
Regular Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules
of any stock exchange on which the Preferred Securities are then listed
or trading provide otherwise, the Regular Trustees, in their sole
discretion, shall establish all other provisions relating to meetings
of Holders of Securities, including notice of the time, place or
purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1 Representations and Warranties of Institutional
Trustee.
The Trustee that acts as initial Institutional Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Institutional Trustee represents and warrants to
the Trust and the Sponsor at the time of the Successor Institutional Trustee's
acceptance of its appointment as Institutional Trustee that:
(a) The Institutional Trustee is a banking corporation with
trust powers, duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, with trust power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, this Declaration.
(b) The execution, delivery and performance by the
Institutional Trustee of the Declaration has been duly
<PAGE> 69
-62-
authorized by all necessary corporate action on the part of the Institutional
Trustee; and the Declaration has been duly executed and delivered by the
Institutional Trustee, and constitutes a legal, valid and binding obligation of
the Institutional Trustee, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, insolvency, and
other similar laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration
by the Institutional Trustee does not conflict with or constitute a breach of
the certificate of incorporation or Bylaws of the Institutional Trustee.
(d) At the Closing Date, the Institutional Trustee has not
knowingly created any liens or encumbrances on such Debentures.
(e) No consent, approval or authorization of, or registration
with or notice to, any New York State or federal banking authority is required
for the execution, delivery or performance by the Institutional Trustee, of the
Declaration.
SECTION 12.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration and
at the time of Closing, and each Successor Delaware Trustee represents and
warrants to the Trust and the Sponsor at the time of the Successor Delaware
Trustee's acceptance of its appointment as Delaware Trustee that:
(a) The Delaware Trustee is a duly organized, validly existing
and in good standing under the laws of the State of Delaware, with power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, the Declaration.
(b) The execution, delivery and performance by the Delaware
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee; and the Declaration has been duly
executed and delivered by the Delaware Trustee, and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable
<PAGE> 70
-63-
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration
by the Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Delaware Trustee.
(d) No consent, approval or authorization of, or registration
with or notice to, any state or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of this Declaration.
(e) The Delaware Trustee is an entity which has its
principal place of business in the State of Delaware.
(f) The Delaware Trustee has been authorized to
perform its obligations under the Certificate of Trust and the
Declaration.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
sent by facsimile or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders of the Securities):
Walbro Corporation
6242 Garfield Street
Cass City, MI 48726
Tel: [ ]
Telecopy: [ ]
Attention: [ ]
<PAGE> 71
-64-
(b) if given to the Institutional Trustee, at the mailing
address set forth below (or such other address as the Institutional Trustee may
give notice of to the Holders of the Securities):
[
]
Tel: [ ]
Telecopy: [ ]
Attention: [ ]
(c) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as the Delaware Trustee may give notice
of to the Holders of the Securities):
[
]
Attention: [ ]
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
Walbro Corporation
6242 Garfield Street
Cass City, MI 48726
Tel: [ ]
Telecopy: [ ]
Attention: [ ]
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
<PAGE> 72
-65-
SECTION 13.2 Governing Law.
This Declaration and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 13.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
SECTION 13.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 13.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 13.6 Partial Enforceability.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 13.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
<PAGE> 73
-66-
IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the date first above written.
--------------------------------------
Lambert E. Althaver,
as Regular Trustee
--------------------------------------
Michael A. Shope,
as Regular Trustee
[ ],
as Delaware Trustee
By:
-----------------------------------
Name:
Title:
[ ],
as Institutional Trustee
By:
-----------------------------------
Name:
Title:
WALBRO CORPORATION,
as Sponsor
By:
-----------------------------------
Name:
Title:
<PAGE> 74
ANNEX I
TERMS OF
[ ]% CONVERTIBLE PREFERRED SECURITIES
[ ]% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of [ ], 1997 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration or, if not defined in such
Declaration, as defined in the Registration Statement):
1. Designation and Number.
(a) "Preferred Securities." [ ] Preferred
--------------------
Securities of the Trust with an aggregate liquidation
amount with respect to the assets of the Trust of
[ ] Dollars
($[ ]), plus up to an additional
[ ] Preferred Securities of the Trust with
an aggregate liquidation amount with respect to the
assets of the Trust of
[ ] Dollars
($[ ]) solely to cover over-allotments, as
provided for in the Purchase Agreement (the "Additional
Preferred Securities"), and a liquidation amount with
respect to the assets of the Trust of $25 per Preferred
Security, are hereby designated for the purposes of
identification only as "[ ]% Convertible Preferred
Securities (liquidation amount $25 per Preferred
Convertible Security)" (the "Preferred Securities").
The Preferred Security Certificates evidencing the
Preferred Securities shall be substantially in the form
of Exhibit A-1 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice or to
conform to the rules of any stock exchange or other
organization on which the Preferred Securities are
listed or quoted for trading.
(b) "Common Securities." [ ] Common Securities
of the Trust with an aggregate liquidation amount with
respect to the assets of the Trust of
<PAGE> 75
[ ] Dollars ($[ ]) plus up to an additional [ ]
Common Securities of the Trust with an aggregate liquidation
amount with respect to the assets of the Trust of [ ] Dollars
($[ ]) to meet the capital requirements of the Trust in the
event of an issuance of Additional Preferred Securities, and a
liquidation amount with respect to the assets of the Trust of
$25 per Common Security, are hereby designated for the
purposes of identification only as "[ ]% Convertible Common
Securities (liquidation amount $25 per Convertible Common
Security)" (the "Common Securities"). The Common Security
Certificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration,
with such changes and additions thereto or deletions therefrom
as may be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at
a rate per annum of [ ]% (the "Coupon Rate") of the
stated liquidation amount of $25 per Security, such
rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee.
Distributions in arrears for more than one quarter will
bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes
any such interest including any Additional Interest and
Compounded Interest payable unless otherwise stated. A
Distribution is payable only to the extent that
payments are made in respect of the Debentures held by
the Institutional Trustee and to the extent the Trust
has funds available therefor. The amount of
Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarterly Distribution
period for which Distributions are computed,
Distributions will be computed on the basis of the
actual number of days elapsed per 90-day quarter.
(b) Except as otherwise described below, Distributions on
the Securities will be cumulative, will accrue from the
date of initial issuance and will be payable quarterly
in arrears, on the following dates, which
I-2
<PAGE> 76
dates correspond to the interest payment dates on the
Debentures: March 31, June 30, September 30 and December 31 of
each year, commencing on March 31, 1997, when, as and if
available for payment by the Institutional Trustee. The
Debenture Issuer has the right at any time during the term of
the Debentures to defer interest payments from time to time by
extending the interest payment period for successive periods
not exceeding 20 consecutive quarters (each, an "Extension
Period") for each such period; provided that no Extension
Period may extend beyond the maturity date of the Debentures.
As a consequence of such extension, quarterly Distributions on
the Securities would be deferred (though such Distributions
would continue to accrue with interest since interest would
continue to accrue on the Debentures) during any such extended
interest payment period. In the event that the Debenture
Issuer exercises this right, then, during such period, (a) the
Debenture Issuer shall not declare or pay dividends on, or
make any distributions or liquidation payments with respect
to, or redeem, purchase or acquire any of its capital stock
(other than (i) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by the Debenture
Issuer of its obligations under any employee benefit plans or
the satisfaction by the Debenture Issuer of its obligations
pursuant to any contract or security requiring the Debenture
Issuer to purchase shares of the Common Stock, (ii) as a
result of a reclassification of the Debenture Issuer's capital
stock or the exchange or conversion of one class or series of
the Debenture Issuer's capital stock for another class or
series of the Debenture Issuer's capital stock, (iii) the
purchase of fractional interests in shares of the Debenture
Issuer's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being
converted or exchanged or (iv) stock dividends paid by the
Debenture Issuer where the dividend stock is the same stock as
that on which the dividend is paid), (b) the Debenture Issuer
shall not make any payment of interest on or principal of (or
premium, if any, on) or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Debenture
Issuer which rank pari passu with or junior to the Debentures
and (c) the Debenture Issuer shall not make any guarantee
payments with respect to the foregoing (other than pursuant to
the Guarantee). Prior to the termination of any such Extension
Period, the Debenture Issuer may further extend the
I-3
<PAGE> 77
interest payment period; provided that such Extension Period,
together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity date of the Debentures. Upon the
termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records
of the Trust on the relevant record dates. The
relevant record dates shall be the March 15, June 15,
September 15 and December 15 prior to the next
succeeding payment dates, except as otherwise described
in this Annex I to the Declaration. Subject to any
applicable laws and regulations and the provisions of
the Declaration, each such payment in respect of the
Preferred Securities being held in book-entry form
through The Depository Trust Company (the "Depositary")
will be made as described under the heading
"Description of the Preferred Securities -- Book Entry
Only Issuance -- The Depository Trust Company" in the
Registration Statement. The relevant record dates for
the Common Securities shall be the same record dates as
for the Preferred Securities. Distributions payable on
any Securities that are not punctually paid on any
Distribution payment date as a result of the Debenture
Issuer having failed to make a payment under the
Debentures, will cease to be payable to the Person in
whose name such Securities are registered on the
relevant record date, and such defaulted Distribution
will instead be payable to the Person in whose name
such Securities are registered on the special record
date or other specified date determined in accordance
with the Indenture. If any date on which Distributions
are payable on the Securities is not a Business Day,
then payment of the Distribution payable on such date
will be made on the next succeeding day that is a
Business Day (and without any distribution or other
payment in respect of any such delay) except that, if
such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately
preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) In the event of an election by the Holder to convert
its Securities through the Conversion Agent into
Common Stock of the Debenture Issuer pursuant to the
I-4
<PAGE> 78
terms of the Securities as set forth in this Annex I to the
Declaration, accrued Distributions will not be paid on
Preferred Securities that are converted, nor will any payment,
allowance or adjustment be made for accumulated and unpaid
Distributions, whether or not in arrears, on converted
Preferred Securities except that if any Preferred Security is
converted (i) on or after a record date for payment of
Distributions thereon, the amount of the Distributions payable
on the related payment date with respect to such Preferred
Security shall be paid by the converting Holder to the Trust
and the Distributions payable on the related payment date with
respect to such Preferred Security shall be distributed to the
Holder as of such record date, despite such conversion, and
(ii) during an Extension Period and after the Institutional
Trustee mails a notice of redemption of the Preferred
Securities that are converted, accrued and unpaid
Distributions through the date of conversion on such Preferred
Securities called for redemption shall be distributed to the
Holder who converts such Preferred Securities, which
Distribution shall be made on the redemption date.
(e) In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined in
paragraph 9) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then Holders
of the Securities on the date of the Liquidation will be entitled to receive out
of the assets of the Trust available for distribution to Holders of Securities
after satisfaction of liabilities of creditors, Distributions in an amount equal
to the aggregate of the stated liquidation amount of $25 per Security plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
Liquidation, Debentures in an aggregate principal amount equal to the aggregate
stated liquidation amount of such Securities, with an interest rate equal to the
Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to
the accrued and unpaid Distributions on, such Securities, shall be distributed
on a Pro Rata basis to the Holders of the Securities.
I-5
<PAGE> 79
If, upon any such Liquidation, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis in
accordance with paragraph 9 below.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures, in whole or in part,
whether at maturity or upon redemption (either at the option
of the Debenture Issuer or pursuant to a Tax Event), the
proceeds from such repayment or payment shall be
simultaneously applied to redeem Securities having an
aggregate liquidation amount equal to the aggregate principal
amount of the Debentures so repaid or redeemed at a redemption
price equal to the redemption price of such repaid or redeemed
Debentures, together with accrued and unpaid Distributions
thereon through the date fixed for redemption, payable in cash
(the "Redemption Price").
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Preferred Securities
will be redeemed Pro Rata and the Preferred Securities to be
redeemed will be as described in paragraph 4(f)(ii) below.
(c) If, at any time, a Tax Event or an Investment Company
Event (each as defined below and each a "Special
Event") shall occur and be continuing, the Regular
Trustees shall, unless the Debentures are redeemed in
the limited circumstances in relation to a Tax Event
described in the following paragraph of this paragraph
4(c), dissolve the Trust and, after satisfaction of
creditors of the Trust, if any, cause Debentures held
by the Institutional Trustee (w) having an aggregate
principal amount equal to the aggregate stated
liquidation amount of, (x) an interest rate identical
to the Coupon Rate of, (y) accrued and unpaid interest
on, and (z) the same record dates for payment as, the
Securities, to be distributed to the Holders of the
Securities in liquidation of such Holders' interest in
the Trust on a Pro Rata basis, within 90 days following
the occurrence of such Special Event (the "90 Day
Period"); provided, however, that in the case of a Tax
Event, such dissolution and distribution shall be
conditioned on the Regular Trustees' receipt of an
opinion of a nationally recognized independent tax
counsel experienced in such
I-6
<PAGE> 80
matters (a "No Recognition Opinion"), which opinion may rely
on published revenue rulings of the Internal Revenue Service,
to the effect that the Holders of the Preferred Securities
will not recognize any gain or loss for United States federal
income tax purposes as a result of such dissolution and
distribution of Debentures, and provided, further, that
if at the time there is available to the Trust the
opportunity to eliminate, within the 90 Day Period, the
Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other
similar reasonable measure that in the sole judgment of the
Debenture Issuer has, or will cause, no adverse effect on the
Trust, the Debenture Issuer or the Holders of the Securities
("Ministerial Action"), the Debenture Issuer or the Trust
will pursue such Ministerial Action in lieu of dissolution.
If in the event of a Tax Event, (i) the
Debenture Issuer has received an opinion (a "Redemption Tax
Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of such Tax
Event, there is more than an insubstantial risk that the
Debenture Issuer would be precluded from deducting the
interest on the Debentures for United States federal income
tax purposes even if the Debentures were distributed to the
Holders of Securities in liquidation of such Holders' interest
in the Trust as described in this paragraph 4(c), or (ii) the
Regular Trustees shall have been informed by such a tax
counsel that it cannot deliver a No Recognition Opinion to the
Regular Trustees, the Debenture Issuer shall have the right,
upon not less than 30 nor more than 60 days' notice, to redeem
the Debentures, in whole or in part, for cash within 90 days
following the occurrence of such Tax Event, and promptly
following such redemption, Securities shall be redeemed at the
Redemption Price on a Pro Rata basis at $25 per security plus
accrued and unpaid distributions; provided, however, that if
at the time there is available to the Debenture Issuer or the
Trust the opportunity to eliminate, within such 90 Day Period,
the Tax Event by taking some Ministerial Action that has no
adverse effect on the Trust, the Holders of Securities or the
Debenture Issuer, the Trust or the Debenture Issuer will
pursue such Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees
shall have received an opinion of nationally
I-7
<PAGE> 81
recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that as a result
of (a) any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision
or taxing authority thereof or therein or (b) any amendment
to, or change in, an interpretation or application of such
laws or regulations by any legislative body, court,
governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any
judicial decision or regulatory determination on or after
[ ], 1997), in either case after [ ],
1997, there is more than an insubstantial risk that (i) the
Trust would be subject to United States federal income tax
with respect to income accrued or received on the Debentures,
(ii) the Trust would be subject to more than a de minimis
amount of other taxes, duties or other governmental charges or
(iii) interest payable by the Debenture Issuer to the Trust on
the Debentures would not be deductible, in whole or in part,
by the Debenture Issuer for United States federal income tax
purposes.
"Investment Company Event" means that the
Regular Trustees shall have received an opinion of a
nationally recognized independent counsel experienced in
practicing under the Investment Company Act of 1940, as
amended (the "1940 Act"), to the effect that, as a result of
the occurrence of a change in law or regulation or a written
change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is
more than an insubstantial risk that the Trust is or will be
considered an "investment company" which is required to be
registered under the 1940 Act, which Change in 1940 Act Law
becomes effective on or after [ ], 1997.
On the date fixed for any distribution of
Debentures, upon dissolution of the Trust: (i) the Securities
will no longer be deemed to be outstanding and (ii)
certificates representing Securities will be deemed to
represent beneficial interests in Debentures having an
aggregate principal amount equal to the stated liquidation
amount, and bearing accrued and unpaid interest equal to
accrued and unpaid Distributions, on such Securities until
such
I-8
<PAGE> 82
certificates are presented to the Debenture Issuer or its
agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding
Securities unless all accrued and unpaid Distributions have
been paid on all Securities for all quarterly Distribution
periods terminating on or before the date fixed for
redemption.
(e) If the Debentures are distributed to the Holders of the
Securities, pursuant to the terms of the Indenture, the
Debenture Issuer will use its best efforts to have the
Debentures quoted for trading on the Nasdaq National Market
System or on such exchange as the Preferred Securities were
listed immediately prior to the distribution of the
Debentures.
(f) Redemption or Distribution Procedures.
(i) Notice of any redemption of, or notice of
distribution of Debentures in exchange for, the
Securities (a "Redemption/Distribution Notice") will
be given by the Trust by mail to each Holder of
Securities to be redeemed or exchanged not fewer than
30 nor more than 60 days before the date fixed for
redemption or exchange thereof, which, in the case of
a redemption, will be the date fixed for redemption
of the Debentures. For purposes of the calculation
of the date of redemption or exchange and the dates
on which notices are given pursuant to this paragraph
4(f)(i), a Redemption/Distribution Notice shall be
deemed to be given on the day such notice is first
mailed by first-class mail, postage prepaid, to
Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of
Securities at the address of each such Holder
appearing in the books and records of the Trust. No
defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any
Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other
Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to
be redeemed shall be redeemed Pro Rata from each
Holder of Preferred Securities, it being
understood that, in respect of Preferred
Securities
I-9
<PAGE> 83
registered in the name of and held of record by the
Depositary or its nominee (or any successor Clearing
Agency or its nominee), the distribution of the
proceeds of such redemption will be made to each
Clearing Agency Participant (or Person on whose
behalf such nominee holds such securities) in
accordance with the procedures applied by such agency
or nominee.
(iii) If Securities are to be redeemed and the Trust gives
a Redemption/Distribution Notice (which notice is
irrevocable), then, provided that the Debenture
Issuer has paid the Institutional Trustee a
sufficient amount of cash in connection with the
related redemption or maturity of the Debentures, (A)
with respect to Preferred Securities held in
book-entry form, by 12:00 noon, New York City time,
on the redemption date, the Trust will deposit
irrevocably with the Depositary or its nominee (or
successor Clearing Agency or its nominee) funds
sufficient to pay the applicable Redemption Price
with respect to such Preferred Securities and will
give the Depositary irrevocable instructions and
authority to pay the applicable Redemption Price to
the Holders of such Preferred Securities represented
by the Global Certificates, and (B) with respect to
Preferred Securities issued in definitive form and
Common Securities, the Trust will irrevocably deposit
with the Paying Agent funds sufficient to pay the
amount payable on redemption to the Holders of such
Securities upon surrender of their certificates. If a
Redemption/Distribution Notice shall have been given
and funds deposited as required, then on the date of
such deposit, all rights of Holders of such
Securities so called for redemption will cease,
except the right of the Holders of such Securities to
receive the Redemption Price, but without interest
thereon. Neither the Regular Trustees nor the Trust
shall be required to register or cause to be
registered the transfer of any Securities that have
been so called for redemption. If any date fixed for
redemption of Securities is not a Business Day, then
payment of the amount payable on such date will be
made on the next succeeding day that is a Business
Day (without any interest or other payment in respect
of any such delay) except that, if such Business Day
falls in the next calendar year,
I-10
<PAGE> 84
such payment will be made on the immediately
preceding Business Day, in each case with the same
force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in
respect of any Securities is improperly withheld or
refused and not paid either by the Trust or by the
Debenture Issuer as guarantor pursuant to the
relevant Securities Guarantee, Distributions on such
Securities will continue to accrue at the then
applicable rate, from the original redemption date to
the date of payment, in which case the actual payment
date will be considered the date fixed for redemption
for purposes of calculating the amount payable upon
redemption (other than for purposes of calculating
any premium).
(iv) In the event of any redemption in part, the Trust
shall not be required to (i) issue, register the
transfer of or exchange of any Preferred Security
during a period beginning at the opening of business
15 days before any selection for redemption of
Preferred Securities and ending at 5:00 p.m. (New
York City time) on the earliest date in which the
relevant notice of redemption is deemed to have been
given to all holders of Preferred Securities to be so
redeemed and (ii) register the transfer of or
exchange of any Preferred Securities so selected for
redemption, in whole or in part, except for the
unredeemed portion of any Preferred Securities being
redeemed in part.
(v) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in the
case of Preferred Securities held in book-entry form,
the Depositary and, in the case of Securities held in
definitive form, the Holders of such certificates and
(B) in respect of the Common Securities, the Holder
thereof.
(vi) Subject to the foregoing and applicable law
(including, without limitation, United States federal
securities laws), the Debenture Issuer or any of its
subsidiaries may at any time and from time to time
purchase outstanding Preferred Securities by tender,
in the open market or by private agreement.
5. Conversion Rights.
I-11
<PAGE> 85
The Holders of Securities shall have the right at any time prior to
5:00 p.m. (New York City time) on the Business Day immediately
preceding the date of repayment of such Securities, whether at maturity
or upon redemption (either at the option of the Debenture Issuer or
pursuant to a Tax Event), at their option, to cause the Conversion
Agent to convert Securities, on behalf of the converting Holders, into
shares of Common Stock of the Debenture Issuer in the manner described
herein on and subject to the following terms and conditions:
(a) The Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable
shares of Common Stock of the Debenture Issuer pursuant
to the Holder's direction to the Conversion Agent to
exchange such Securities for a portion of the
Debentures theretofore held by the Trust on the basis
of one Security per $25 principal amount of Debentures,
and immediately convert such amount of Debentures into
fully paid and nonassessable shares of Common Stock of
the Debenture Issuer at an initial conversion rate of
[ ] shares of Common Stock of the Debenture
Issuer per $25 principal amount of Debentures (which is
equivalent to a conversion price of $[ ] per
share of Common Stock of the Debenture Issuer, subject
to certain adjustments set forth in the terms of the
Debentures (as so adjusted, "Conversion Price")).
(b) In order to convert Securities into Common Stock of the
Debenture Issuer, the Holder shall submit to the
Conversion Agent at the office referred to above an
irrevocable request to convert Securities on behalf of
such Holder (the "Conversion Request"), together, if
the Securities are in certificated form, with such
certificates. The Conversion Request shall (i) set
forth the number of Securities to be converted and the
name or names, if other than the Holder, in which the
shares of Common Stock of the Debenture Issuer should
be issued and (ii) direct the Conversion Agent (A) to
exchange such Securities for a portion of the
Debentures held by the Trust (at the rate of exchange
specified in the preceding paragraph) and (B) to
immediately convert such Debentures on behalf of such
Holder, into Common Stock of the Debenture Issuer (at
the conversion rate specified in the preceding
paragraph). The Conversion Agent shall notify the
Trust of the Holder's election to exchange Securities
for a portion of the Debentures held by the Trust and
the Trust shall, upon receipt of such notice, deliver to
I-12
<PAGE> 86
the Conversion Agent the appropriate principal amount of
Debentures for exchange in accordance with this paragraph 5.
The Conversion Agent shall thereupon notify the Debenture
Issuer of the Holder's election to convert such Debentures
into shares of Common Stock of the Debenture Issuer. Accrued
Distributions will not be paid on Preferred Securities that
are converted, nor will any payment, allowance or adjustment
be made for accumulated and unpaid Distributions, whether or
not in arrears, on converted Preferred Securities except that
if any Preferred Security is converted (i) on or after a
record date for payment of Distributions thereon, the amount
of the Distributions payable on the related payment date with
respect to such Preferred Security shall be paid by the
converting Holder to the Trust and the Distributions payable
on the related payment date with respect to such Preferred
Security shall be distributed to the Holder on such record
date, despite such conversion, and (ii) during an Extension
Period and after the Institutional Trustee mails a Redemption
Distribution Notice with respect to the Preferred Securities
that are converted, accrued and unpaid Distributions through
the date of conversion on such Preferred Securities called for
redemption shall be distributed to the Holder who converts
such Preferred Securities, which Distribution shall be made on
the redemption date fixed for redemption. Except as provided
above, neither the Trust nor the Debenture Issuer will make,
or be required to make, any payment, allowance or adjustment
upon any conversion on account of any accumulated and unpaid
Distributions accrued on the Securities (including any
Additional Interest or Compounded Interest) surrendered for
conversion, or on account of any accumulated and unpaid
dividends on the shares of Common Stock of the Debenture
Issuer issued upon such conversion. The Debenture Issuer shall
make no payment or allowance for distributions on the shares
of Common Stock of the Debenture Issuer issued upon such
conversion, except to the extent that such shares of Common
Stock of the Debenture Issuer are held of record on the record
date for any such distributions and except as provided in
Section [1309] of the Indenture. Securities shall be deemed to
have been converted immediately prior to 5:00 p.m. (New York
City time) on the day on which a Conversion Request relating
to such Securities is received by the Trust in accordance with
the foregoing provision (the "Conversion Date"). The Person or
Persons entitled to receive the Common
I-13
<PAGE> 87
Stock of the Debenture Issuer issuable upon conversion of the
Debentures shall be treated for all purposes as the record
holder or holders of such Common Stock of the Debenture Issuer
at such time. As promptly as practicable on or after the
Conversion Date, the Debenture Issuer shall issue and deliver
at the office of the Conversion Agent a certificate or
certificates for the number of full shares of Common Stock of
the Debenture Issuer issuable upon such conversion, together
with the cash payment, if any, in lieu of any fraction of any
share to the Person or Persons entitled to receive the same,
unless otherwise directed by the Holder in the notice of
conversion and the Conversion Agent shall distribute such
certificate or certificates to such Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints
[ ] (the "Conversion Agent") for the purpose
of effecting the conversion of Securities in accordance with
this paragraph 5. In effecting the conversion and transactions
described in this paragraph 5, the Conversion Agent shall be
acting as agent of the Holders of Securities directing it to
effect such conversion transactions. The Conversion Agent is
hereby authorized (i) to exchange Securities from time to time
for Debentures held by the Trust in connection with the
conversion of such Securities in accordance with this
paragraph 5 and (ii) to convert all or a portion of the
Debentures into Common Stock of the Debenture Issuer and
thereupon to deliver such shares of Common Stock of the
Debenture Issuer in accordance with the provisions of this
paragraph 5 and to deliver to the Trust a new Debenture or
Debentures for any resulting unconverted principal amount.
(d) No fractional shares of Common Stock of the Debenture Issuer
will be issued as a result of conversion, but in lieu thereof,
such fractional interest will be in cash (based on the last
reported sale price of the Common Stock of the Debenture
Issuer on the Conversion Date) by the Debenture Issuer to the
Trust, which in turn will make such payment to the Holder or
Holders of Securities so converted.
(e) The Debenture Issuer shall at all times reserve and keep
available out of its authorized and unissued Common Stock out
of its authorized and unissued Common Stock of the Debenture
Issuer, solely for
I-14
<PAGE> 88
issuance upon the conversion of the Debentures, free from any
preemptive or other similar rights, such number of shares of
Common Stock of the Debenture Issuer as shall from time to
time be issuable upon the conversion of all the Debentures
then outstanding. Notwithstanding the foregoing, the Debenture
Issuer shall be entitled to deliver upon conversion of
Debentures, shares of Common Stock of the Debenture Issuer
reacquired and held in the treasury of the Debenture Issuer
(in lieu of the issuance of authorized and unissued shares of
Common Stock of the Debenture Issuer), so long as any such
treasury shares are free and clear of all liens, charges,
security interests or encumbrances. Any shares of Common Stock
of the Debenture Issuer issued upon conversion of the
Debentures shall be duly authorized, validly issued, fully
paid and nonassessable. The Trust shall deliver the shares of
Common Stock of the Debenture Issuer received upon conversion
of the Debentures to the converting Holder free and clear of
all liens, charges, security interests and encumbrances,
except for United States withholding taxes. Each of the
Debenture Issuer and the Trust shall prepare and shall use its
best efforts to obtain and keep in force such governmental or
regulatory permits or other authorizations as may be required
by law, and shall comply with all applicable requirements as
to registration or qualification of the Common Stock of the
Debenture Issuer (and all requirements to list the Common
Stock of the Debenture Issuer issuable upon conversion of
Debentures that are at the time applicable), in order to
enable the Debenture Issuer to lawfully issue Common Stock of
the Debenture Issuer to the Trust upon conversion of the
Debentures and the Trust to lawfully deliver the Common Stock
of the Debenture Issuer to each Holder upon conversion of the
Securities.
(f) The Debenture Issuer will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of
Common Stock of the Debenture Issuer on conversion of
Debentures and the delivery of the shares of Common Stock of
the Debenture Issuer by the Trust upon conversion of the
Securities. The Debenture Issuer shall not, however, be
required to pay any tax that may be payable in respect of any
transfer involved in the issue and delivery of shares of
Common Stock of the Debenture Issuer in a name other than that
in which the Securities so converted were registered, and no
such issue or delivery shall be
I-15
<PAGE> 89
made unless and until the person requesting such issue has
paid to the Trust the amount of any such tax or has
established to the satisfaction of the Trust that such tax has
been paid.
(g) Nothing in the preceding paragraph 5(f) shall limit the
requirement of the Trust to withhold taxes pursuant to the
terms of the Securities or as set forth in this Annex I to the
Declaration or the Declaration itself or otherwise require the
Institutional Trustee or the Trust to pay any amount on
account of such withholdings.
6. Voting Rights - Preferred Securities.
(a) Except as provided under paragraph 6(b) and paragraph 8, in
the Business Trust Act and as otherwise required by law and
the Declaration, the Holders of the Preferred Securities will
have no voting rights. No vote or consent of the Holders of
the Preferred Securities will be required for the Trust to
redeem and cancel Preferred Securities or to distribute the
Debentures in accordance with the Declaration and the terms of
the Securities.
(b) Subject to the requirements set forth in this paragraph 6(b),
the Holders of a majority in liquidation amount of the
Preferred Securities, voting separately as a class may direct
the time, method, and place of conducting any proceeding for
any remedy available to the Institutional Trustee and direct
the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as holder of the
Debentures, to (i) exercise the remedies available to it under
the Indenture as a holder of the Debentures, (ii) waive any
past default and its consequences that are waivable under the
Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be
due and payable, or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures
where such consent shall be required; provided, however, that
where a consent or action under the Indenture would require
the consent or act of the Holders of a Super Majority of
Debentures affected thereby, the Institutional Trustee may
only give such consent or take such action at the written
direction of the Holders of at least the proportion in
liquidation amount of the Preferred Securities that the
relevant
I-16
<PAGE> 90
Super Majority represents of the aggregate principal amount of
the Debentures outstanding. The Institutional Trustee shall be
under no obligation to revoke any action previously authorized
or approved by a vote of the Holders of the Preferred
Securities. Other than with respect to directing the time,
method and place of conducting any remedy available to the
Institutional Trustee or the Debenture Trustee as set forth
above, the Institutional Trustee shall be under no obligation
to take any action in accordance with the directions of the
Holders of the Preferred Securities under this paragraph 6
unless the Institutional Trustee has obtained an opinion of
independent tax counsel to the effect that for the purposes of
United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such
action and each Holder will be treated as owning an undivided
beneficial interest in the Debentures. If the Institutional
Trustee fails to enforce its rights under the Debentures after
a Holder of Preferred Securities has made a written request,
such Holder of Preferred Securities may directly institute a
legal proceeding against the Debenture Issuer to enforce the
Institutional Trustee's rights under the Debentures without
first instituting any legal proceeding against the
Institutional Trustee or any other Person. Notwithstanding the
foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of
the Debenture Issuer to pay interest or principal on the
Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption on the date fixed for
redemption), then a Holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to
such Holder (a "Direct Action") of the principal of or
interest on Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of
such Holder on or after the respective due date specified in
the Debentures. Except as provided in the preceding sentence,
the Holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of
the Debentures. In connection with such Direct Action, the
Debenture Issuer will be subrogated to the rights of such
Holder of Preferred Securities under the Declaration to the
extent of any payment made by the Debenture Issuer to such
Holder of Preferred Securities in such Direct Action.
I-17
<PAGE> 91
(c) Any required approval or direction of Holders of Preferred
Securities may be given at a separate meeting of Holders of
Preferred Securities convened for such purpose, at a meeting
of all of the Holders of Securities in the Trust or pursuant
to written consent. The Regular Trustees will cause a notice
of any meeting at which Holders of Preferred Securities are
entitled to vote, or of any matter upon which action by
written consent of such Holders is to be taken, to be mailed
to each Holder of record of Preferred Securities. Each such
notice will include a statement setting forth the following
information (i) the date of such meeting or the date by which
such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such
Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the
delivery of proxies or consents.
(d) Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances
described above, any of the Preferred Securities that are
owned by the Debenture Issuer or any Affiliate of the
Debenture Issuer shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if
such Preferred Securities were not outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under paragraphs 7(b) and (c) and paragraph
8, in the Business Trust Act and as otherwise required by law
and the Declaration, the Holders of the Common Securities will
have no voting rights. No vote or consent of the Holders of
the Common Securities will be required for the Trust to redeem
and cancel Common Securities or to distribute the Debentures
in accordance with the Declaration and the terms of the
Securities.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to
appoint, remove or replace any Trustee or to increase or
decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after the
Event of Default with respect to the Preferred Securities has
been cured, waived, or otherwise eliminated and subject to the
requirements of the penultimate sentence of this paragraph
7(c), the
I-18
<PAGE> 92
Holders of a majority in liquidation amount of the Common
Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any
trust or power conferred upon the Institutional Trustee under
the Declaration, including (i) directing the time, method,
place of conducting any proceeding for any remedy available to
the Debenture Trustee, or exercising any trust or power
conferred on the Debenture Trustee with respect to the
Debentures, (ii) waive any past default and its consequences
that are waivable under Section 513 of the Indenture, (iii)
exercise any right to rescind or annul a declaration that the
principal of all the Debentures shall be due and payable, or
(iv) consent to any amendment, modification or termination of
the Indenture or the Debentures where such consent shall be
required; provided that, where a consent or action under the
Indenture would require the consent or act of the Holders of a
Super Majority in principal amount of Debentures affected
thereby, the Institutional Trustee may only give such consent
or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding.
Pursuant to this paragraph 7(c), the Institutional Trustee
shall not revoke any action previously authorized or approved
by a vote of the Holders of the Preferred Securities. Other
than with respect to directing the time, method and place of
conducting any remedy available to the Institutional Trustee
or the Debenture Trustee as set forth above, the Institutional
Trustee shall be under no obligation to take any action in
accordance with the directions of the Holders of the Common
Securities under this paragraph 7(c) unless the Institutional
Trustee has obtained an opinion of independent tax counsel to
the effect that for the purposes of United States federal
income tax the Trust will not be classified as other than a
grantor trust on account of such action and each Holder will
be treated as owning an undivided beneficial interest in the
Debentures. If the Institutional Trustee fails to enforce its
rights under the Debentures after a Holder of Common
Securities has made a written request, such Holder of Common
Securities may institute a legal proceeding directly against
the Debenture Issuer or any other Person to enforce the
Institutional Trustee's rights under the
I-19
<PAGE> 93
Debentures, without first instituting any legal proceeding
against the Institutional Trustee or any other Person.
(d) Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities
convened for such purpose, at a meeting of all of the Holders
of Securities in the Trust or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is
to be taken, to be mailed to each Holder of record of Common
Securities. Each such notice will include a statement setting
forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders
are entitled to vote or of such matter upon which written
consent is sought and (iii) instructions for the delivery of
proxies or consents.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 11.1 of
the Declaration, if any proposed amendment to the
Declaration provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special
rights of the Securities, whether by way of amendment
to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust,
other than as described in Section 3.10 of the
Declaration, then the Holders of Securities as a class,
will be entitled to vote on such amendment or proposal
(but not on any other amendment or proposal) and such
amendment or proposal shall not be effective except
with the approval of the Holders of a majority in
liquidation amount of the Securities affected thereby,
voting together as a single class; provided, however,
if any amendment or proposal referred to in clause (i)
above would adversely affect only the Preferred
Securities or only the Common Securities, then only the
affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a
majority in liquidation amount of such class of
Securities.
I-20
<PAGE> 94
(b) In the event the consent of the Institutional Trustee
as the holder of the Debentures is required under the
Indenture with respect to any amendment, modification
or termination on the Indenture or the Debentures, the
Institutional Trustee shall request the written
direction of the Holders of the Securities with respect
to such amendment, modification or termination and
shall vote with respect to such amendment, modification
or termination as directed by a majority in liquidation
amount of the Securities voting together as a single
class; provided, however, that where a consent under
the Indenture would require a Super Majority in
aggregate principal amount of the Debentures, the
Institutional Trustee may only give such consent at the
written direction of the Holders of at least the same
proportion in aggregate stated liquidation preference
of the Securities; provided, further, that the
Institutional Trustee shall not take any action in
accordance with the directions of the Holders of the
Securities under this paragraph 8(b) unless the
Institutional Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United
States federal income tax the Trust will not be
classified as other than a grantor trust on account of
such action.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of Securities according to the aggregate liquidation amount of the Securities
held by the relevant Holder in relation to the aggregate liquidation amount of
all Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.
I-21
<PAGE> 95
10. Ranking.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Institutional Trustee, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Preferred Securities.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights
to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Debenture Issuer will provide a copy of the Declaration,
the Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request to
the Debenture Issuer at its principal place of business.
I-22
<PAGE> 96
EXHIBIT A-1
FORM OF PREFERRED SECURITY
<PAGE> 97
EXHIBIT A-1
FORM OF PREFERRED SECURITY
[FACE OF SECURITY]
[Include if Preferred Security is in global form: THIS SECURITY IS A GLOBAL
CERTIFICATE WITHIN THE MEANING OF THE DECLARATION HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS
SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A PREFERRED SECURITY
REGISTERED, AND NO TRANSFER OF THIS PREFERRED SECURITY IN WHOLE OR IN PART
MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR
A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION.]
[Include if Preferred Security is in global form and The Depository Trust
Company is the Depositary: UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED SIGNATORY OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE TRUST
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
Cert. No.: No. of Preferred Securities:
CUSIP No. [ ]
WALBRO CAPITAL TRUST
[ ]%; Convertible Preferred Securities
(liquidation amount $25 per Convertible Preferred Security)
Walbro Capital Trust, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that
__________________________ (the "Holder") is the registered owner of preferred
securities of the Trust
<PAGE> 98
representing undivided beneficial interests in the assets of the Trust
designated the "[ ]% Convertible Preferred Securities (liquidation amount $25
per Convertible Preferred Security)" (the "Preferred Securities"). The
Preferred Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer. The designation, rights,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Securities represented hereby are issued and shall in all respects be
subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of [ ], 1997 (the "Declaration"), as the same may
be amended from time to time, including the designation of the terms of the
Preferred Securities as set forth in Annex I to the Declaration. Capitalized
terms used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Preferred
Securities Guarantee to the extent provided therein. The Debenture Issuer will
provide a copy of the Declaration, the Preferred Securities Guarantee and the
Indenture to a Holder without charge upon written request to the Trust at its
principal place of business.
Reference is hereby made to select provisions of the Preferred Securities
set forth on the reverse hereof, which select provisions shall for all purposes
have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal income
tax purposes, the Debentures as indebtedness and the Preferred Securities as
evidence of indirect beneficial ownership in the Debentures.
Unless the Institutional Trustee's Certificate of Authentication hereon has
been properly executed, these Preferred Securities shall not be entitled to any
benefit under the Declaration or be valid or obligatory for any purpose.
A-1-2
<PAGE> 99
IN WITNESS WHEREOF, the Trust has caused this instrument to be duly
executed.
Dated:
WALBRO CAPITAL TRUST
By:
-----------------------------------------
Name:
Title:
INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the within-mentioned
Declaration.
Dated:
[ ], as Institutional
Trustee
By:
-----------------------------------------
Authorized Signatory
A-1-3
<PAGE> 100
[REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed at a rate
per annum of [ ]% (the "Coupon Rate") of the stated liquidation amount of $25
per Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears
for more than one quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes any such interest including any
Additional Interest and Compounded Interest payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Institutional Trustee and to the extent the Trust has
funds available therefor. The amount of Distributions payable for any period
will be computed for any full quarterly Distribution period on the basis of a
360-day year of twelve 30-day months, and for any period shorter than a full
quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
Except as otherwise described below, Distributions on the Preferred
Securities will be cumulative, will accrue from the date of initial issuance and
will be payable quarterly in arrears, on the following dates, which dates
correspond to the interest payment dates on the Debentures: March 31, June 30,
September 30 and December 31 of each year, commencing on March 31, 1997, when,
as and if available for payment by the Institutional Trustee. The Debenture
Issuer has the right at any time during the term of the Debentures to defer
interest payments from time to time by extending the interest payment period for
successive periods not exceeding 20 consecutive quarters (each, an "Extension
Period") for each such period; provided that no Extension Period may extend
beyond the maturity date of the Debentures. As a consequence of such extension,
quarterly Distributions on the Preferred Securities would be deferred (though
such Distributions would continue to accrue with interest since interest would
continue to accrue on the Debentures) during any such extended interest payment
period. In the event that the Debenture Issuer exercises this right, then,
during such period, (a) the Debenture Issuer shall not declare or pay dividends
on, or make any distributions or liquidation payments with respect to, or
redeem, purchase or acquire any of its capital stock (other than (i) purchases
or acquisitions of shares of Common Stock in connection with the satisfaction by
the Debenture
A-1-4
<PAGE> 101
Issuer of its obligations under any employee benefit plans or the satisfaction
by the Debenture Issuer of its obligations pursuant to any contract or
security requiring the Debenture Issuer to purchase shares of the Common Stock,
(ii) as a result of a reclassification of the Debenture Issuer's capital stock
or the exchange or conversion of one class or series of the Debenture Issuer's
capital stock for another class or series of the Debenture Issuer's capital
stock, (iii) the purchase of fractional interests in shares of the Debenture
Issuer's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged or (iv) stock
dividends paid by the Debenture Issuer where the dividend stock is the same
stock as that on which the dividend is paid), (b) the Debenture Issuer shall
not make any payment of interest on or principal of (or premium, if any, on) or
repay, repurchase or redeem any debt securities (including guarantees) issued
by the Debenture Issuer which rank pari passu with or junior to the Debentures
and (c) the Debenture Issuer shall not make any guarantee payments with respect
to the foregoing (other than pursuant to the Preferred Securities Guarantee or
Common Securities Guarantee). Prior to the termination of any such Extension
Period, the Debenture Issuer may further extend the interest payment period;
provided that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity date of the Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, the Debenture Issuer
may commence a new Extension Period, subject to the above requirements.
Notwithstanding anything to the contrary, the Debenture Issuer shall not have
the right at any time to defer any Additional Interest, including by extending
the interest payment period.
Distributions on the Preferred Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. The relevant record dates shall be the March 15, June 15,
September 15 and December 15 prior to the next such succeeding payment date,
except as otherwise described in the Declaration.
The Preferred Securities shall be redeemable as provided in the
Declaration.
The Preferred Securities shall be convertible into shares of Common Stock
of Walbro Corporation, through (i) the exchange of Preferred Securities for a
portion of the Debentures and (ii) the immediate conversion of such Debentures
into Common Stock of Walbro Corporation, in the manner and according to the
terms set forth in the Declaration.
A-1-5
<PAGE> 102
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
(Insert assignee's social security
or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:____________________
__________________________________
(Sign exactly as your name appears
on the other side of this Preferred
Security Certificate)
Signature Guarantee:* _____________________________
__________________________________
* (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.)
A-1-6
<PAGE> 103
CONVERSION REQUEST
To: [ ], as Institutional
Trustee of Walbro Capital Trust
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Preferred Securities, or the portion below
designated, into Common Stock of WALBRO CORPORATION (the "Common Stock") in
accordance with the terms of the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Preferred Securities, the undersigned
hereby directs the Conversion Agent (as that term is defined in the Declaration)
to (i) exchange such Preferred Securities for a portion of the Debentures (as
that term is defined in the Declaration) held by the Trust (at the rate of
exchange specified in the terms of the Preferred Securities set forth as Annex I
to the Declaration) and (ii) immediately convert such Debentures on behalf of
the undersigned, into Common Stock (at the conversion rate specified in the
terms of the Preferred Securities set forth as Annex I to the Declaration).
The undersigned also hereby directs the Conversion Agent that the shares
issuable and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Date: ____________________
Number of Preferred Securities to be converted: ______________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
__________________________________
__________________________________
__________________________________
__________________________________
(Sign exactly as your name appears
on the other side of this Preferred
Security certificate) (for
conversion only)
A-1-7
<PAGE> 104
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number.
__________________________________________
__________________________________________
__________________________________________
Signature Guarantee:* _________________________________
__________________________________
* (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.)
A-1-8
<PAGE> 105
EXHIBIT A-2
FORM OF COMMON SECURITY
<PAGE> 106
EXHIBIT A-2
FORM OF COMMON SECURITY
[FACE OF SECURITY]
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE REGISTRATION
STATEMENT. OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
RELATED PARTY (AS DEFINED IN THE DECLARATION) OF WALBRO CORPORATION
Certificate Number Number of Common Securities
WALBRO CAPITAL TRUST
[ ]% Convertible Common Securities
(liquidation amount $25 per Convertible Common Security)
Walbro Capital Trust, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that
_______________________ (the "Holder") is the registered owner of common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the [ ]% Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)" (the "Common
Securities"). The Common Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of
this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities represented hereby are issued and shall in
all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of [ ], 1997, as the same
may be amended from time to time (the "Declaration"), including the designation
of the terms of the Common Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits
of the Common Securities Guarantee to the extent provided therein. The
Debenture Issuer will provide a copy of the Declaration, the Common Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Sponsor at its principal place of business.
<PAGE> 107
Reference is hereby made to select provisions of the Common Securities set
forth on the reverse hereof, which select provisions shall for all purposes
have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Declaration and
is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States federal income
tax purposes the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
A-2-2
<PAGE> 108
IN WITNESS WHEREOF, the Trust has caused this instrument to be duly
executed.
Dated:
WALBRO CAPITAL TRUST
By: ____________________________
Name:
Title:
A-2-3
<PAGE> 109
[REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate per
annum of [ ] (the "Coupon Rate") of the stated liquidation amount of $25 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Institutional Trustee. Distributions in arrears for more
than one quarter will bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions" as
used herein includes any such interest including any Additional Interest and
Compounded Interest payable unless otherwise stated. A Distribution is payable
only to the extent that payments are made in respect of the Debentures held by
the Institutional Trustee and to the extent the Trust has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 90-day quarter.
Except as otherwise described below, Distributions on the Common Security
Securities will be cumulative, will accrue from the date of initial issuance
and will be payable quarterly in arrears, on the following dates, which dates
correspond to the interest payment dates on the Debentures: March 31, June 30,
September 30 and December 31 of each year, commencing on March 31, 1997, when,
as and if available for payment by the Institutional Trustee. The Debenture
Issuer has the right at any time during the term of the Debentures to defer
interest payments from time to time by extending the interest payment period
for successive periods not exceeding 20 consecutive quarters (each, an
"Extension Period") for each such period; provided that no Extension Period may
extend beyond the maturity date of the Debentures. As a consequence of such
extension, quarterly Distributions on the Common Security Securities would be
deferred (though such Distributions would continue to accrue with interest
since interest would continue to accrue on the Debentures) during any such
extended interest payment period. In the event that the Debenture Issuer
exercises this right, then, during such period, (a) the Debenture Issuer shall
not declare or pay dividends on, or make any distributions or liquidation
payments with respect to, or redeem, purchase or acquire any of its capital
stock (other than (i) purchases or
A-2-4
<PAGE> 110
acquisitions of shares of Common Stock in connection with the satisfaction by
the Debenture Issuer of its obligations under any employee benefit plans or the
satisfaction by the Debenture Issuer of its obligations pursuant to any
contract or security requiring the Debenture Issuer to purchase shares of the
Common Stock, (ii) as a result of a reclassification of the Debenture Issuer's
capital stock or the exchange or conversion of one class or series of the
Debenture Issuer's capital stock for another class or series of the Debenture
Issuer's capital stock, (iii) the purchase of fractional interests in shares of
the Debenture Issuer's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
or (iv) stock dividends paid by the Debenture Issuer where the dividend stock
is the same stock as that on which the dividend is paid), (b) the Debenture
Issuer shall not make any payment of interest on or principal of (or premium,
if any, on) or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Debenture Issuer which rank pari passu with or junior
to the Debentures and (c) the Debenture Issuer shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Preferred
Securities Guarantee or Common Securities Guarantee). Prior to the termination
of any such Extension Period, the Debenture Issuer may further extend the
interest payment period; provided that such Extension Period, together with all
such previous and further extensions thereof, may not exceed 20 consecutive
quarters or extend beyond the maturity date of the Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Debenture Issuer may commence a new Extension Period, subject to the above
requirements. Notwithstanding anything to the contrary, the Debenture Issuer
shall not have the right at any time to defer any Additional Interest,
including by extending the interest payment period.
The Common Securities shall be convertible into shares of Common Stock of
Walbro Corporation through (i) the exchange of Common Securities for a portion
of the Debentures and (ii) the immediate conversion of such Debentures into
Common Stock of Walbro Corporation, in the manner and according to the terms
set forth in the Declaration.
A-2-5
<PAGE> 111
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
(Insert assignee's social security
or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Common Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: _________________
___________________________________
(Sign exactly as your name appears
on the other side of this Common
Security Certificate)
Signature Guarantee: _______________________
__________________________________
(Signature must be guaranteed by an "eligible guarantor institution," that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.)
A-2-6
<PAGE> 112
CONVERSION REQUEST
To: [ ], as Institutional Trustee of Walbro
Capital Trust
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Stock of WALBRO CORPORATION (the "Common Stock") in
accordance with the terms of the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Common Securities, the undersigned
hereby directs the Conversion Agent (as that term is defined in the
Declaration) to (i) exchange such Common Securities for a portion of the
Debentures (as that term is defined in the Declaration) held by the Trust (at
the rate of exchange specified in the terms of the Common Securities set forth
as Annex I to the Declaration) and (ii) immediately convert such Debentures on
behalf of the undersigned, into Common Stock (at the conversion rate specified
in the terms of the Common Securities set forth as Annex I to the Declaration).
The undersigned also hereby directs the Conversion Agent that the shares
issuable and deliverable upon conversion, together with any check in payment
for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Date: _______________________
Number of Common Securities to be converted: ________________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________
(Sign exactly as your name appears on the
other side of this Common Security
Certificate) (for conversion only)
A-2-7
<PAGE> 113
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Signature Guarantee: ___________________________________
________________________________
(Signature must be guaranteed by an "eligible guarantor institution," that is,
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)'
A-2-8
<PAGE> 114
EXHIBIT B
SPECIMEN OF DEBENTURE
FORM OF SECURITY
[FACE OF SECURITY]
[Include if Security is in global form:
THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE
THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE
OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER
OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[Include if Security is in global form and The
Depository Trust Company is the Depositary:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
SIGNATORY OF THE DEPOSITORY TRUST COMPANY ("DTC") TO
THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
B-1
<PAGE> 115
WALBRO CORPORATION
[ ]% Convertible Subordinated Debenture Due 2017
No._____________________ $_______________________
CUSIP No.
WALBRO CORPORATION, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to __________ or registered assigns, the
principal sum of _______ Dollars ($ ) on [ ], 2017 and to pay
interest thereon from [ ], 1997 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable quarterly (subject to deferral as set forth in the Indenture),
in arrears, on March 31, June 30, September 30 and December 31 (each an
"Interest Payment Date") of each year, commencing March 31, 1997, until the
principal thereof is paid or made available for payment, and they shall be paid
to the Person in whose name the Security is registered at 5:00 p.m. (New York
City time) on the regular record date for such interest installment, which
shall be the March 15, June 15, September 15 and December 15 next preceding
such Interest Payment Date (the "Regular Record Date").
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
B-2
<PAGE> 116
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
WALBRO CORPORATION
By: __________________________________
Name:
Title:
[Seal]
Attest:
__________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: [ ],
as Trustee
By: ____________________________
Authorized Signatory
B-3
<PAGE> 117
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities of the
Company designated as its [ ]% Convertible Subordinated Debenture Due 2017
(herein called the "Securities"), in aggregate principal amount of $[
] (or up to $[ ] if the over-allotment option is exercised by the
Trust in accordance with the terms and provisions of the Underwriting
Agreement), issued and to be issued under an Indenture, dated as of [
], 1997 (herein called the "Indenture"), between the Company and [
], as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Trustee,
the Company and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S.C. Section Section
77aaa-77bbbb) ("TIA") as in effect on the date of the Indenture. The
Securities are subject to, and qualified by, all such terms, certain of which
are summarized hereon, and holders are referred to the Indenture and the TIA
for a statement of such terms. No reference herein to the Indenture and no
provision of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed or to convert this Security as provided
in the Indenture. All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture. The
Company will furnish to any Holder upon written request and without charge a
copy of the Indenture.
(1) Interest. The Securities shall bear interest at the rate of [ ]% per
annum, from [ ], 1997 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, payable
quarterly (subject to deferral as set forth herein), in arrears, on March 31,
June 30, September 30 and December 31 (each an "Interest Payment Date") of each
year, commencing March 31, 1997, until the principal thereof is paid or made
available for payment, and they shall be paid to the Person in whose name the
Security is registered at 5:00 p.m. (New York City time) on the
B-4
<PAGE> 118
regular record date for such interest installment, which shall be the March 15,
June 15, September 15 and December 15 next preceding such Interest Payment Date
(the "Regular Record Date"). Interest will compound quarterly and will accrue
at the rate of [ ]% per annum on any interest installment in arrears for more
than one quarter or during an extension of an interest payment period as set
forth below.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than
a full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed per 90-day quarter. In the event
that any date on which interest is payable on the Securities is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
If at any time while the Institutional Trustee is the Holder of any
Securities, the Trust or the Institutional Trustee is required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, the Company shall pay as additional interest
("Additional Interest") on the Securities held by the Institutional Trustee,
such amounts as shall be required so that the net amounts received and retained
by the Trust and the Institutional Trustee after paying any such taxes, duties,
assessments or other governmental charges will be not less than the amounts the
Trust and the Institutional Trustee would have received had no such taxes,
duties, assessments or other governmental charges been imposed.
The principal of and interest on the Securities shall be payable at the
office or agency of the Company in the United States maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company
B-5
<PAGE> 119
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
(2) Option to Extend Interest Payment Period. The Company shall have the
right at any time during the term of the Securities to defer interest payments
(including Additional Payments) by extending the interest payment period for a
period (each, an "Extension Period") not exceeding 20 consecutive quarters;
provided, no Extension Period may extend beyond the maturity date of the
Securities and at the end of which Extension Period, the Company shall pay all
interest then accrued and unpaid (including Additional Interest) together with
interest thereon compounded quarterly at the rate specified for the Securities
to the extent permitted by applicable law ("Compounded Interest"); provided,
that during any Extension Period, the Company shall (i) not declare or pay
dividends on, or make any distributions with respect to, or redeem or purchase
or acquire, or liquidation payments with respect to, or redeem, purchase or
acquire any of its capital stock (other than (A) purchases or acquisitions of
shares of Common Stock in connection with the satisfaction by the company of
its obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of Common Stock, (B) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock or (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged) or (D) stock dividends paid by the Company where the dividend stock
is the same as that on which the dividend is paid), (ii) not make any payment
of interest on or principal of (or premium, if any, on) or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to the Securities and (iii) not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided, that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters; and provided further that no Extension Period may
extend beyond the maturity date of the Securities. Upon the termination of any
Extension Period and the payment of
B-6
<PAGE> 120
all amounts then due, the Company may commence a new Extension Period, subject
to the above requirements. No interest during an Extension Period shall be
due and payable. Notwithstanding anything to the contrary, the Company shall
not have the right at any time to defer any Additional Interest, including by
extending the interest payment period.
If the Institutional Trustee is the sole Holder of the Securities at the
time the Company selects an Extension Period, the Company shall give written
notice to the Regular Trustees, the Institutional Trustee and the Trustee of
its selection of such Extension Period at least one Business Day prior to the
earlier of (i) the date the distributions on the Preferred Securities would be
payable, if not for such Extension Period or (ii) if the Preferred Securities
are listed on the Nasdaq National Market or any other stock exchange or
quotation system, the date the Regular Trustees are required to give notice to
the Nasdaq National Market (or other applicable self-regulatory organization)
or to holders of the Preferred Securities of the record date or the date such
distributions would be payable if not for such Extension Period, but in any
event not less than one Business Day prior to such record date.
If the Institutional Trustee is not the sole Holder of the Securities at
the time the Company selects an Extension Period, the Company shall give the
Holders of the Securities and the Trustee written notice of its selection of
such Extension Period at least 10 Business Days prior to the earlier of (i) the
next succeeding Interest Payment Date or (ii) the date upon which the Company
is required to give notice to the Nasdaq National Market (or any applicable
self-regulatory organization) or to Holders of the Securities on the record or
payment date of such related interest payment.
The quarter in which any notice is given pursuant to paragraphs second and
third of this Section 2 shall be counted as one of the 20 quarters permitted in
the maximum Extension Period permitted under paragraph one of this Section 2.
(3) Paying Agent and Security Registrar. The Trustee will act as Paying
Agent, Security Registrar and Conversion Agent. The Company may change any
Paying Agent, Security Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such
capacity.
B-7
<PAGE> 121
(4) Redemption. The Securities are redeemable, in whole or in part, at any
time or from time to time after [ ], 2000 at the redemption prices
(expressed as a percentage of the principal amount of Securities) specified
below for the 12 month period commencing [ ] in the year indicated ([
], in the case of 2000), if redeemed during the 12-month period
beginning December 31:
Percentage of
Principal
Year Amount
---- -----------------
2000 %
2001
2002
2003
2004
2005
2006
2007 and thereafter 100.0%
plus, in each case, accrued and unpaid interest (including Additional Payments,
if any) to the Redemption Date. On and after the Redemption Date, interest
ceases to accrue on the Securities or portions of them called for redemption.
The Securities are subject to redemption in whole or in part), at any time
within 90 days, under certain circumstances if a Tax Event (as defined in the
Declaration) shall occur and be continuing, at a redemption price equal to 100%
of the principal amount thereof plus accrued but unpaid interest (including
Additional Payments, if any) to the Redemption Date. On and after the
Redemption Date, interest ceases to accrue on the Securities or portions of
them called for redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at such Holder's address appearing in
the Security Register. The Securities in denominations larger than $25 may be
redeemed in part but only in integral multiples of $25. In the event of a
redemption of less than all of the Securities, the Securities will be chosen
for redemption by the Trustee in accordance with the Indenture.
B-8
<PAGE> 122
If this Security is redeemed subsequent to a Regular Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid to the person in
whose name this Security is registered at the close of business on such record
date.
(5) Sinking Fund. The Securities are not entitled to the benefit of any
sinking fund.
(6) Subordination. The payment of the principal of, premium, if any, and
interest (including Additional Payments, if any) on all Securities is
subordinated and junior in right of payment to the prior payment in full of all
existing and future Senior Indebtedness, whether outstanding at the date of
this Indenture or thereafter incurred. Each holder, by accepting a Security,
agrees to such subordination and authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee as its attorney-in-fact for
such purpose.
(7) Conversion. The Holder of any Security has the right, exercisable
at any time after [ ], 1997 and on or before 5:00 p.m. (New York City
time) on the Business Day immediately preceding the date of repayment of such
Securities, whether at maturity or upon redemption (either at the option of the
Company or pursuant to a Tax Event), to convert the principal amount thereof
(or any portion thereof that is an integral multiple of $25) into fully paid
and nonassessable shares of Common Stock of the Company at an initial
conversion rate of [ ] shares of Common Stock for each $25 in aggregate
principal amount of Securities (equal to a conversion price of $[ ] per
share of Common Stock), subject to adjustment under certain circumstances. The
number of shares issuable upon conversion of a Security is determined by
dividing the principal amount of the Security converted by the conversion price
in effect on the Conversion Date. No fractional shares will be issued upon
conversion but a cash adjustment will be made for any fractional interest. The
outstanding principal amount of any Security shall be reduced by the portion of
the principal amount thereof converted into shares of Common Stock.
To convert a Security, a Holder must (i) complete and sign a conversion
notice substantially in the form attached hereto, (ii) surrender the Security
to a Conversion Agent, (iii) furnish appropriate endorsements or transfer
documents if
B-9
<PAGE> 123
required by the Security Registrar or Conversion Agent and (iv) pay any
transfer or similar tax, if required. If a Notice of Conversion is delivered
on or after the Regular Record Date and prior to the subsequent Interest
Payment Date, the Holder shall be required to pay to the Company the interest
payment on the subsequent Interest Payment Date and, will be entitled to
receive the interest payable on the subsequent Interest Payment Date, on the
portion of Securities to be converted notwithstanding the conversion thereof
prior to such Interest Payment Date. Notwithstanding the foregoing, if, during
an Extension Period, a notice of redemption is mailed pursuant to Section 11.06
of the Indenture and a Security is converted after such mailing but prior to
the relevant Redemption Date, all accrued but unpaid interest (including
Additional Payments, if any) through the date of conversion shall be paid to
the holder of such Security on the Redemption Date. Except as otherwise
provided in the immediately preceding two sentences, in the case of any
Security which is converted, interest whose Stated Maturity is after the date
of conversion of such Security shall not be payable, and the Company shall not
make nor be required to make any other payment, adjustment or allowance with
respect to accrued but unpaid interest (including Additional Payments, if any)
on the Securities being converted, which shall be deemed to be paid in full. If
any Security called for redemption is converted, any money deposited with the
Trustee or with any Paying Agent or so segregated and held in trust for the
redemption of such Security shall (subject to any right of the Holder of such
Security or any Predecessor Security to receive interest as provided in the
last paragraph of Section 3.07 of the Indenture and this paragraph) be paid to
the Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.
(8) Registration, Transfer, Exchange and Denominations. As provided in
the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
B-10
<PAGE> 124
The Securities are issuable only in registered form without coupons in
denominations of $25 and integral multiples thereof. No service charge shall
be made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Prior to due presentment of this
Security for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name this Security
is registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary. In the event of redemption or
conversion of this Security in part only, a new Security or Securities for the
unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
(9) Persons Deemed Owners. Except as provided in the Indenture, the
registered Holder of a Security may be treated as its owner for all purposes.
(10) Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, holders of
Securities entitled to the money must look to the Company for payment unless an
abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
(11) Defaults and Remedies. The Securities shall have the Events of
Default as set forth in Section 5.01 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the holders of at least 25% in
aggregate principal amount of the then outstanding Securities by notice to the
Company and the Trustee may declare all the Securities to be due and payable
immediately.
The holders of a majority in principal amount of the Securities then
outstanding by written notice to the Trustee may rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration. Holders may not enforce the Indenture or the
B-11
<PAGE> 125
Securities except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Securities issued under the Indenture may direct the Trustee in its exercise of
any trust or power. The Securities are unsecured general obligations of the
Company. The Company must furnish annually compliance certificates to the
Trustee. The above description of Events of Default and remedies is qualified
by reference to, and subject in its entirety by, the more complete description
thereof contained in the Indenture.
(12) Amendments, Supplements and Waivers. The Indenture permits, with
certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the time Outstanding, on behalf
of the Holders of all the Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
(13) Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity may become the owner or pledgee of the Securities and may
otherwise deal with the Company or an Affiliate with the same rights it would
have, as if it were not Trustee, subject to certain limitations provided for in
the Indenture and in the TIA. Any Agent may do the same with like rights.
(14) No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
B-12
<PAGE> 126
(15) Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
(16) Authentication. The Securities shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee
or an authenticating agent.
B-13
<PAGE> 127
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him or her.
Date: ______________
_________________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:* ____________________
*(Signature must be guaranteed by an "eligible guarantor institution" that is,
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
B-14
<PAGE> 128
NOTICE OF CONVERSION
To: Walbro Corporation
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or the portion below designated, into Common
Stock (the "Common Stock") of WALBRO CORPORATION (the "Company") in accordance
with the terms of the Indenture, between the Company and [
], as Trustee, and directs that the shares issuable and deliverable upon
conversion, together with any check in payment for fractional shares, be issued
in the name of and delivered to the undersigned, unless a different name has
been indicated in the assignment below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
Date: ______________
Number of Securities to be converted ($25 or integral
multiples thereof): _____________________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________
(Sign exactly as your name appears on the Security) (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and Social
Security or Other Identifying Number.
____________________________________
____________________________________
____________________________________
Signature Guarantee:* ____________________
_______________________
*(Signature must be guaranteed by an "eligible guarantor institution" that is,
a bank, stockbroker, savings and
Footnote continued on next page.
B-15
<PAGE> 129
________________________
Footnote continued from previous page
loan association or credit union meeting the requirements of the Registrar,
which requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.)
B-16
<PAGE> 1
EXHIBIT 4.12
FORM OF INDENTURE
BETWEEN
WALBRO CORPORATION, as Issuer
and
[ ], as Trustee
_________________
Dated as of [ ], 1997
$[ ]*
[ ]% Convertible Subordinated Debentures Due 2017
_________________
___________________
* Subject to increase to up to $[ ] in the event
an over-allotment option is exercised.
<PAGE> 2
Walbro Corporation
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- -------------------- ------------------
Section 310(a)(1) 609
(a)(2) 609
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 608, 610
Section 311(a) 613
(b) 613
Section 312(a) 701, 702(a)
(b) 702(b)
(c) 702(c)
Section 313(a) 703(a)
(a)(4) 101, 1004
(b) 703(a)
(c) 703(a)
(d) 703(b)
Section 314(a) 704
(b) Not Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not Applicable
(d) Not Applicable
(e) 102
Section 315(a) 601
(b) 602
(c) 601
(d) 601
(e) 514
Section 316(a) 101
(a)(1)(A) 502, 512
(a)(1)(B) 513
(a)(2) Not Applicable
(b) 508
(c) 104(c)
Section 317(a)(1) 503
(a)(2) 504
(b) 1003
Section 318(a) 107
______________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
-i-
<PAGE> 3
TABLE OF CONTENTS
Page
Recitals of the Company
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions
SECTION 1.02. Compliance Certificates and Opinions
SECTION 1.03. Form of Documents Delivered to Trustee
SECTION 1.04. Acts of Holders; Record Dates
SECTION 1.05. Notices, Etc., to Trustee and the Company
SECTION 1.06. Notice to Holders; Waiver
SECTION 1.07. Conflict with Trust Indenture Act
SECTION 1.08. Effect of Headings and Table of Contents
SECTION 1.09. Successors and Assigns
SECTION 1.10. Separability Clause
SECTION 1.11. Benefits of Indenture
SECTION 1.12. Governing Law
SECTION 1.13. Legal Holidays
ARTICLE TWO
Security Forms
SECTION 2.01. Forms Generally
SECTION 2.02. Initial Issuance to Institutional Trustee
ARTICLE THREE
The Securities
SECTION 3.01. Title and Terms
SECTION 3.02. Denominations
SECTION 3.03. Execution, Authentication, Delivery
and Dating
SECTION 3.04. Temporary Securities
SECTION 3.05. Registration, Registration of Transfer
and Exchange
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Securities
-ii-
<PAGE> 4
Page
SECTION 3.07. Payment of Interest; Interest Rights
Preserved
SECTION 3.08. Persons Deemed Owners
SECTION 3.09. Cancellation
SECTION 3.10. Right of Setoff
SECTION 3.11. CUSIP Numbers
SECTION 3.12. Option to Extend Interest Payment
Period
SECTION 3.13. Paying Agent, Security Registrar
and Conversion Agent
SECTION 3.14. Global Security
ARTICLE FOUR
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture
SECTION 4.02. Application of Trust Money
ARTICLE FIVE
Remedies
SECTION 5.01. Events of Default
SECTION 5.02. Acceleration of Maturity; Rescission
and Annulment
SECTION 5.03. Collection of Indebtedness and Suits
for Enforcement by Trustee
SECTION 5.04. Trustee May File Proofs of Claim
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Securities
SECTION 5.06. Application of Money Collected
SECTION 5.07. Limitation on Suits
SECTION 5.08. Unconditional Right of Holders to
Receive Principal and Interest
and Convert
SECTION 5.09. Restoration of Rights and Remedies
SECTION 5.10. Rights and Remedies Cumulative
SECTION 5.11. Delay or Omission Not Waiver
SECTION 5.12. Control by Holders
SECTION 5.13. Waiver of Past Defaults
SECTION 5.14. Undertaking for Costs
SECTION 5.15. Waiver of Stay or Extension Laws
SECTION 5.16. Enforcement by Holders of Preferred
Securities
-iii-
<PAGE> 5
Page
ARTICLE SIX
The Trustee
SECTION 6.01. Certain Duties and Responsibilities
SECTION 6.02. Notice of Defaults
SECTION 6.03. Certain Rights of Trustee
SECTION 6.04. Not Responsible for Recitals or
Issuance of Securities
SECTION 6.05. May Hold Securities
SECTION 6.06. Money Held in Trust
SECTION 6.07. Compensation and Reimbursement
SECTION 6.08. Disqualification; Conflicting
Interest
SECTION 6.09. Corporate Trustee Required; Eligibility
SECTION 6.10. Resignation and Removal; Appointment of
Successor
SECTION 6.11. Acceptance of Appointment by Successor
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business
SECTION 6.13. Preferential Collection of Claims
Against Company
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 7.01. Company to Furnish Trustee Names and
Addresses of Holders
SECTION 7.02. Preservation of Information;
Communications to Holders
SECTION 7.03. Reports by Trustee
SECTION 7.04. Reports by Company
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate, Etc., Only
on Certain Terms
SECTION 8.02. Successor Substituted
ARTICLE NINE
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without
Consent of Holders
-iv-
<PAGE> 6
Page
SECTION 9.02. Supplemental Indentures with Consent
of Holders
SECTION 9.03. Execution of Supplemental Indentures
SECTION 9.04. Effect of Supplemental Indentures
SECTION 9.05. Conformity with Trust Indenture Act
SECTION 9.06. Reference in Securities to Supplemental
Indentures
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 10.01. Payment of Principal and Interest
SECTION 10.02. Maintenance of Office or Agency
SECTION 10.03. Money for Security Payments to Be
Held in Trust
SECTION 10.04. Statement by Officers as to Default
SECTION 10.05. Limitation on Dividends; Covenants as
to the Trust
SECTION 10.06. Payment of Expenses of the Trust
ARTICLE ELEVEN
Redemption of Securities
SECTION 11.01. Optional Redemption
SECTION 11.02. Tax Event Optional Redemption
SECTION 11.03. Applicability of Article
SECTION 11.04. Election to Redeem; Notice to Trustee
SECTION 11.05. Selection by Trustee of Securities to
Be Redeemed
SECTION 11.06. Notice of Redemption
SECTION 11.07. Deposit and Payment of Redemption
Price
SECTION 11.08. Securities Payable on Redemption Date
SECTION 11.09. Securities Redeemed in Part
SECTION 11.10. No Sinking Fund
ARTICLE TWELVE
Subordination of Securities
SECTION 12.01. Agreement to Subordinate
SECTION 12.02. Default on Senior Indebtedness
SECTION 12.03. Liquidation; Dissolution; Bankruptcy
-v-
<PAGE> 7
Page
SECTION 12.04. Subrogation
SECTION 12.05. Trustee to Effectuate Subordination
SECTION 12.06. Notice by the Company
SECTION 12.07. Rights of the Trustee; Holders of
Senior Indebtedness
SECTION 12.08. Subordination May Not Be Impaired
ARTICLE THIRTEEN
Conversion of Securities
SECTION 13.01. Conversion Rights
SECTION 13.02. Conversion Procedures
SECTION 13.03. Conversion Price Adjustments
SECTION 13.04. Reclassification, Consolidation,
Merger or Sale of Assets
SECTION 13.05. Notice of Adjustments of Conversion
Price
SECTION 13.06. Prior Notice of Certain Events
SECTION 13.07. Certain Defined Terms
SECTION 13.08. Dividend or Interest Reinvestment Plans
SECTION 13.09. Certain Additional Rights
SECTION 13.10. Trustee Not Responsible for Determining
Conversion Price or Adjustments
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 14.01. No Recourse
-vi-
<PAGE> 8
EXHIBIT AND ANNEX
EXHIBIT A Form of Security
ANNEX A Amended and Restated Declaration of Trust
among the Company, as trust sponsor, [ ],
as institutional trustee, [ ], as Delaware trustee,
Lambert E. Althaver and Michael A. Shope, as regular
trustees, dated as of [ ], 1997.
___________
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-vii-
<PAGE> 9
INDENTURE, dated as of [ ], 1997, between Walbro
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
6242 Garfield Street, Cass City, MI 48726, and [ ], as
Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, Walbro Capital Trust, a Delaware business trust (the
"Trust"), formed under the Amended and Restated Declaration of Trust among the
Company, as trust sponsor, [ ], as institutional trustee (the
"Institutional Trustee"), [ ], as Delaware trustee (the
"Delaware Trustee"), and Lambert E. Althaver and Michael A. Shope, as regular
trustees (the "Regular Trustees"), dated as of [ ], 1997 (the
"Declaration"), pursuant to the Underwriting Agreement (the "Underwriting
Agreement") dated [ ], 1997, among the Company and the underwriters
named therein, will issue and sell up to [ ] (or [ ] if the
over-allotment option is exercised in full) of its [ ]% Convertible Trust
Preferred Securities (the "Preferred Securities") with a liquidation amount of
$25 per Preferred Security, having an aggregate liquidation amount with respect
to the assets of the Trust of $[ ] (or $[ ] if the
over-allotment option is exercised in full);
WHEREAS, the trustees of the Trust, on behalf of the Trust, will
execute and deliver to the Company Common Securities (the "Common Securities")
of the Trust, registered in the name of the Company, in an aggregate amount
equal to three percent of the capitalization of the Trust, equivalent to [
] Common Securities (or [ ] Common Securities if the over-allotment option
is exercised);
WHEREAS, the Trust will use the proceeds from the sale of the
Preferred Securities and the Common Securities to purchase from the Company [
]% Convertible Subordinated Debentures Due 2017 (the "Securities") of the
Company in an aggregate principal amount of $[ ] (or $[ ] if
the over-allotment option is exercised in full);
WHEREAS, the Company is guaranteeing the payment of distributions on
the Preferred Securities, and payment of the Redemption Price and payments on
liquidation with respect to the Preferred Securities, to the extent provided in
the Preferred Securities Guarantee Agreement (the "Guarantee") dated [ ], 1997
between the Company and [ ],
<PAGE> 10
-2-
as guarantee trustee, for the benefit of the holders of the Preferred Securities
from time to time;
WHEREAS, the Company has duly authorized the creation of the
Securities of the tenor and amount herein set forth and to provide therefor the
Company has duly authorized the execution and delivery of this Indenture;
WHEREAS, so long as the Trust is a Holder of Securities, and any
Preferred Securities are outstanding, the Declaration provides that the holders
of Preferred Securities may cause the Conversion Agent to (a) exchange such
Preferred Securities for Securities held by the Trust and (b) immediately
convert such Securities into Common Stock of the Company; and
WHEREAS, all things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 1.01 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
<PAGE> 11
-3-
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.04.
"Additional Interest" has the meaning specified in Section 3.01.
"Additional Payments" means Compounded Interest and Additional
Interest, if any.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day on which banking institutions in The City
of New York, Wilmington, Delaware or Detroit, Michigan are authorized or
required by law to close.
"Closing Price" has the meaning specified in Section 13.07.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust
<PAGE> 12
-4-
Indenture Act, then the body performing such duties at such time.
"Common Securities" has the meaning specified in the recitals to this
Instrument.
"Common Securities Guarantee" means any guarantee that the Company may
enter into that operates directly or indirectly for the benefit of holders of
Common Securities of the Trust.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company and which is not subject to redemption by the Company. However, subject
to the provisions of Article Thirteen, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided, that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable on conversion shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Compounded Interest" has the meaning specified in Section 3.12.
<PAGE> 13
-5-
"Conversion Agent" means the Person appointed to act on behalf of the
holders of Preferred Securities in effecting the conversion of Preferred
Securities as and in the manner set forth in the Declaration and Section 13.02
hereof.
"Conversion Date" has the meaning specified in Section 13.02.
"Corporate Trust Office" means the principal office of the Trustee in
New York, New York, at which at any particular time its corporate trust business
shall be administered and which at the date of this Indenture is [ ], New York,
New York [ ], Attention: [ ].
"Current Market Price" has the meaning specified in Section 13.03.
"Declaration" has the meaning specified in the Recitals of this
instrument.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Delaware Trustee" has the meaning given it in the Recitals of this
instrument.
"Depositary" means, with respect to any Securities issued in the form
of one or more Global Securities, a clearing agency registered under the
Exchange Act that is dedicated to act as Depositary for the Securities.
"Direct Action" means a proceeding directly instituted by a holder of
Preferred Securities for enforcement of payment to such holder of the principal
of or interest on the Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due date specified in the Securities, if an Event of
Default under the Declaration has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Securities on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date).
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration and the
<PAGE> 14
-6-
Securities held by the Institutional Trustee are to be distributed to the
holders of Trust Securities issued by the Trust pro rata in accordance with the
Declaration.
"Dissolution Tax Opinion" has the meaning specified in the
Declaration.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder, or any
successor legislation.
"Extension Period" has the meaning specified in Section 3.12.
"Global Security" has the meaning specified in Section 3.14.
"Guarantee" has the meaning specified in the Recitals to this
instrument.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date" has the meaning specified in Section 3.01.
"Institutional Trustee" has the meaning specified in the Recitals of
this instrument.
"Investment Company Event" has the meaning specified in Annex I to the
Declaration.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the
<PAGE> 15
-7-
Stated Maturity or by declaration of acceleration, call for redemption or
otherwise.
"Ministerial Action" has the meaning specified in Section 11.02.
"90-Day Period" has the meaning specified in Section 11.02.
"No Recognition Opinion" has the meaning specified in Annex I to the
Declaration.
"Notice of Conversion" means the notice to be given by a holder of
Preferred Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Securities for Securities and to convert such Securities
into Common Stock on behalf of such holder.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or a Vice President,
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 10.04 shall be the
principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except: (i) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose
payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities; provided, that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made; and (iii) Securities that have been paid pursuant to Section 3.07,
converted into Common Stock pursuant to Section 13.01, or in exchange for or in
lieu of which other Securities have been
<PAGE> 16
-8-
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company, provided,
however, that in determining whether the Holders of the requisite principal
amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company. "Person"
means any legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.06 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the Recitals to
this instrument.
<PAGE> 17
-9-
"Purchased Shares" has the meaning specified in Section 13.03(e).
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Redemption Tax Opinion" has the meaning set forth in Annex I to the
Declaration.
"Reference Date" has the meaning specified in Section 13.03(c).
"Regular Record Date" has the meaning specified in Section 3.01.
"Regular Trustees" has the meaning specified in the Recitals of this
instrument.
"Responsible Officer", when used with respect to the Trustee, means
any vice-president, any assistant vice-president, the treasurer, any assistant
treasurer, any trust officer or assistant trust officer or any other officer in
the Corporate Trust Department of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Securities" has the meaning specified in the Recitals to this
instrument.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.05.
"Senior Indebtedness" means in respect of the Company (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities, notes,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred
<PAGE> 18
-10-
purchase price of property, all conditional sale obligations of such obligor and
all obligations of such obligor under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business),
(iv) all obligations of such obligor for the reimbursement of any letter of
credit, banker's acceptance, security purchase facility or similar credit
transaction, (v) all obligations in respect of interest rate swap, cap or other
similar agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar agreements,
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other Persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (vii) all obligations of the type referred
to in clauses (i) through (vi) above of other Persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed by
such obligor), except for (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Securities and (2) any indebtedness
between or among such obligor or its Affiliates, including all other debt
securities and guarantees in respect of those debt securities issued to (a) the
Trust or a trustee of such trust and (b) any other trust, or a trustee of such
trust, partnership, or other entity affiliated with the Company that is a
financing vehicle of the Company (a "Financing Entity") in connection with the
issuance by such Financing Entity of preferred securities or other securities
which rank pari passu with, or junior to, the Preferred Securities. Such Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
"Special Event" has the meaning specified in Annex I to the
Declaration.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity" when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal, together with any accrued and unpaid
interest (including Compounded Interest), of such Security or such installment
of interest is due and payable.
<PAGE> 19
-11-
"Subsidiary" of any Person means (i) a corporation more than 50% of
the outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Tax Event" has the meaning specified in Annex I to the Declaration.
"Trading Day" has the meaning specified in Section 13.07.
"Trust" has the meaning specified in the Recitals to this instrument.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, and the rules and regulations promulgated thereunder,
or any successor legislation.
"Trust Securities" means Common Securities and Preferred Securities.
"Underwriting Agreement" has the meaning specified in the Recitals to
this instrument.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means capital stock of such Person which
ordinarily has voting power for the election of directors (or Persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
<PAGE> 20
-12-
SECTION 1.02 Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act or reasonably requested by the Trustee in connection with such
application or request. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
applicable requirements of the Trust Indenture Act and any other applicable
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with. SECTION Form of
Documents Delivered to Trustee.
SECTION 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
<PAGE> 21
-13-
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual
<PAGE> 22
-14-
signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee or the Company, as the
case may be, deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders of Outstanding Securities entitled to give, make or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by Holders. If
not set by the Company prior to the first solicitation of a Holder made by any
Person in respect of any such action, or, in the case of any such vote, prior to
such vote, the record date for any such action or vote shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 7.01) prior to such first solicitation or vote, as
the case may be. With regard to any record date, only the Holders on such date
(or their duly designated proxies) shall be entitled to give or take, or vote
on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(f) Without limiting the foregoing, a Holder entitled hereunder to
give or take any such action with regard to any particular Security may do so
with regard to all or any part of the principal amount of such Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
<PAGE> 23
-15-
SECTION 1.05. Notices, Etc., to Trustee and the Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust & Agency Department, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the first
paragraph of this instrument or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 1.06. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when
mailed to a Holder in the aforesaid manner shall be conclusively deemed to have
been received by such Holder whether or not actually received by such Holder.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be
<PAGE> 24
-16-
impracticable to give such notice by mail, then such notification as shall be
made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
SECTION 1.07. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 1.08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness, the holders of Preferred
Securities (to the extent provided herein) and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
<PAGE> 25
-17-
SECTION 1.12 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 1.13 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security or the last date on which a Holder has the right to
convert his Securities shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal or conversion of the Securities need not be made on such date, but may
be made on the next succeeding Business Day (except that, if such Business Day
is in the next succeeding calendar year, such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, shall be the immediately preceding
Business Day) with the same force and effect as if made on the Interest Payment
Date or Redemption Date, or at the Stated Maturity or on such last day for
conversion, provided, that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
ARTICLE TWO
Security Forms
SECTION 2.01 Forms Generally.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have letters,
numbers, notations or other marks of identification or designation and such
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). The Company
shall furnish any such legend not contained in Exhibit A to the Trustee in
writing. Each Security shall be dated the date of its authentication. The
terms and provisions of the Securities set forth in Exhibit A are part of the
terms of this Indenture and to the extent applicable, the Company and the
Trustee, by
<PAGE> 26
-18-
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
The definitive Securities shall be typewritten or printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution thereof.
SECTION 2.02. Initial Issuance to Institutional Trustee.
The Securities initially issued to the Institutional Trustee of the
Trust shall be in the form of one or more individual certificates in definitive,
fully registered form without coupons.
ARTICLE THREE
The Securities
SECTION 3.01. Title and Terms.
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is limited to $[ ] (or up to $[ ] if
the over-allotment option is exercised in full in accordance with the terms and
provisions of the Underwriting Agreement), except for Securities authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities pursuant to Section 3.04, 3.05, 3.06, 9.06, 11.09 or 13.01.
The Securities shall be known and designated as the "[ ]%
Convertible Subordinated Debentures Due 2017" of the Company. Their
Stated Maturity shall be [ ], 2017, and they shall bear interest at
the rate of [ ]% per annum, from [ ], 1997 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, as
the case may be, payable quarterly (subject to deferral as set forth herein),
in arrears, on March 31, June 30, September 30 and December 31 (each an
"Interest Payment Date") of each year, commencing March 31, 1997, until the
principal thereof is paid or made available for payment, and they shall be
paid to the Person in whose name the Security is registered at 5:00 p.m. (New
York City time) on the regular record date for such interest installment, which
shall be the March 15, June 15,
<PAGE> 27
-19-
September 15 and December 15 next preceding such Interest Payment Date (the
"Regular Record Date"). Interest will compound quarterly and will accrue at the
rate of [ ]% per annum on any interest installment in arrears for more than
one quarter or during an extension of an interest payment period as set forth in
Section 3.12 hereof.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest in computed, will be computed on the
basis of the actual number of days elapsed per 90-day quarter. In the event
that any date on which interest is payable on the Securities is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
If at any time while the Institutional Trustee is the Holder of any
Securities, the Trust or the Institutional Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, the Company will pay as additional interest ("Additional
Interest") on the Securities held by the Institutional Trustee, such amounts as
shall be required so that the net amounts received and retained by the Trust and
the Institutional Trustee after paying any such taxes, duties, assessments or
other governmental charges will be not less than the amounts the Trust and the
Institutional Trustee would have received had no such taxes, duties, assessments
or other governmental charges been imposed.
The principal of and interest on the Securities shall be payable at
the office or agency of the Company in the United States maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address
<PAGE> 28
-20-
of the Person entitled thereto as such address shall appear in the Security
Register.
The Securities shall be redeemable as provided in Article Eleven
hereof.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve hereof.
The Securities shall be convertible as provided in Article Thirteen
hereof.
SECTION 3.02. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $25 and integral multiples thereof.
SECTION 3.03. Execution, Authentication, Delivery
and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and make available for delivery such
Securities as in this Indenture provided and not otherwise.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless
<PAGE> 29
-21-
there appears on such Security a certificate of authentication substantially in
the form provided for herein executed by the Trustee by manual signature, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 3.04. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are typewritten, printed, lithographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 10.02, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.05. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.02 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
<PAGE> 30
-22-
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 10.02 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.04, 9.06, 11.09 or 13.01 not involving any
transfer.
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
<PAGE> 31
-23-
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07. Payment of Interest; Interest Rights
Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at 5:00 p.m. (New York City time) on the Regular Record Date.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest
<PAGE> 32
-24-
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at 5:00 p.m. (New York City time) on
a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same time
the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause (a) provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at 5:00 p.m. (New York
City time) on such Special Record Date and shall no longer be payable
pursuant to the following Clause
(b) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and, if so
listed, upon such
<PAGE> 33
-25-
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause (b),
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.07, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue (including in each such case Additional
Payments, if any), which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at 5:00 p.m. (New York City time) on such Regular Record Date.
Notwithstanding the foregoing, if, during an Extension Period, a notice of
redemption is mailed pursuant to Section 11.06 and a Security is converted after
such mailing but prior to the relevant Redemption Date, all accrued but unpaid
interest (including Additional Payments, if any) through the date of conversion
shall be paid to the holder of such Security on the Redemption Date. Except as
otherwise expressly provided in the immediately preceding two sentences, in the
case of any Security that is converted prior to any Regular Record Date,
interest whose Stated Maturity is after the date of conversion of such Security
shall not be payable, and the Company shall not make nor be required to make any
other payment, adjustment or allowance with respect to accrued but unpaid
interest (including Additional Payments, if any) on the Securities being
converted, which shall be deemed to be paid in full. Subject to any right of
the Holder of such Security or any Predecessor Security to receive interest as
provided in this paragraph and the second paragraph of Clause (a) of Section
13.02, the Company's delivery upon conversion of the fixed number of shares of
Common Stock into which the Securities are convertible (together with the cash
payment, if any, in lieu of fractional shares) shall be deemed to satisfy the
Company's obligation to pay the principal amount at Maturity of the portion of
Securities so converted and any unpaid interest (including Additional Payments,
if any) accrued on such Securities at the time of such
<PAGE> 34
-26-
conversion. If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in this paragraph) be paid to the Company upon Company Request or, if
then held by the Company, shall be discharged from such trust.
SECTION 3.08. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.07) interest (including Additional Payments, if any) on such Security
and for all other purposes whatsoever, whether or not such Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 3.09. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order; provided, however, that the Trustee shall not be required to destroy the
certificates representing such cancelled Securities.
SECTION 3.10. Right of Setoff.
Notwithstanding anything to the contrary in this Indenture, the
Company shall have the right to set off any payment it is otherwise required to
make hereunder to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Guarantee.
<PAGE> 35
-27-
SECTION 3.11. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided, that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
SECTION 3.12. Option to Extend Interest Payment Period.
(a) The Company shall have the right at any time, and from time to
time during the term of the Securities, to defer interest payments (including
Additional Payments) by extending the interest payment period for a period
(each, an "Extension Period") not exceeding 20 consecutive quarters; provided,
no Extension Period may extend beyond the maturity date of the Securities, and
at the end of which Extension Period, the Company shall pay all interest then
accrued and unpaid (including Additional Interest) together with interest
thereon compounded quarterly at the rate specified for the Securities to the
extent permitted by applicable law ("Compounded Interest"); provided, that
during any Extension Period, the Company shall (i) not declare or pay dividends
on, or make any distributions or liquidation payments with respect to, or
redeem, purchase or acquire, any of its capital stock (other than (A) purchases
or acquisitions of shares of Common Stock in connection with the satisfaction by
the Company of its obligations under any employee benefit plans or the
satisfaction by the Company of its obligations pursuant to any contract or
security requiring the Company to purchase shares of Common Stock, (B) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock or (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged or (D) stock dividends paid by the Company where the dividend stock is
the same as that on which the dividend is paid), (ii) not make any payment of
interest on or principal of (or premium, if any, on) or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or
<PAGE> 36
-28-
junior to the Securities and (iii) not make any guarantee payments with respect
to the foregoing (other than pursuant to the Guarantee). Prior to the
termination of any such Extension Period, the Company may further extend such
Extension Period; provided, that such Extension Period, together with all such
previous and further extensions thereof, may not exceed 20 consecutive quarters;
and provided further that no Extension Period may extend beyond the maturity
date of the Securities. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may commence a new Extension
Period, subject to the above requirements. No interest during an Extension
Period shall be due and payable. Notwithstanding any other provision in this
Indenture to the contrary, the Company shall not have the right at any time to
defer any Additional Interest, including by extending the interest payment
period.
(b) If the Institutional Trustee is the sole Holder of the
Securities at the time the Company selects an Extension Period, the Company
shall give written notice to the Regular Trustees, the Institutional Trustee and
the Trustee of its selection of such Extension Period at least one Business Day
prior to the earlier of (i) the date the distributions on the Preferred
Securities would be payable, if not for such Extension Period, or (ii) if the
Preferred Securities are quoted for trading on the Nasdaq National Market or any
other stock exchange or quotation system, the date the Regular Trustees are
required to give notice to the Nasdaq National Market (or other applicable
self-regulatory organization) or to holders of the Preferred Securities of the
record date or the date such distributions would be payable if not for such
Extension Period, but in any event not less than one Business Days prior to such
record date.
(c) If the Institutional Trustee is not the sole Holder of the
Securities at the time the Company selects an Extension Period, the Company
shall give the Holders of the Securities and the Trustee written notice of its
selection of such Extension Period at least 10 Business Days prior to the
earlier of (i) the next succeeding Interest Payment Date or (ii) the date upon
which the Company is required to give notice to Nasdaq National Market (or any
applicable self-regulatory organization) or to Holders of the Securities on the
record or payment date of such related interest payment.
(d) The quarter in which any notice is given pursuant to
paragraphs (b) and (c) hereof shall be counted as one of
<PAGE> 37
-29-
the 20 quarters permitted in the maximum Extension Period permitted under
paragraph (a) hereof.
SECTION 3.13. Paving Agent, Security Registrar and
Conversion Agent.
The Trustee will initially act as Paying Agent, Security Registrar and
Conversion Agent. The Company may change any Paying Agent, Security Registrar,
co-registrar or Conversion Agent without prior notice. The Company or any of
its Affiliates may act in any such capacity. The Trustee is entitled to the
protections of Article Six in its capacity as Paying Agent, Registrar and
Conversion Agent.
SECTION 3.14. Global Security.
(a) In connection with a Dissolution Event,
(1) the Securities in certificated form may be presented to the
Trustee by the Institutional Trustee in exchange for a global Security in
an aggregate principal amount equal to the aggregate principal amount of
all outstanding Securities (a "Global Security"), to be registered in the
name of the Depositary, or its nominee, and delivered by the Trustee to the
Depositary for crediting to the accounts of its participants pursuant to
the instructions of the Regular Trustees. The Company upon any such
presentation shall execute a Global Security in such aggregate principal
amount and deliver the same to the Trustee for authentication and delivery
in accordance with this Indenture. Payments on the Securities issued as a
Global Security will be made to the Depositary; and
(2) if any Preferred Securities are held in non-book-entry
certificated form, the Securities in certificated form may be presented to
the Trustee by the Institutional Trustee and any Preferred Security
Certificate which represents Preferred Securities other than Preferred
Securities held by the Depositary or its nominee ("Non-Book-Entry Preferred
Securities") will be deemed to represent beneficial interests in Securities
presented to the Trustee by the Institutional Trustee having an aggregate
principal amount equal to the aggregate liquidation amount of the
Non-Book-Entry Preferred Securities until such Preferred Security
Certificates are presented to the Security Registrar for transfer or
reissuance, at which time such Preferred Security Certificates will be
cancelled and a
<PAGE> 38
-30-
Security, registered in the name of the holder of the Preferred Security
Certificate or the transferee of the holder of such Preferred Security
Certificate, as the case may be, with an aggregate principal amount equal
to the aggregate liquidation amount of the Preferred Security Certificate
cancelled, will be executed by the Company and delivered to the Trustee for
authentication and delivery in accordance with this Indenture. On issue of
such Securities, Securities with an equivalent aggregate principal amount
that were presented by the Institutional Trustee to the Trustee will be
deemed to have been cancelled.
(b) A Global Security may be transferred, in whole but not in part,
only to another nominee of the Depositary, or to a nominee of such successor
Depositary.
(c) If (i) the Depositary notifies the Company that it is unwilling
or unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the Depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Event of Default with respect to such
Securities, as the case may be, the Company will execute, and, subject to
Article Three of this Indenture, the Trustee, upon written notice from the
Company and receipt of a Company Order, will authenticate and deliver the
Securities in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Security in exchange for such Global Security. In
addition, upon an Event of Default or if the Company may at any time determine
that the Securities shall no longer be represented by a Global Security, in such
event the Company will execute, and subject to Section 3.05 of this Indenture,
the Trustee, upon receipt of an Officers' Certificate evidencing such
determination by the Company, will authenticate and make available for delivery
the Securities in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Security in exchange for such Global Security. Upon the
exchange of the Global Security for such Securities in definitive registered
form without coupons, in authorized denominations, the Global Security shall be
cancelled by the Trustee. Such Securities in definitive
<PAGE> 39
-31-
registered form issued in exchange for the Global Security shall be registered
in such names and in such authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Securities to the
Depositary for delivery to the Persons in whose names such Securities are so
registered.
(d) Every Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form, in capital letters and
bold face type:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART
FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN
PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
(e) If the Depositary is the Depository Trust Company, the Global
Security authenticated and delivered hereunder shall also bear a legend in
substantially the following form, in capital letters and bold face type:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED SIGNATORY OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 40
-32-
ARTICLE FOUR
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(i) all Securities theretofore authenticated and delivered
(other than (A) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 3.06 and
(B) Securities 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, as provided in
Section 10.03) have been delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee
for cancellation have become due and payable, and the Company has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal and interest (including
Additional Payments, if any) to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be, along with an
accountant's certificate stating such funds are sufficient to pay
principal and interest on the Securities when and as due;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each
<PAGE> 41
-33-
stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (ii) of Clause(a) of
this Section, the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.
SECTION 4.02. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.03, all
money deposited with the Trustee pursuant to Section 4.01 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee. All moneys
deposited with the Trustee pursuant to Section 4.01 (and held by it or any
Paying Agent) for the payment of Securities subsequently converted shall be
returned to the Company upon Company Request.
ARTICLE FIVE
Remedies
SECTION 5.01. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and whether it shall be occasioned by the provisions of
Article Twelve or be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(a) failure for 30 days to pay interest on the Securities, including
any Additional Payments in respect thereof, when due; provided that a valid
extension of an interest payment period will not constitute a default in
<PAGE> 42
-34-
the payment of interest (including Additional Payments, if any) for this
purpose;
(b) failure to pay principal of or premium, if any, on the Securities
when due, whether at maturity, upon redemption, by declaration or
otherwise;
(c) failure by the Company to deliver shares of its Common Stock upon
an election by a holder of Preferred Securities to convert such Preferred
Securities;
(d) failure to observe or perform any other covenant contained in the
Indenture for 90 days after notice to the Company by the Trustee or by the
holders of not less than 25% in aggregate outstanding principal amount of
the Securities;
(e) entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of substantially
all of the property of the Company, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days;
(f) the commencement by the Company of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by the Company or to
the entry of a decree or order for relief in respect of itself in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Company, or the filing by the Company of a petition or answer or consent
seeking reorganization or relief under any applicable federal or state law,
or the consent by the
<PAGE> 43
-35-
Company to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of substantially
all of the property of the Company, or the making by the Company of an
assignment for the benefit of creditors, or the admission by the Company in
writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company in furtherance of any such
action; or
(g) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the distribution of
Securities to holders of Preferred Securities in liquidation of the Trust
upon the redemption of all of the outstanding Preferred Securities of the
Trust or (ii) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities may declare the principal of all the
Securities and any other amounts payable hereunder to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal and all accrued
interest shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as provided in this Article, the Holders of a majority in aggregate
principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest (including Additional Payments, if any)
on all Securities,
<PAGE> 44
-36-
(ii) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities, and
(iii) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(b) all Events of Default, other than the nonpayment of the principal
of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if:
(a) default is made in the payment of any interest (including
Additional Payments, if any) on any Security when such interest becomes due
and payable and such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of any Security
at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest (including Additional Payments, if any)
and, to the extent that payment thereof shall be legally enforceable, interest
on any overdue principal and on any overdue interest (including Additional
Payments, if any), at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce
<PAGE> 45
-37-
its rights and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 5.05. Trustee May Enforce Claims
Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the
<PAGE> 46
-38-
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Securities in respect of which such judgment has been recovered.
SECTION 5.06. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal or interest (including Additional Payments, if any), upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (premium, if any) and interest (including Additional Payments,
if any) on the Securities in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Securities for
principal (premium, if any) and interest (including Additional Payments, if
any), respectively.
SECTION 5.07. Limitation on Suits.
Subject to Section 5.16, no Holder of any Security shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
<PAGE> 47
-39-
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.08. Unconditional Right of Holders to Receive
Principal and Interest and Convert.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 3.07) interest
(including Additional Payments, if any) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to convert such Security in accordance with Article
Thirteen and to institute suit for the enforcement of any such payment and right
to convert, and such rights shall not be impaired without the consent of such
Holder.
SECTION 5.09. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their
<PAGE> 48
-40-
former positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
3.06, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
<PAGE> 49
-41-
SECTION 5.13. Waiver of Past Defaults.
Subject to Section 9.02 hereof, the Holders of not less than a
majority in principal amount of the Outstanding Securities may on behalf of the
Holders of all the Securities waive any past default hereunder and its
consequences, except a default
(a) in the payment of the principal of, premium, if any, or
interest (including Additional Payments, if any) on any Security (unless
such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration
has been deposited with the Trustee); or
(b) in respect of a covenant or provision hereof that under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected; provided, however, that if the
Securities are held by the Trust or a trustee of such Trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation amount of Trust Securities shall have consented to
such waiver or modification to such waiver; provided, further, that if the
consent of the Holder of each outstanding Security is required, such waiver
shall not be effective until each holder of the Trust Securities shall have
consented to such waiver.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in the
Trust Indenture Act; provided, that neither this Section nor the Trust Indenture
Act shall be deemed to authorize any court to require such an undertaking or to
make such an assessment in any suit instituted by the Company
<PAGE> 50
-42-
or the Trustee or in any suit for the enforcement of the right to receive the
principal of and interest (including Additional Payments, if any) on any
Security or to convert any Security in accordance with Article Thirteen.
SECTION 5.15. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 5.16. Enforcement by Holders of Preferred Securities.
Notwithstanding the foregoing, if an Event of Default has occurred and
is continuing and such event is attributable to the failure of the Company to
pay interest or principal on the Securities on the date such interest or
principal is otherwise payable, the Company acknowledges that, in such event, a
holder of Preferred Securities may institute a Direct Action for payment on or
after the respective due date specified in the Securities. The Company may not
amend this Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of all the holders of Preferred Securities.
Notwithstanding any payment made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest of the Trust on the Securities (including
Additional Payments, if any) held by the Trust or the Institutional Trustee, and
the Company shall be subrogated to the rights of the holder of such Preferred
Securities with respect to payments on the Preferred Securities to the extent
of any payments made by the Company to such holder in any Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the Holders of the Securities.
<PAGE> 51
-43-
ARTICLE SIX
The Trustee
SECTION 6.01. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Indenture or indemnity reasonably
satisfactory to the Trustee against such risk or liability is not reasonably
assured to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.01.
SECTION 6.02. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; provided, however, that
in the case of any default of the character specified in Section 5.01(d), no
such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section 6.02, the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default.
SECTION 6.03. Certain Rights of Trustee.
Subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company
<PAGE> 52
-44-
Request or Company Order and any resolution of the Board of Directors may
be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to reasonable examination of the books, records and
premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
<PAGE> 53
-45-
(h) the Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith, without negligence or willful
misconduct, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of the Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities and, subject to Sections 6.08 and 6.13, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent.
SECTION 6.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 6.07. Compensation and Reimbursement.
The Company agrees
(a) to pay to the Trustee from time to time such compensation as the
Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder;
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all
<PAGE> 54
-46-
reasonable expenses, fees, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Indenture (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee and any predecessor Trustee for, and
to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or
duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.01(f) or Section 5.01(g), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 6.08. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and has its Corporate
Trust Office in New York, New York. If such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus
<PAGE> 55
-47-
as set forth in its most recent report of condition so published. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in aggregate principal amount of the Outstanding Securities, delivered
to the Trustee and to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.08 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee
<PAGE> 56
-48-
or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (A) the Company by Board Resolution may remove the
Trustee, or (B) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.06. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; provided, that on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its
<PAGE> 57
-49-
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments required to more
fully and certainly vest in and confirm to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation
or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of Claims Against
Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
<PAGE> 58
-50-
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 7.01. Company to Furnish Trustee Names and
Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than February 15 and August 15 in each
year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of a date not more than 15 days prior
to the delivery thereof, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 7.02. Preservation of Information; Communications
to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of
<PAGE> 59
-51-
information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.
SECTION 7.03. Reports by Trustee.
(a) Within 60 days after May 15 of each year, commencing May 15,
1997, the Trustee shall transmit by mail to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.04. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided, that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
The Company shall also provide to the Trustee on a timely basis such
information as the Trustee requires to enable the Trustee to prepare and file
any form required to be submitted by the Company with the Internal Revenue
Service and the Holders of the Securities relating to original issue discount,
if any, including, without limitation, Form 1099-OID or any successor form.
<PAGE> 60
-52-
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate, Etc., Only
on Certain Terms.
The Company shall not consolidate with or merge with or into any other
Person or, directly or indirectly, convey, transfer or lease all or
substantially all of its properties and assets on a consolidated basis to any
Person, unless:
(a) the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance, transfer or lease,
all or substantially all of the properties and assets of the Company on a
consolidated basis shall be a corporation, partnership or trust, shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest
(including Additional Payments, if any) on all the Securities and the
performance or observance of every covenant of this Indenture on the part
of the Company to be performed or observed and shall have provided for
conversion rights in accordance with Article Thirteen;
(b) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture, comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
<PAGE> 61
-53-
This Section shall only apply to a merger or consolidation in which
the Company is not the surviving corporation and to conveyances, leases and
transfers by the Company as transferor or lessor.
SECTION 8.02. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company on a consolidated
basis in accordance with Section 8.01, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(c) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article Thirteen; or
<PAGE> 62
-54-
(d) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture; provided, that such action pursuant to this Clause (d)
shall not adversely affect the interests of the Holders of the Securities
or, so long as any of the Preferred Securities shall remain outstanding,
the holders of the Preferred Securities; to comply with the requirements of
the Commission in order to effect or maintain the qualification of this
Indenture under the Trust Indenture Act; or
(e) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if any,
to be placed on Securities, and all other matters required pursuant to
Section 3.05(b) or otherwise necessary, desirable or appropriate in
connection with the issuance of Securities to holders of Preferred
Securities in the event of a distribution of Securities by the Trust if a
Special Event occurs and is continuing.
SECTION 9.02. Supplemental Indentures with Consent
of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(a) extend the Stated Maturity of the principal of, or any
installment of interest (including Additional Payments, if any) on, any
Security, or reduce the principal amount thereof, or reduce the rate or
extend the time for payment of interest thereon, or extend the Extension
Period, or reduce any premium payable upon the redemption thereof, or
change the place of payment where, or the coin
<PAGE> 63
-55-
or currency in which, any Security or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or adversely affect the right to convert any
Security as provided in Article Thirteen (except as permitted by Section
9.01(c)), or modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders,
(b) reduce the percentage in aggregate principal amount of the
Outstanding Securities, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(c) modify any of the provisions of this Section or Section 5.13,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby;
provided that if the Securities are held by the Trust or a trustee of the Trust,
such supplemental indenture shall not be effective until the holders of a
majority in liquidation amount of Trust Securities shall have consented to such
supplemental indenture; provided, further, that if the consent of the Holder of
each Outstanding Security is required, such supplemental indenture shall not be
effective until each holder of the Trust Securities of the Trust shall have
consented to such supplemental indenture.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record
date, or their duly designated proxies, and only such Persons, shall be entitled
to consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided that
<PAGE> 64
-56-
unless such consent shall have become effective by virtue of the requisite
percentage having been obtained prior to the date which is 90 days after such
record date, any such consent previously given shall automatically and without
further action by any Holder be cancelled and of no further effect.
SECTION 9.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. No such supplemental indenture shall directly or
indirectly modify the provisions of Article Twelve in any manner which might
terminate or impair the rights of the Senior Indebtedness pursuant to such
subordination provisions.
SECTION 9.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 9.06. Reference in Securities to Supplemental
Indenture.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
<PAGE> 65
-57-
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
ARTICLE TEN
Covenants, Representations and Warranties
SECTION 10.01. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities and Additional Payments, if any
in accordance with the terms of the Securities and this Indenture.
SECTION 10.02. Maintenance of Office or Agency.
The Company will maintain in the United States an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Securities may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in the United States for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
<PAGE> 66
-58-
SECTION 10.03. Money for Security Payments to Be Held
in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on
(including Additional Payments, if any) any Security and remaining unclaimed for
two years
<PAGE> 67
-59-
after such principal or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of any such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 10.04. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the
material terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 10.05. Limitation on Dividends; Covenants as to
the Trust.
(a) The Company covenants that so long as the Securities are
outstanding, if (i) there shall have occurred and be continuing any event that
with the giving of notice or the lapse of time or both, would constitute an
Event of Default, (ii) the Company shall be in default with respect to its
payment of any obligations under the Guarantee, or (iii) the Company has
exercised its option to defer interest payments on the Securities by extending
the interest payment period and such period, or any extension thereof, shall be
continuing, then the Company shall (A) not declare or pay dividends on, or make
a distribution with respect to, or redeem or purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (w)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security requiring the Company to purchase shares of Common Stock, (x) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (y) the purchase of fractional
interests in shares of the Company's
<PAGE> 68
-60-
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged or (z) stock dividends paid
by the Company where the dividend stock is the same stock as that on which the
dividend is paid), (B) not make any payment of interest on or principal of (or
premium, if any, on) or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank pari passu with or junior
to the Securities and (C) not make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee).
(b) The Company also covenants and agrees (i) that it shall directly
or indirectly maintain 100% ownership of the Common Securities of the Trust;
provided, however, that any permitted successor of the Company hereunder may
succeed to the Company's ownership of such Common Securities and (ii) that it
shall use its reasonable efforts, consistent with the terms and provisions of
the Declaration, to cause the Trust (x) to remain a statutory business trust,
except in connection with the distribution of the Securities to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States Federal income tax purposes.
SECTION 10.06. Payment of Expenses of the Trust.
In connection with the offering, sale and issuance of the Securities
to the Institutional Trustee in connection with the sale of the Trust
Securities by the Trust, the Company shall:
(a) pay for all costs, fees and expenses relating to the offering,
sale and issuance of the Securities, including commissions, discounts and
expenses payable pursuant to the Purchase Agreement and compensation of the
Trustee under the Indenture in accordance with the provisions of Section
6.07 of the Indenture;
(b) be responsible for and pay for all debts and obligations (other
than with respect to the Trust Securities) of the Trust, pay for all costs
and expenses of the Trust (including, but not limited to, costs and
expenses relating to the organization of the Trust, the offering, sale and
issuance of the Trust Securities (including commissions, discounts and
expenses in connection therewith),
<PAGE> 69
-61-
the fees and expenses of the Institutional Trustee and the Delaware
Trustee, the costs and expenses relating to the operation of the Trust,
including without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving
and computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection
with the acquisition, financing, and disposition of Trust assets); and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
ARTICLE ELEVEN
Redemption of Securities
SECTION 11.01. Optional Redemption.
(a) The Company shall have the right to redeem the Securities, in
whole or in part, at any time or from time to time after , 2000, at
the redemption prices (expressed as a percentage of the principal amount of
Securities) specified below (the "Redemption Prices") for the 12-month period
commencing [ ] in the year indicated ([ ], in the case of
2000):
Optional
Year Redemption Price
---------------------- ----------------
2000 %
2001 %
2002 %
2003 %
2004 %
2005 %
2006 %
2007 and thereafter 100.00%
plus, in each case, accrued and unpaid interest (including Additional Payments,
if any) to the Redemption Date. Any redemption pursuant to this Section 11.01
shall be made pursuant to the provisions of Sections 11.03 through 11.08
hereof.
<PAGE> 70
-62-
(b) If a partial redemption of the Securities would result in the
delisting of the Preferred Securities issued by the Trust from any national
securities exchange or other organization on which the Preferred Securities are
listed, the Company shall not be permitted to effect such partial redemption and
may only redeem the Securities in whole.
SECTION 11.02. Tax Event Optional Redemption.
If a Tax Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Regular Trustees
shall have been informed by tax counsel rendering the Dissolution Tax
Opinion that a No Recognition Opinion cannot be delivered to the Regular
Trustees,
then, notwithstanding Section 11.01(a) but subject to Section 11.01(b), the
Company shall have the right upon not less than 30 days nor more than 60 days
notice to the Holders of the Securities to redeem the Securities in whole or in
part for cash at a redemption price equal to 100% of the principal amount of the
Securities plus accrued and unpaid interest (including Additional Payments), if
any, within 90 days following the occurrence of such Tax Event (the "90-day
Period"); provided, however, that if, at the time there is available to the
Company or the Trust the opportunity to eliminate within such 90-Day Period, the
Tax Event by taking some ministerial action ("Ministerial Action"), such as
filing a form or making an election, or pursuing some other similar reasonable
measure which, in the sole judgment of the Company, has or will cause no adverse
effect on the Company, the Trust or the Holders of the Trust Securities, the
Company or the Trust shall pursue such Ministerial Action or other measure in
lieu of redemption, and provided, further, that the Company shall have no right
to redeem the Securities while the Trust is pursuing any Ministerial Action or
other similar measure pursuant to its obligations under the Declaration.
SECTION 11.03. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by Sections 11.01 and 11.02, shall be made in accordance with such provision and
this Article.
<PAGE> 71
-63-
SECTION 11.04. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities pursuant to Section
11.01 or 11.02 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 45 days
and no more than 90 days prior to the Redemption Date fixed by the Company,
notify the Trustee in writing of such Redemption Date and of the principal
amount of Securities to be redeemed and provide a copy of the notice of
redemption given to Holders of Securities to be redeemed pursuant to Section
11.05.
SECTION 11.05. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 45 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions (equal to $25 or
any integral multiple thereof) of the principal amount of the Securities.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
<PAGE> 72
-64-
SECTION 11.06. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at such Holder's address
appearing in the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including, if relevant, CUSIP number or ISIN) and shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and that interest thereon
will cease to accrue on and after said date, and
(d) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.07. Deposit and Payment of Redemption Price.
Prior to 10:00 a.m. (New York City time) on the Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.03) an amount of money sufficient to pay the Redemption
Price of, plus (except if the Redemption Date shall be an Interest Payment Date)
accrued and unpaid interest (including Additional Payments, if any) on all the
Securities which are to be redeemed on that date. Such redemption payment shall
be made to the Holders prior to 12:00 noon (New York City time) on the
Redemption Date or such earlier time as the Company determines.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such
<PAGE> 73
-65-
Security shall (subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last paragraph of
Section 3.07) be paid to the Company upon Company Request or, if then held by
the Company, shall be discharged from such trust.
SECTION 11.08. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest, including Additional Payments, if any) such Securities shall
cease to bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with accrued and unpaid interest (including
Additional Payments, if any) to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at 5:00 p.m. (New York City time) on
the relevant Record Dates according to the terms and provisions of Section 3.07.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borne by the Security.
SECTION 11.09. Securities Redeemed in Part.
In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Security during
a period beginning at 9:00 a.m. (New York City time) 15 Business Days before any
selection for redemption of Securities and ending at 5:00 p.m. (New York City
time) on the earliest date in which the relevant notice of redemption is deemed
to have been given to all holders of Securities to be so redeemed and (ii)
register the transfer of or exchange any Securities so selected for redemption,
in whole or in part, except for the unredeemed portion of any Securities being
redeemed in part.
Any Security which is to be redeemed only in part shall be surrendered
at a place of payment therefor (with, if
<PAGE> 74
-66-
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing), and
the Company shall execute, and the Trustee shall authenticate and make available
for delivery to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
SECTION 11.10. No Sinking Fund.
The Securities are not entitled to the benefit of any sinking fund.
ARTICLE TWELVE
Subordination of Securities
SECTION 12.01. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Securities by
such Holder's acceptance thereof likewise covenants and agrees, that all
Securities shall be issued subject to the provisions of this Article Twelve; and
each Holder of a Security, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions. The
payment by the Company of the principal of, premium, if any, and interest
(including Additional Payments, if any) on all Securities issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and junior in right of payment to the prior payment in full of all existing and
future Senior Indebtedness, whether outstanding at the date of this Indenture or
thereafter incurred; provided however, that no provision of this Article Twelve
shall prevent the occurrence of any default or Event of Default hereunder.
SECTION 12.02. Default on Senior Indebtedness.
In the event and during the continuation of any default by the on any
Senior Indebtedness continuing beyond the period of grace, if any, specified in
the instrument evidencing such Senior Indebtedness, unless and until such
default shall have been cured or waived or shall have ceased to exist, and in
the event that the maturity of any
<PAGE> 75
-67-
Senior Indebtedness has been accelerated because of a default, then no payment
shall be made by the Company with respect to the principal of (including
redemption payments, if any), premium, if any, or interest on the Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 12.02, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.
SECTION 12.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all principal of, and premium, if any, and interest due or to
become due on, all Senior Indebtedness must be paid in full before any payment
is made on account of the principal (and premium, if any) or interest (including
Additional Payments, if any) on the Securities; and upon any such dissolution or
winding up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Holders of the Securities or the Trustee
would be entitled, except for the provisions of this Article Twelve, shall be
paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Holders of the Securities or by the Trustee under this Indenture if received by
them or it, directly to the holders of Senior Indebtedness (pro rata to such
holders on the basis of the respective amounts of Senior Indebtedness held by
such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any
<PAGE> 76
-68-
instruments evidencing such Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay such Senior
Indebtedness in full, in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Holders of
Securities or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or the Holders of the Securities before all Senior Indebtedness is paid
in full, or provision is made for such payment in money in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, and their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay such Senior Indebtedness in full
in money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
For purposes of this Article Twelve, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Twelve with
respect to the Securities to the payment of all Senior Indebtedness which may at
the time be outstanding; provided, that (i) such Senior Indebtedness is assumed
by the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of all or substantially all
its properties and assets on a consolidated basis to another Person upon the
terms and conditions provided for in Article Eight hereof shall not be deemed a
dissolution, winding up, liquidation or reorganization for the
<PAGE> 77
-69-
purposes of this Section 12.03 if such other Person shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the conditions
stated in Article Eight hereof. Nothing in Section 12.02 or in this Section
12.03 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.07 hereof.
SECTION 12.04. Subrogation.
Subject to the payment in full of all Senior Indebtedness, the rights
of the Holders of the Securities shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable to
such Senior Indebtedness until the principal of (and premium, if any) and
interest (including Additional Payments, if any) on the Securities shall be paid
in full; and, for the purposes of such subrogation, no payments or distributions
to the holders of such Senior Indebtedness of any cash, property or securities
to which the Holders of the Securities or the Trustee would be entitled except
for the provisions of this Article Twelve, and no payment over pursuant to the
provisions of this Article Twelve, to or for the benefit of the holders of such
Senior Indebtedness by Holders of the Securities or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness,
and the Holders of the Securities, be deemed to be a payment by the Company to
or on account of such Senior Indebtedness. It is understood that the provisions
of this Article Twelve are and are intended solely for the purposes of defining
the relative rights of the Holders of the Securities, on the one hand, and the
holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
Holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest (including Additional Payments, if any) on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Company, as the case may be,
other than the holders of Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise
<PAGE> 78
-70-
permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Twelve of the
holders of such Senior Indebtedness in respect of cash, property or securities
of the Company, as the case may be, received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Twelve, the Trustee, subject to the provisions of Section 6.03,
and the Holders of the Securities, shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Twelve.
SECTION 12.05. Trustee to Effectuate Subordination.
Each Holder of Securities by such Holder's acceptance thereof
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Twelve and appoints the Trustee as such Holder's attorney-in-fact
for any and all such purposes.
SECTION 12.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company which would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Twelve. Notwithstanding the
provisions of this Article Twelve or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the provision of this Article Twelve,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office of the Trustee from the
Company or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before
<PAGE> 79
-71-
the receipt of any such written notice, the Trustee, subject to the provisions
of Section 6.03 hereof, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 12.06 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (and
premium, if any) or interest (including Additional Payments, if any) on any
Security), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purposes for which they were received, and shall not be affected
by any notice to the contrary which may be received by it within two Business
Days prior to such date.
The Trustee, subject to the provisions of Section 6.03, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of such Senior Indebtedness or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Twelve, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
right of such Person under this Article Twelve, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 12.07. Rights of the Trustee; Holders of
Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Twelve in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
<PAGE> 80
-72-
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are set forth in this Article Twelve, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Section 6.03, the Trustee shall not be liable to
any holder of such Senior Indebtedness if it shall pay over or deliver to
Holders of Securities, the Company or any other Person money or assets to which
any holder of such Senior Indebtedness shall be entitled by virtue of this
Article Twelve or otherwise. With respect to the holders of Senior
Indebtedness, the Trustee undertakes to perform or to observe only such of its
covenants or obligations as are specifically set forth in this Article Twelve
and no implied covenants or obligations with respect to holders of Senior
Indebtedness shall be read into this Indenture against the Trustee.
SECTION 12.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, such Senior Indebtedness, or otherwise amend or supplement in any
manner such Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
<PAGE> 81
-73-
otherwise securing such Senior Indebtedness; (iii) release any Person liable in
any manner for the collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 13.01. Conversion Rights.
Subject to and upon compliance with the provisions of this Article,
the Securities are convertible, at the option of the Holder at any time after
[], 1997 and on or prior to 5:00 p.m. (New York City time) on the Business Day
immediately preceding the date of repayment of such Securities, whether at
maturity or upon redemption (either at the option of the Company or pursuant to
a Tax Event), into fully paid and nonassessable shares of Common Stock of the
Company at an initial conversion rate of [ ] shares of Common Stock for
each $25 in aggregate principal amount of Securities (equal to a conversion
price of $[ ] per share of Common Stock), subject to adjustment as
described in this Article Thirteen. A Holder of Securities may convert any
portion of the principal amount of the Securities into that number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) obtained by dividing the principal amount of
the Securities to be converted by such conversion price. In case a Security or
portion thereof is called for redemption, such conversion right in respect of
the Security or portion so called shall expire at 5:00 p.m. (New York City time)
on the Business Day immediately preceding the corresponding Redemption Date,
unless the Company defaults in making the payment due upon redemption.
SECTION 13.02. Conversion Procedures.
(a) In order to convert all or a portion of the Securities, the
Holder thereof shall deliver to the Conversion Agent an irrevocable Notice of
Conversion setting forth the principal amount of Securities to be converted,
together with the name or names, if other than the Holder, in which the shares
of Common Stock should be issued upon conversion and, if such Securities are
definitive Securities, surrender to the Conversion Agent the Securities to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
holder of Preferred Securities may exercise its right under the
<PAGE> 82
-74-
Declaration to convert such Preferred Securities into Common Stock by
delivering to the Conversion Agent an irrevocable Notice of Conversion
setting forth the information called for by the preceding sentence and
directing the Conversion Agent (i) to exchange such Preferred Security for
a portion of the Securities held by the Trust (at an exchange rate of $25
principal amount of Securities for each Preferred Security) and (ii) to
immediately convert such Securities, on behalf of such holder, into Common
Stock of the Company pursuant to this Article Thirteen and, if such
Preferred Securities are in definitive form, surrendering such Preferred
Securities, duly endorsed or assigned to the Company or in blank. So long
as any Preferred Securities are outstanding, the Trust shall not convert
any Securities except pursuant to a Notice of Conversion delivered to the
Conversion Agent by a holder of Preferred Securities.
If a Notice of Conversion is delivered on or after the Regular Record
Date and prior to the subsequent Interest Payment Date, the Holder shall be
required to pay to the Company the interest payable on the subsequent
Interest Payment Date, and will be entitled to receive the interest payable
on the subsequent Interest Payment Date, on the portion of Securities to be
converted notwithstanding the conversion thereof prior to such Interest
Payment Date. Notwithstanding the foregoing, if, during an Extension
Period, a notice of redemption is mailed pursuant to Section 11.06 and a
Security is converted after such mailing but prior to the relevant
Redemption Date, all accrued but unpaid interest (including Additional
Payments, if any) through the date of conversion shall be paid to the
holder of such Security on the Redemption Date. Except as otherwise
provided in the immediately preceding two sentences, in the case of any
Security which is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable, and the Company
shall not make nor be required to make any other payment, adjustment or
allowance with respect to accrued but unpaid interest (including Additional
Payments, if any) on the Securities being converted, which shall be deemed
to be paid in full. If any Security called for redemption is converted,
any money deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security shall
(subject to any right of the Holder of such Security or any Predecessor
Security to receive interest as provided in the last paragraph of Section
3.07 and this paragraph) be paid to the Company upon Company Request or, if
then held by the Company, shall be discharged from such trust.
<PAGE> 83
-75-
Each conversion shall be deemed to have been effected immediately
prior to 5:00 p.m. (New York City time) on the day on which the Notice of
Conversion was received (the "Conversion Date") by the Conversion Agent
from the Holder or from a holder of the Preferred Securities effecting a
conversion thereof pursuant to its conversion rights under the Declaration,
as the case may be. The Person or Persons entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock as of the Conversion
Date. As promptly as practicable on or after the Conversion Date, the
Company shall issue and deliver at the office of the Conversion Agent,
unless otherwise directed by the Holder in the Notice of Conversion, a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with the cash payment, if any, in
lieu of any fraction of any share to the Person or Persons entitled to
receive the same. The Conversion Agent shall deliver such certificate or
certificates to such Person or Persons.
(b) Subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last paragraph
of Section 3.07 and the second paragraph of Clause (a) of Section 13.02,
the Company's delivery upon conversion of the fixed number of shares of
Common Stock into which the Securities are convertible (together with the
cash payment, if any, in lieu of fractional shares) shall be deemed to
satisfy the Company's obligation to pay the principal amount of the portion
of Securities so converted and any unpaid interest (including Additional
Payments, if any) accrued on such Securities at the time of such
conversion.
(c) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction
of the last reported sale price of such fractional interest on the date on
which the Securities or Preferred Securities, as the case may be, were duly
surrendered to the Conversion Agent for conversion, or, if such day is not
a Trading Day, on the next Trading Day, and the Conversion Agent in turn
will make such payment, if any, to the Holder of the Securities or the
holder of the Preferred Securities so converted.
(d) In the event of the conversion of any Security in part only,
a new Security or Securities for the unconverted portion thereof will be
issued in the name of the Holder
<PAGE> 84
-76-
thereof upon the cancellation thereof in accordance with Section 3.05.
(e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as agent of the holders of Preferred
Securities (in the exchange of Preferred Securities for Securities) and as agent
of the Holders of Securities (in the conversion of Securities into Common
Stock), as the case may be, directing it to effect such conversion transactions.
The Conversion Agent is hereby authorized (i) to exchange Securities held by the
Trust from time to time for Preferred Securities in connection with the
conversion of such Preferred Securities in accordance with this Article Thirteen
and (ii) to convert all or a portion of the Securities into Common Stock and
thereupon to deliver such shares of Common Stock in accordance with the
provisions of this Article Thirteen and to deliver to the Trust a new Security
or Securities for any resulting unconverted principal amount.
SECTION 13.03. Conversion Price Adjustments.
The conversion price shall be subject to adjustment (without
duplication) from time to time as follows:
(a) In case the Company shall, while any of the Securities are
outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by reclassification of
its shares of Common Stock any shares of capital stock of the Company, the
conversion price in effect immediately prior to such action shall be
adjusted so that the Holder of any Securities thereafter surrendered for
conversion shall be entitled to receive the number of shares of capital
stock of the Company which he would have owned immediately following such
action had such Securities been converted immediately prior thereto. An
adjustment made pursuant to this Section 13.03(a) shall become effective
immediately after the record date in the case of a dividend or other
distribution and shall become effective immediately after the effective
date in case of a subdivision, combination or reclassification (or
immediately after the record date if a record date shall have been
established for such event). If, as a result of an adjustment made
pursuant to this Section 13.03(a), the Holder of any Security thereafter
surrendered for
<PAGE> 85
-77-
conversion shall become entitled to receive shares of two or more classes
or series of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a Board
Resolution filed with the Trustee) shall determine the allocation of the
adjusted conversion price between or among shares of such classes or series
of capital stock.
(b) In case the Company shall, while any of the Securities are
outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned in this Section 13.03(b)) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market Price per
share of Common Stock (as determined pursuant to 13.03(f) below) on such
record date, the conversion price for the Securities shall be adjusted so
that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the date of issuance of
such rights or warrants by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered for subscription
or purchase would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase.
Such adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive such rights or
warrants. For the purposes of this subsection, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company. The Company shall not issue any rights or
warrants in respect of shares of Common Stock held in the treasury of the
Company. In case any rights or warrants referred to in this subsection in
respect of which an adjustment shall have been made shall expire
unexercised within 45 days after the same shall have been distributed or
issued by the Company, the conversion price shall be readjusted at the time
of such expiration to the conversion price that would have been in effect
if no adjustment had been made on account of the distribution or issuance
of such expired rights or warrants.
<PAGE> 86
-78-
(c) Subject to the last sentence of this Section
13.03(c), in case the Company shall, by dividend or otherwise,
distribute to holders of its Common Stock evidences of its
indebtedness, shares of any class or series of capital stock, cash or
assets (including securities, but excluding any rights or warrants
referred to in Section 13.03(b), any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in
Section 13.03(a)), the conversion price shall be reduced so that the
same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by Section 13.03(c) by a
fraction of which the numerator shall be the Current Market Price per
share (determined as provided in Section 13.03(f)) of the Common Stock
on the date fixed for the payment of such distribution (the "Reference
Date") less the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors), on the Reference
Date, of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to one share
of Common Stock and the denominator shall be such Current Market
Price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day
following the Reference Date. In the event that such dividend or
distribution is not so paid or made, the conversion price shall again
be adjusted to be the conversion price which would then be in effect
if such dividend or distribution had not occurred. If the Board of
Directors determines the fair market value of any distribution for
purposes of this Section 13.03(c) by reference to the actual or when
issued trading market for any securities comprising such distribution,
it must in doing so consider the prices in such market over the same
period used in computing the Current Market Price per share of Common
Stock (determined as provided in Section 13.03(f)). For purposes of
this Section 13.03(c), any dividend or distribution that includes
shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, shares of
capital stock, cash or assets other than such shares of Common Stock
or such rights or warrants (making any conversion price reduction
required by this Section 13.03(c)) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights
or
<PAGE> 87
-79-
warrants (making any further conversion price reduction required by Section
13.03(a) or 13.03(b)), except (A) the Reference Date of such dividend or
distribution as defined in this 13.03(c) shall be substituted as (a) "the
record date in the case of a dividend or other distribution," and (b) "the
record date for the determination of stockholders entitled to receive such
rights or warrants" and (c) "the date fixed for such determination" within
the meaning of Sections 13.03(a) and 13.03(b) and (B) any shares of Common
Stock included in such dividend or distribution shall not be deemed
outstanding for purposes of computing any adjustment of the conversion
price in Section 13.03(a).
(d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding any cash
distribution referred to in 13.03(c)) to all holders of Common Stock in an
aggregate amount that, together with (i) all other cash distributions
(excluding any cash distributions referred to in Section 13.03(c)) made
within the 12 months preceding such distribution and (ii) any cash and the
fair market value of other consideration payable in respect of any tender
offer by the Company or a Subsidiary of the Company for the Common Stock
consummated within the 12 months preceding such distribution, exceeds 12.5%
of the Company's market capitalization (being the product of the Current
Market Price multiplied by the number of shares of Common Stock then
outstanding (Current Market Price per share shall be determined as provided
in Section 13.03(f) of the Common Stock on the Trading Day immediately
preceding the date of declaration of such dividend)), the conversion price
shall be reduced so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the
effectiveness of the conversion price reduction contemplated by this
Section 13.03(d) by a fraction of which the numerator shall be the Current
Market Price per share (determined as provided in Section 13.03(f)) of the
Common Stock on the date fixed for the payment of such distribution less
the amount of cash so distributed and not excluded as provided applicable
to one share of Common Stock and the denominator shall be such Current
Market Price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day following
the date fixed for the payment of such distribution; provided, however,
that in the event the portion of the cash so distributed applicable to one
share of Common Stock is equal
<PAGE> 88
-80-
to or greater than the Current Market Price per share (as defined in
Section 13.03(f)) of the Common Stock on the record date mentioned above,
in lieu of the foregoing adjustment, adequate provision shall be made so
that each Holder of shares of Securities shall have the right to receive
upon conversion the amount of cash such Holder would have received had such
Holder converted each share of the Securities immediately prior to the
record date for the distribution of the cash. In the event that such
dividend or distribution is not so paid or made, the conversion price shall
again be adjusted to be the conversion price which would then be in effect
if such record date had not been fixed.
(e) In the case of a tender offer by the Company or any
Subsidiary of the Company for Common Stock which involves an aggregate
consideration that, together with (x) any cash and other consideration
payable in respect of any tender offer consummated by the Company or a
Subsidiary of the Company for the Common Stock consummated within the 12
months preceding the consummation of such tender offer and (y) the
aggregate amount of all cash distributions (excluding any cash
distributions referred to in Section 13.03(c)) to all holders of the Common
Stock within the twelve months preceding the consummation of such tender
offer, exceeds 12.5% of the Company's market capitalization (being the
product of the Current Market Price multiplied by the number of shares of
Common Stock then outstanding (Current Market Price per share shall be
determined as provided in 13.03(f)) at the date of consummation of such
tender offer, the conversion price shall be reduced so that the same shall
equal the price determined by multiplying the conversion price in effect
immediately prior to the effectiveness of the conversion price reduction
contemplated by this Section 13.03(e) by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding (including any
tendered shares) multiplied by the closing bid price per share of the
Common Stock on the Trading Day next succeeding the last time tenders may
be made pursuant to such tender offer (as it shall have been amended) (the
"Expiration Time") and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of all shares validly tendered
and not withdrawn as of the Expiration Time (the shares deemed so accepted,
up to any such
<PAGE> 89
-81-
maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) at the Expiration Time and the closing bid price per
share of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior
to the opening of business on the day following the Expiration Time.
(f) For the purpose of any computation under Section
13.03(b), 13.03(c), 13.03(d) or 13.03(e), the "Current Market Price"
per share of Common Stock or any other security on any date in
question shall be deemed to be the average of the daily Closing Prices
for the ten consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later
than, the day in question; provided, however, that if another event
occurs that would require an adjustment pursuant to Section 13.03(a)
through (e), inclusive, the Board of Directors may make such
adjustments to the Closing Prices during such ten Trading Day period
as it deems appropriate to effectuate the intent of the adjustments
in this Section 13.03, in which case any such determination by the
Board of Directors shall be set forth in a Board Resolution and shall
be conclusive.
(g) The Company may make at its option such reductions in
the conversion price, in addition to those required by Sections 13.03
(a) through (e), as it considers to be advisable to avoid or diminish
any income tax to holders of Common Stock or rights to purchase Common
Stock resulting from any dividend or distribution of stock (or rights
to acquire stock) or from any event treated as such for income tax
purposes. The Company from time to time may reduce the conversion
price by any amount for any period of time if the period is at least
20 days, the reduction is irrevocable during the period, and the Board
of Directors of the Company shall have made a determination that such
reduction would be in the best interest of the Company, which
determination shall be conclusive. Whenever the conversion price is
reduced pursuant to the preceding sentence, the Company shall mail to
holders of record of the Securities a notice of the reduction at least
15 days prior to the date the reduced conversion price takes effect,
and such notice shall state the reduced conversion price and the
period it will be in effect.
<PAGE> 90
-82-
(h) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in the conversion price then in effect; provided, however,
that any adjustments which by reason of this Section 13.03(h) are not
required to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required.
(i) If any action would require adjustment of the conversion
price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the
amount of adjustment that has the highest absolute value to the Holder
of the Securities.
SECTION 13.04. Reclassification, Consolidation, Merger
or Sale of Assets.
(a) In the event that the Company shall be a party to any
transaction or series of transactions constituting a Fundamental Change (as
hereinafter defined), including, without limitation, (i) any recapitalization
or reclassification of the Common Stock (other than a change in par value or as
a result of a subdivision or combination of the Common Stock), (ii) any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger
which does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock), (iii) any sale or transfer
of all or substantially all of the assets of the Company or (iv) any compulsory
share exchange pursuant to any of which holders of Common Stock shall be
entitled to receive other securities, cash or other property or assets, then
appropriate provision shall be made as part of the terms of such transaction or
series of transactions so that the holders of each Security then outstanding
shall have the right thereafter to convert such Security only into (A) if any
such transaction does not constitute a Common Stock Fundamental Change (as
hereinafter defined), the kind and amount of the securities, cash or other
property or assets that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange by a
holder of the number of shares of Common Stock into which such Security might
have been converted immediately prior to such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange,
after, in the case of a Non-Stock Fundamental Change (as hereinafter
<PAGE> 91
-83-
defined), giving effect to any adjustment in the conversion price required by
the provisions which follow in subparagraph (i) of Section 13.04(c), and (B) in
the case of a Common Stock Fundamental Change (as hereinafter defined), common
stock of the kind received by holders of Common Stock as a result of such Common
Stock Fundamental Change in an amount determined pursuant to the provisions
which follow in subparagraph (ii) of Section 13.04(c). The company formed by
such consolidation or resulting from such merger or which acquires such assets
or which acquires the Common Stock, as the case may be, shall enter into a
supplemental indenture with the Trustee, satisfactory in form to the Trustee and
executed and delivered to the Trustee, the provisions of which shall establish
such right and provide for adjustments which, for events subsequent to the
effective date of such supplemental indenture, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article Thirteen.
The above provisions shall similarly apply to successive recapitalizations,
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(b) Notwithstanding any other provisions in this Article
Thirteen to the contrary, if any Fundamental Change occurs, then the conversion
price in effect will be adjusted immediately following such Fundamental Change
as described below in Section 13.04(c). In addition, in the event of a Common
Stock Fundamental Change, each Security shall be convertible solely into common
stock of the kind received by holders of Common Stock as the result of such
Common Stock Fundamental Change as more specifically provided below in Section
13.04(c).
(c) For purposes of calculating any adjustment to be made
pursuant to this Article Thirteen in the event of a Fundamental Change,
immediately following such Fundamental Change (and for such purposes a
Fundamental Change shall be deemed to occur on the earlier of (a) the occurrence
of such Fundamental Change and (b) the date, if any, fixed for determination of
shareholders entitled to receive the cash, securities, property or other assets
distributable in such Fundamental Change to holders of the Common Stock):
(i) in the case of a Non-Stock Fundamental Change, the
conversion price per share of Common Stock shall be the lower of (A)
the conversion price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Article Thirteen, and (B) the
<PAGE> 92
-84-
product of (1) the greater of the Applicable Price (as hereinafter
defined) and the then applicable Reference Market Price (as
hereinafter defined) and (2) a fraction the numerator of which shall
be $25 and the denominator of which shall be (x) the amount set forth
below (based on the date on which such Non-Stock Fundamental Change
occurs). For the twelve month period beginning on [ ] in the
year indicated:
Year Denominator
---- -----------
1997 $
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007 and thereafter 25.00
plus (y) any then accrued but unpaid interest (including Additional
Payments, if any) on $25 principal amount of Securities; and
(ii) in the case of a Common Stock Fundamental Change, the
conversion price per share of Common Stock shall be the conversion
price in effect immediately prior to such Common Stock Fundamental
Change, but after giving effect to any other adjustments effected
pursuant to this Article Thirteen, multiplied by a fraction, the
numerator of which is the Purchaser Stock Price (as hereinafter
defined) and the denominator of which is the Applicable Price;
provided, however, that in the event of a Common Stock Fundamental
Change in which (A) 100% of the value of the consideration received by
a holder of Common Stock (subject to certain limited exceptions) is
shares of common stock of the successor, acquiror or other third party
(and cash, if any, paid with respect to any fractional interests in
such shares of common stock resulting from such Common Stock
Fundamental Change) and (B) all of the Common Stock shall have been
exchanged for, converted into or acquired for shares of common stock
(and cash, if any, with respect to fractional interests) of the
successor, acquiror or other third party, the conversion price per
<PAGE> 93
-85-
share of Common Stock immediately following such Common Stock Fundamental
Change shall be the conversion price in effect immediately prior to such
Common Stock Fundamental Change divided by the number of shares of common
stock of the successor, acquiror or other third party received by a holder
of one share of Common Stock as a result of such Common Stock Fundamental
Change.
(d) The following definitions shall apply to terms used in this
Article Thirteen:
(i) "Applicable Price" means (A) in the event of a Non-Stock
Fundamental Change in which the holders of Common Stock receive only cash,
the amount of cash receivable by a holder of one share of Common Stock and
(B) in the event of any other Fundamental Change, the Current Market Price
for one share of Common Stock on the record date for the determination of
the holders of Common Stock entitled to receive cash, securities, property
or other assets in connection with such Fundamental Change or, if there is
no such record date, on the date on which the holders of the Common Stock
will have the right to receive such cash, securities, property or other
assets.
(ii) "Common Stock Fundamental Change" means any Fundamental Change
in which more than 50% of the value (as determined in good faith by the
Company's Board of Directors) of the consideration received by holders of
Common Stock (subject to certain limited exceptions) pursuant to such
transaction consists of shares of common stock that, for the twenty
consecutive trading days immediately prior to such Fundamental Change, has
been admitted for listing or admitted for listing subject to notice of
issuance on a national securities exchange or quoted on the Nasdaq National
Market; provided, however, that a Fundamental Change will not be a Common
Stock Fundamental Change unless either (A) the Company continues to exist
after the occurrence of such Fundamental Change and the outstanding
Preferred Securities continue to exist as outstanding Preferred Securities,
or (B) the outstanding Preferred Securities continue to exist as Preferred
Securities and are convertible into shares of common stock of the successor
to the Company.
(iii) "Fundamental Change" means the occurrence of any transaction
or event or series of transactions or events pursuant to which all or
substantially all of the Common
<PAGE> 94
-86-
Stock is exchanged for, converted into, acquired for or constitutes solely
the right to receive cash, securities, property or other assets (whether by
means of an exchange offer, liquidation, tender offer, consolidation,
merger, combination, reclassification, recapitalization or otherwise);
provided, however, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change will be deemed to have occurred when substantially
all of the Common Stock has been exchanged for, converted into, or acquired
for or constitutes solely the right to received cash, securities, property
or other assets but the adjustment shall be based upon the consideration
that the holders of Common Stock received in the transaction or event as a
result of which more than 50% of the Common Stock shall have been exchanged
for, converted into, or acquired for, or shall constitute solely the right
to receive such cash, securities, property or other assets.
(iv) "Non-Stock Fundamental Change" means any Fundamental Change
other than a Common Stock Fundamental Change.
(v) "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the Current Market Price of common stock received by
holders of Common Stock in such Common Stock Fundamental Change on the
record date for the determination of the holders of Common Stock entitled
to receive such shares of common stock or, if there is no such record date,
on the date upon which the holders of Common Stock shall have the right to
receive such shares of common stock.
(vi) "Reference Market Price" will initially mean $[ ] (which,
unless otherwise specified in this Indenture, will be 66 2/3% of the last
reported sale price per share of Common Stock on the Nasdaq National Market
on [ ], 1997) and, in the event of any adjustment to the
conversion price other than as a result of a Fundamental Change, the
Reference Market Price will also be adjusted so that the ratio of the
Reference Market Price to the conversion price after giving effect to any
adjustment will always be the same as the ratio of the initial Reference
Market Price to the initial conversion price.
(e) In determining the amount and type of consideration received
by a holder of Common Stock in the event of a
<PAGE> 95
-87-
Fundamental Change, consideration received by a holder of Common Stock pursuant
to a statutory right of appraisal will be disregarded.
SECTION 13.05. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price and
shall prepare a certificate signed by the Chief Financial Officer or the
Treasurer of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed with the Trustee, the
Conversion Agent and the transfer agent for the Preferred Securities and
the Securities; and
(b) a notice stating the conversion price has been adjusted and
setting forth the adjusted conversion price shall as soon as practicable be
mailed by the Company to all record holders of Preferred Securities and the
Securities at their last addresses as they appear upon the stock transfer
books of the Company and the Trust.
SECTION 13.06. Prior Notice of Certain Events.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash that would not
require an adjustment pursuant to Section 13.03(c) or 13.03(d), or (ii)
authorize a tender or exchange offer that would require an adjustment
pursuant to Section 13.03(e);
(b) the Company shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Company is a
<PAGE> 96
-88-
party and for which approval of any stockholders of the Company shall be
required, or of the sale or transfer of all or substantially all of the
assets of the Company or of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall (1) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the stock transfer books to the Trust or (2)
shall cause to be mailed to all Holders at their last addresses as they shall
appear in the Security Register, at least 15 days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record (if any) is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
SECTION 13.07. Certain Defined Terms.
The following definitions shall apply to terms used in this Article
Thirteen:
(a) "Closing Price" of any Common Stock or other Security on any
day shall mean the last reported sale price regular way on such day or, in
case no such sale takes place on such day, the average of the reported
closing bid and asked prices regular way of such Common Stock, in each case
on the Nasdaq National Market or, if the
<PAGE> 97
-89-
Common Stock is not listed or admitted to trading on such exchange, on the
principal national securities exchange on which such common stock is listed
or admitted to trading, or, if not listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked
prices as furnished by any Nasdaq National Market member firm selected from
time to time by the Board of Directors of the Company for that purpose or,
if not so available in such manner, as otherwise determined in good faith
by the Board of Directors.
(b) "Trading Day" shall mean a day on which securities are traded
on the national securities exchange or quotation system used to determine
the Closing Price.
SECTION 13.08. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of any shares
of Common Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under any such plan, and
the issuance of any shares of Common Stock or options or rights to purchase such
shares pursuant to any employee benefit plan or program of the Company or
pursuant to any option, warrant, right or exercisable, exchangeable or
convertible security outstanding as of the date the Securities were first
issued, shall not be deemed to constitute an issuance of Common Stock or
exercisable, exchangeable or convertible securities by the Company to which any
of the adjustment provisions described above applies. There shall also be no
adjustment of the conversion price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the Company except as
specifically described in this Article Thirteen.
SECTION 13.09. Certain Additional Rights.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in Section 13.03(c) or 13.03(d)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 13.03(c)), the Holder of the Securities, upon the
conversion thereof subsequent to 5:00 p.m. (New York City time) on the date
fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the conversion price adjustment
in respect of such distribution, shall also be entitled to receive for each
share of
<PAGE> 98
-90-
Common Stock into which the Securities are converted, the portion of the shares
of Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of Common Stock;
provided, however, that, at the election of the Company (whose election shall be
evidenced by a resolution of the Board of Directors with respect to all Holders
so converting, the Company may, in lieu of distributing to such Holder any
portion of such distribution not consisting of cash or securities of the
Company, pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors). If any conversion of Securities described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
holders of Common Stock which the Holder of Securities so converted is entitled
to receive in accordance with the immediately preceding sentence, the Company
may elect (such election to be evidenced by a resolution of the Board of
Directors) to distribute to such Holder a due bill for the shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of capital stock,
cash or assets to which such Holder is so entitled, provided, that such due bill
(i) meets any applicable requirements of the principal national securities
exchange or other market on which the Common Stock is then traded and (ii)
requires payment or delivery of such shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or assets no later than
the date of payment or delivery thereof to holders of shares of Common Stock
receiving such distribution.
SECTION 13.10. Trustee Not Responsible for Determining Conversion Price or
Adjustments.
Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of any Security to determine
whether any facts exist which may require any adjustment of the conversion
price, or with respect to the nature or extent of any such adjustment when made,
or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. Neither the Trustee nor
any Conversion Agent shall be accountable with respect to the validity or value
(or the kind of account) of any shares of Common Stock or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Security; and neither the Trustee nor any Conversion Agent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be
<PAGE> 99
-91-
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any shares of Common Stock or stock certificates or other
securities or property upon the surrender of any Security for the purpose of
conversion, or, except as expressly herein provided, to comply with any of the
covenants of the Company contained in Article Ten or this Article Thirteen.
ARTICLE FOURTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
SECTION 14.01. No Recourse.
No recourse under or upon any obligation, covenant or agreement of
this Indenture, or of any Security, or for any claim based thereon or otherwise
in respect thereof, shall be had against any incorporator, stockholder, officer
or director, past, present or future as such, of the Company or of any
predecessor or successor corporation, either directly or through the Company or
any such predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or of
any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities or implied therefrom, are hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this Indenture and
the issuance of such Securities.
<PAGE> 100
-92-
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE> 101
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
WALBRO CORPORATION
By:________________________________
Name:
Title:
[ ],
as Trustee
By:___________________________________
Name:
Title:
<PAGE> 102
EXHIBIT A
FORM OF SECURITY
[FACE OF SECURITY]
[Include if Security is in global form: THIS SECURITY IS A
GLOBAL CERTIFICATE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND
NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[Include if Security is in global form and The Depository
Trust Company is the Depositary: UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED SIGNATORY OF THE DEPOSITORY TRUST
COMPANY ("DTC") TO THE TRUST OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
A-1
<PAGE> 103
-2-
WALBRO CORPORATION
[ ]% Convertible Subordinated Debenture Due 2017
No. _______________ $__________________
CUSIP No.
WALBRO CORPORATION, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to __________ or registered assigns, the
principal sum of _______ Dollars ($ ) on [ ], 2017 and to pay
interest thereon from [ ], 1997 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable quarterly (subject to deferral as set forth in the Indenture),
in arrears, on March 31, June 30, September 30 and December 31 (each an
"Interest Payment Date") of each year, commencing March 31, 1997, until the
principal thereof is paid or made available for payment, and they shall be paid
to the Person in whose name the Security is registered at 5:00 p.m. (New York
City time) on the regular record date for such interest installment, which shall
be the March 15, June 15, September 15 and December 15 next preceding such
Interest Payment Date (the "Regular Record Date").
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
A-2
<PAGE> 104
-3-
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
WALBRO CORPORATION
By: _______________________________
Name:
Title:
[Seal]
Attest:
__________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: [ ],
as Trustee
By: ______________________________
Authorized Signatory
A-3
<PAGE> 105
-4-
[FORM OF REVERSE OF SECURITY]
This Security is one of a duly authorized issue of securities of the
Company designated as its [ ]% Convertible Subordinated Debenture Due 2017
(herein called the "Securities"), in aggregate principal amount of $[ ] (or up
to $[ ] if the over- allotment option is exercised by the Trust in
accordance with the terms and provisions of the Underwriting Agreement), issued
and to be issued under an Indenture, dated as of [ ], 1997 (herein called the
"Indenture"), between the Company and [ ], as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by the Trust Indenture Act
of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) ("TIA") as in effect on the
date of the Indenture. The Securities are subject to, and qualified by, all
such terms, certain of which are summarized hereon, and holders are referred to
the Indenture and the TIA for a statement of such terms. No reference herein to
the Indenture and no provision of this Security or of the Indenture shall alter
or impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of and interest on this Security at the times, place and rate,
and in the coin or currency, herein prescribed or to convert this Security as
provided in the Indenture. All terms used in this Security which are defined in
the Indenture shall have the meanings assigned to them in the Indenture. The
Company will furnish to any Holder upon written request and without charge a
copy of the Indenture.
(1) Interest. The Securities shall bear interest at the rate of
[ ]% per annum, from [ ], 1997 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
payable quarterly (subject to deferral as set forth herein), in arrears, on
March 31, June 30, September 30 and December 31 (each an "Interest Payment
Date") of each year, commencing March 31, 1997, until the principal thereof is
paid or made available for payment, and they shall be paid to the Person in
whose name the Security is registered at 5:00 p.m. (New York City time) on the
regular record date for such interest installment, which shall
A-4
<PAGE> 106
-5-
be the March 15, June 15, September 15 and December 15 next preceding such
Interest Payment Date (the "Regular Record Date"). Interest will compound
quarterly and will accrue at the rate of [ ]% per annum on any interest
installment in arrears for more than one quarter or during an extension of an
interest payment period as set forth below.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed per 90-day quarter. In the event
that any date on which interest is payable on the Securities is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
If at any time while the Institutional Trustee is the Holder of any
Securities, the Trust or the Institutional Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, the Company shall pay as additional interest
("Additional Interest") on the Securities held by the Institutional Trustee,
such amounts as shall be required so that the net amounts received and retained
by the Trust and the Institutional Trustee after paying any such taxes, duties,
assessments or other governmental charges will be not less than the amounts the
Trust and the Institutional Trustee would have received had no such taxes,
duties, assessments or other governmental charges been imposed.
The principal of and interest on the Securities shall be payable at
the office or agency of the Company in the United States maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address
A-5
<PAGE> 107
-6-
of the Person entitled thereto as such address shall appear in the Security
Register.
(2) Option to Extend Interest Payment Period. The Company shall
have the right at any time during the term of the Securities to defer interest
payments (including Additional Payments) by extending the interest payment
period for a period (each, an "Extension Period") not exceeding 20 consecutive
quarters; provided, no Extension Period may extend beyond the maturity date of
the Securities and at the end of which Extension Period, the Company shall pay
all interest then accrued and unpaid (including Additional Interest) together
with interest thereon compounded quarterly at the rate specified for the
Securities to the extent permitted by applicable law ("Compounded Interest");
provided, that during any Extension Period, the Company shall (i) not declare or
pay dividends on, or make any distributions with respect to, or redeem or
purchase or acquire, or liquidation payments with respect to, or redeem,
purchase or acquire any of its capital stock (other than (A) purchases or
acquisitions of shares of Common Stock in connection with the satisfaction by
the company of its obligations under any employee benefit plans or the
satisfaction by the Company of its obligations pursuant to any contract or
security requiring the Company to purchase shares of Common Stock, (B) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock or (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged) or (D) stock dividends paid by the Company where the dividend stock
is the same as that on which the dividend is paid), (ii) not make any payment of
interest on or principal of (or premium, if any, on) or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to the Securities and (iii) not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; provided, that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters; and provided further that no Extension Period may
extend beyond the maturity date of the Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. No
interest during
A-6
<PAGE> 108
-7-
an Extension Period shall be due and payable. Notwithstanding anything to the
contrary, the Company shall not have the right at any time to defer any
Additional Interest, including by extending the interest payment period.
If the Institutional Trustee is the sole Holder of the Securities at
the time the Company selects an Extension Period, the Company shall give written
notice to the Regular Trustees, the Institutional Trustee and the Trustee of its
selection of such Extension Period at least one Business Day prior to the
earlier of (i) the date the distributions on the Preferred Securities would be
payable, if not for such Extension Period or (ii) if the Preferred Securities
are listed on the Nasdaq National Market or any other stock exchange or
quotation system, the date the Regular Trustees are required to give notice to
the Nasdaq National Market (or other applicable self-regulatory organization) or
to holders of the Preferred Securities of the record date or the date such
distributions would be payable if not for such Extension Period, but in any
event not less than one Business Day prior to such record date.
If the Institutional Trustee is not the sole Holder of the Securities
at the time the Company selects an Extension Period, the Company shall give the
Holders of the Securities and the Trustee written notice of its selection of
such Extension Period at least 10 Business Days prior to the earlier of (i) the
next succeeding Interest Payment Date or (ii) the date upon which the Company is
required to give notice to the Nasdaq National Market (or any applicable
self-regulatory organization) or to Holders of the Securities on the record or
payment date of such related interest payment.
The quarter in which any notice is given pursuant to paragraphs second
and third of this Section 2 shall be counted as one of the 20 quarters permitted
in the maximum Extension Period permitted under paragraph one of this Section 2.
(3) Paying Agent and Security Registrar. The Trustee will act as
Paying Agent, Security Registrar and Conversion Agent. The Company may change
any Paying Agent, Security Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such
capacity.
(4) Redemption. The Securities are redeemable, in whole or in
part, at any time or from time to time after [ ], 2000 at the
redemption prices (expressed as a
A-7
<PAGE> 109
-8-
percentage of the principal amount of Securities) specified below for the 12
month period commencing [ ] in the year indicated ([ ], in the
case of 2000), if redeemed during the 12-month period beginning December 31:
Percentage of
Principal
Year Amount
---- -------------
2000 %
2001
2002
2003
2004
2005
2006
2007 and thereafter 100 .0%
plus, in each case, accrued and unpaid interest (including Additional Payments,
if any) to the Redemption Date. On and after the Redemption Date, interest
ceases to accrue on the Securities or portions of them called for redemption.
The Securities are subject to redemption in whole or in part), at any
time within 90 days, under certain circumstances if a Tax Event (as defined in
the Declaration) shall occur and be continuing, at a redemption price equal to
100% of the principal amount thereof plus accrued but unpaid interest (including
Additional Payments, if any) to the Redemption Date. On and after the
Redemption Date, interest ceases to accrue on the Securities or portions of them
called for redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at such Holder's address
appearing in the Security Register. The Securities in denominations larger than
$25 may be redeemed in part but only in integral multiples of $25. In the event
of a redemption of less than all of the Securities, the Securities will be
chosen for redemption by the Trustee in accordance with the Indenture.
If this Security is redeemed subsequent to a Regular Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid to the person in
whose name this
A-8
<PAGE> 110
-9-
Security is registered at the close of business on such record date.
(5) Sinking Fund. The Securities are not entitled to the benefit
of any sinking fund.
(6) Subordination. The payment of the principal of, premium, if
any, and interest (including Additional Payments, if any) on all Securities is
subordinated and junior in right of payment to the prior payment in full of all
existing and future Senior Indebtedness, whether outstanding at the date of this
Indenture or thereafter incurred. Each holder, by accepting a Security, agrees
to such subordination and authorizes and directs the Trustee on its behalf to
take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee as its attorney-in-fact for
such purpose.
(7) Conversion. The Holder of any Security has the right,
exercisable at any time after [ ], 1997 and on or before 5:00 p.m.
(New York City time) on the Business Day immediately preceding the date of
repayment of such Securities, whether at maturity or upon redemption (either at
the option of the Company or pursuant to a Tax Event), to convert the principal
amount thereof (or any portion thereof that is an integral multiple of $25) into
fully paid and nonassessable shares of Common Stock of the Company at an initial
conversion rate of [ ] shares of Common Stock for each $25 in aggregate
principal amount of Securities (equal to a conversion price of $[ ] per share of
Common Stock), subject to adjustment under certain circumstances. The number of
shares issuable upon conversion of a Security is determined by dividing the
principal amount of the Security converted by the conversion price in effect on
the Conversion Date. No fractional shares will be issued upon conversion but a
cash adjustment will be made for any fractional interest. The outstanding
principal amount of any Security shall be reduced by the portion of the
principal amount thereof converted into shares of Common Stock.
To convert a Security, a Holder must (i) complete and sign a
conversion notice substantially in the form attached hereto, (ii) surrender the
Security to a Conversion Agent, (iii) furnish appropriate endorsements or
transfer documents if required by the Security Registrar or Conversion Agent and
(iv) pay any transfer or similar tax, if required. If a Notice of Conversion is
delivered on or after the Regular Record Date and prior to the subsequent
Interest Payment Date, the Holder shall
A-9
<PAGE> 111
-10-
be required to pay to the Company the interest payment on the subsequent
Interest Payment Date and, will be entitled to receive the interest payable on
the subsequent Interest Payment Date, on the portion of Securities to be
converted notwithstanding the conversion thereof prior to such Interest Payment
Date. Notwithstanding the foregoing, if, during an Extension Period, a notice
of redemption is mailed pursuant to Section 11.06 of the Indenture and a
Security is converted after such mailing but prior to the relevant Redemption
Date, all accrued but unpaid interest (including Additional Payments, if any)
through the date of conversion shall be paid to the holder of such Security on
the Redemption Date. Except as otherwise provided in the immediately preceding
two sentences, in the case of any Security which is converted, interest whose
Stated Maturity is after the date of conversion of such Security shall not be
payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest
(including Additional Payments, if any) on the Securities being converted, which
shall be deemed to be paid in full. If any Security called for redemption is
converted, any money deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security shall (subject
to any right of the Holder of such Security or any Predecessor Security to
receive interest as provided in the last paragraph of Section 3.07 of the
Indenture and this paragraph) be paid to the Company upon Company Request or, if
then held by the Company, shall be discharged from such trust.
(8) Registration, Transfer, Exchange and Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $25 and integral multiples thereof. No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Prior to due presentment of
A-10
<PAGE> 112
11
this Security for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not
this Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary. In the event of redemption
or conversion of this Security in part only, a new Security or Securities for
the unredeemed or unconverted portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.
(9) Persons Deemed Owners. Except as provided in the Indenture,
the registered Holder of a Security may be treated as its owner for all
purposes.
(10) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, holders of
Securities entitled to the money must look to the Company for payment unless an
abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
(11) Defaults and Remedies. The Securities shall have the Events
of Default as set forth in Section 5.01 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the holders of at least 25% in aggregate
principal amount of the then outstanding Securities by notice to the Company and
the Trustee may declare all the Securities to be due and payable immediately.
The holders of a majority in principal amount of the Securities then
outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration. Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Securities issued under the
Indenture may direct the Trustee in its exercise of any trust or power. The
Securities are unsecured general obligations of the Company. The Company must
furnish annually compliance certificates to the Trustee. The above description
of Events of Default and remedies
A-11
<PAGE> 113
12
is qualified by reference to, and subject in its entirety by, the more
complete description thereof contained in the Indenture.
(12) Amendments, Supplements and Waivers. The Indenture permits,
with certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
(13) Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
(14) No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
(15) Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
(16) Authentication. The Securities shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
A-12
<PAGE> 114
13
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him or her.
Date:
-------------
- -----------------------------------------
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:*
-------------------
- ---------------
* (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements of the Registrar, which
requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.)
A-13
<PAGE> 115
14
NOTICE OF CONVERSION
To: Walbro Corporation
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion below designated,
into Common Stock (the "Common Stock") of WALBRO CORPORATION (the "Company") in
accordance with the terms of the Indenture, between the Company and [
], as Trustee, and directs that the shares issuable and deliverable upon
conversion, together with any check in payment for fractional shares, be issued
in the name of and delivered to the undersigned, unless a different name has
been indicated in the assignment below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
Date: ______________
Number of Securities to be converted ($25 or integral
multiples thereof): _____________________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________
(Sign exactly as your name appears on the Security)
(for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and Social
Security or Other Identifying Number.
________________________________________
________________________________________
________________________________________
________________________________________
Signature Guarantee:* ____________________
__________________________________
* (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or
credit union meeting the requirements
Footnote continued on next page.
A-14
<PAGE> 116
15
__________________________________
Footnote continued from previous page.
of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
A-15
<PAGE> 1
EXHIBIT 4.15
FORM OF
=====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
Walbro Corporation
Dated as of [ ], 1997
=====================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation . . . . . . . . . . . . . . . . . . .
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application . . . . . . . . . . . . . . . . . .
SECTION 2.2. Lists of Holders of Securities . . . . . . . . . . . . . . . . . . .
SECTION 2.3. Reports by the Preferred Guarantee Trustee . . . . . . . . . . . . .
SECTION 2.4. Periodic Reports to the Preferred Guarantee Trustee . . . . . . . . .
SECTION 2.5. Evidence of Compliance with Conditions Precedent . . . . . . . . . .
SECTION 2.6. Event of Default; Waiver . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.7. Event of Default; Notice . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.8. Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee . . . . . . . .
SECTION 3.2. Certain Rights of the Preferred Guarantee Trustee . . . . . . . . . .
SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee . . . . . . . .
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee; Eligibility . . . . . . . . . . . . . .
SECTION 4.2. Appointment, Removal and Resignation
of Preferred Guarantee Trustee . . . . . . . . . . . . . . . . . .
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.2. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.3. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . .
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.4. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.5. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.6. Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.7. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.8. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.9. Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1. Limitation of Transactions . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.2. Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII
TERMINATION
SECTION 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.2. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.4. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
-ii-
<PAGE> 4
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of [ ], 1997, is executed and
delivered by Walbro Corporation, a Delaware corporation (the "Guarantor"), and
[ ], as trustee (the "Preferred Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Preferred Securities (as defined herein) of Walbro Capital Trust, a
Delaware statutory business trust (the "Trust");
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of [ ], 1997, among the trustees
of the Trust named therein, the Guarantor, as sponsor, and the holders from
time to time of undivided beneficial interests in the assets of the Trust, the
Trust is issuing on the date hereof [ ] preferred securities, having an
aggregate liquidation amount of $[ ] [(plus up to an additional [
] preferred securities, having an aggregate liquidation amount of $[ ]
to cover over-allotments)], designated the [ ]% Convertible Trust Preferred
Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to guarantee the
obligations of the Trust to the Holders of the Preferred Securities on the
terms and conditions set forth herein;
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein), except that if an event of default (as
defined in the Indenture (as defined herein), has occurred and is continuing,
the rights of holders of the Common Securities to receive Guarantee Payments
(as defined, in the Common Securities Guarantee) under the Common Securities
Guarantee shall be subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments (as defined herein) under this
Preferred Securities Guarantee; and
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
<PAGE> 5
-2-
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date hereof have
the same meaning when used in this Preferred Securities Guarantee
unless otherwise defined in this Preferred Securities Guarantee;
(c) a term defined anywhere in this Preferred Securities
Guarantee has the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or
"this Preferred Securities Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or amended from
time to time;
(e) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this
Preferred Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Preferred Securities Guarantee, unless
otherwise defined in this Preferred Securities Guarantee or
unless the context otherwise requires;
(g) a reference to the singular includes the plural and vice
versa;
(h) a reference to any Person shall include its successors and
assigns;
(i) a reference to any agreement or instrument shall mean such
agreement or instrument, as
<PAGE> 6
-3-
supplemented, modified, amended, or amended and restated, and in
effect from time to time; and
(j) a reference to any statute, law, rule or regulation, shall
include any amendments thereto applicable to the relevant Person,
and any successor statute, law, rule or regulation.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is authorized
to bind such Person.
"Business Day" means any day other than a day on which banking
institutions in New York, New York or in Wilmington, Delaware are authorized or
required by any applicable law or executive order to close.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at [ ], Attention: [
].
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the [ ]% Convertible Subordinated Deferrable
Interest Debentures due [ ] of the Guarantor held by the
Institutional Trustee (as defined in the Declaration).
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued and unpaid Distributions (as defined
in the
<PAGE> 7
-4-
Declaration) that are required to be paid on the Preferred Securities to the
extent the Trust has funds available therefor, (ii) the redemption price, with
respect to any Preferred Securities called for redemption by the Trust (the
"Redemption Price"), to the extent the Trust has funds available therefor, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Trust (other than in connection with the distribution of Debentures to the
Holders of Preferred Securities or the redemption of all the Preferred
Securities (as provided in the Declaration)), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the Preferred
Securities to the date of payment and (b) the amount of assets of the Trust
remaining available for distribution to Holders of Preferred Securities upon the
liquidation of the Trust (in either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records
of the Trust of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of [ ], 1997,
between the Guarantor (the "Convertible Debenture Issuer") and [ ], as trustee,
pursuant to which the Debentures are to be issued to the Institutional Trustee
of the Trust.
"Indenture Trustee" means the Person acting as trustee under the
Indenture, initially [ ].
"Majority in liquidation amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount of all Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such
<PAGE> 8
-5-
Person. Any Officers, Certificate delivered with respect to compliance with a
condition or covenant provided for in this Preferred Securities Guarantee shall
include:
(a) a statement that each officer signing the officers,
Certificate has read the covenant or condition and the definition
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means [ ], until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Preferred Securities Guarantee and thereafter
means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Guarantee Trustee, including any vice president, any assistant vice
president, any assistant secretary, the treasurer, any assistant treasurer or
other officer of the Corporate Trust Office of the Preferred Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
<PAGE> 9
-6-
"Successor Preferred Guarantee Trustee" means a successor
Preferred Guarantee Trustee possessing the qualifications to act as Preferred
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 List of Holders of Securities.
(a) The Guarantor shall provide the Preferred Guarantee
Trustee with a list, in such form as the Preferred Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the Preferred
Securities ("List of Holders") as of such date, (i) within one Business Day
after January 1 and June 30 of each year, and (ii) at any other time within 30
days of receipt by the Guarantor of a written request for a List of Holders as
of a date no more than 14 days before such List of Holders is given to the
Preferred Guarantee Trustee, provided that the Guarantor shall not be obligated
to provide such List of Holders at any time (x) the List of Holders does not
differ from the most recent List of Holders given to the Preferred Guarantee
Trustee by the Guarantor or (y) the Preferred Securities are represented by one
or more Global Securities (as defined in the Indenture). The Preferred
Guarantee Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Section 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
<PAGE> 10
-7-
SECTION 2.3 Reports by the Preferred Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred Guarantee Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 Periodic Reports to the Preferred Guarantee
Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314, if any, and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers Certificate.
SECTION 2.6 Event of Default; Waiver.
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7 Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the
<PAGE> 11
-8-
Preferred Securities, notices of all Events of Default actually known to a
Responsible Officer of the Preferred Guarantee Trustee, unless such defaults
have been cured before the giving of such notice; provided that the Preferred
Guarantee Trustee shall be protected in withholding such notice if and so long
as a Responsible officer of the Preferred Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee
Trustee.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section 5.5(b) or to a Successor Preferred Guarantee Trustee on acceptance by
such Successor Preferred Guarantee Trustee of its appointment to act as
Successor Preferred Guarantee Trustee. The right, title and interest of the
Preferred Guarantee Trustee shall automatically vest in any Successor Preferred
Guarantee Trustee, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee
<PAGE> 12
-9-
shall enforce this Preferred Securities Guarantee for the benefit of the Holders
of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2(G) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Preferred Guarantee Trustee
shall be determined solely by the express provisions of this Preferred
Securities Guarantee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Preferred Guarantee Trustee and conforming to the requirements of this
Preferred
<PAGE> 13
-10-
Securities Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required
to be furnished to the Preferred Guarantee Trustee, the Preferred
Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Preferred Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Preferred Guarantee Trustee, or exercising any trust
or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTOPM 3.2 Certain Rights of the Preferred Guarantee
Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement,
<PAGE> 14
-11-
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officers Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel of
its selection, and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion.
Such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees. The Preferred Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court
of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs,
<PAGE> 15
-12-
expenses (including attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Preferred Guarantee Trustee; provided that nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Preferred
Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Preferred Guarantee
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders of the Preferred Securities,
and the signature of the Preferred Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action.
No third party shall be required to inquire as to the authority of the
Preferred Guarantee Trustee to so act or as to its compliance with
any of the terms and provisions of this Preferred Securities
Guarantee, both of which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Preferred Securities
Guarantee the Preferred Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Preferred Guarantee Trustee (i)
may request instructions from the Holders of a Majority in liquidation
amount of the Preferred Securities, (ii) may refrain from
<PAGE> 16
-13-
enforcing such remedy or right or taking such other action until such
instructions are received and (iii) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(xi) The Preferred Guarantee Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Preferred Securities
Guarantee.
(b) No provision of this Preferred Securities Guarantee
shall be deemed to impose any duty or obligation on the Preferred
Guarantee Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Preferred
Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or
authority available to the Preferred Guarantee Trustee shall be
construed to be a duty.
SECTION 3.3 Not Responsible for Recitals or Issuance
of Guarantee.
The recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of the
United States of America or any State or Territory thereof or of the District of
Columbia, or a corporation or Person permitted by the Securities And Exchange
Commission to act as an institutional trustee
<PAGE> 17
-14-
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then, for
the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of
Preferred Guarantee Trustee.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
<PAGE> 18
-15-
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of removal or resignation,
the resigning or removed Preferred Guarantee Trustee may petition any court of
competent jurisdiction for appointment of a Successor Preferred Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2,
the Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued
to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders (except to the extent paid by the Trust), as and when due, regardless
of any defense, right of set-off or counterclaim that the Trust may have or
assert, the Guarantee Payments, without duplication. The Guarantor's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
SECTION 5.2 Subordination.
If an Event of Default (as defined in the Indenture) has occurred and is
continuing, the rights of Holders of Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinate to the rights of
Preferred Securities to receive Guarantee Payments under this Preferred
Securities Guarantee.
<PAGE> 19
-16-
SECTION 5.3 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.4 Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or any extension of the maturity date of the Debentures permitted
by the Indenture),
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of
<PAGE> 20
-17-
debt of, or other similar proceedings affecting, the Trust or any of the
assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.4 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or any other Persons to give
notice to, or obtain consent of, the Guarantor with respect to the happening of
any of the foregoing.
SECTION 5.5 Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) Any Holder may directly institute a legal proceeding against the
Guarantor to enforce the obligations of the Guarantor under this Preferred
Securities Guarantee without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other Person.
(c) If an Event of Default with respect to the Debentures (an
"Indenture Event of Default"), constituting the failure to pay interest or
principal on the Debentures on the date such interest or principal is otherwise
payable has occurred and is continuing, then a Holder of Preferred Securities
may directly, at any time, institute a proceeding for enforcement of payment to
such Holder of the principal of or interest on the Debentures having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities of
such Holder on or after the respective due date specified in
<PAGE> 21
-18-
the Debentures. The Holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures
unless the Institutional Trustee (as defined in the Indenture) fails to do so.
SECTION 5.6 Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of payment and not
of collection.
SECTION 5.7 Subrogation.
The Guarantor shall be subrogated to all, if any, rights of the Holders
against the Trust in respect of any amounts paid to such Holders by the
Guarantor under this Preferred Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Preferred Securities Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under this Preferred
Securities Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.8 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Trust with respect to the Preferred Securities, and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g) inclusive, of Section 5.4 hereof.
SECTION 5.9 Conversion.
The Guarantor acknowledges and agrees to honor and perform all of its
obligations to issue and deliver common stock of the Guarantor upon the
conversion of the Preferred Securities as provided in Article Thirteen of the
Indenture.
<PAGE> 22
-19-
ARTICLE VI
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.1 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if (i) the
Guarantor has executed its option to defer interest payments on the Debentures
by extending the interest payment period and such extension shall be continuing,
(ii) there shall have occurred any event of default under this Preferred
Securities Guarantee or (iii) any event that, with the giving of notice or the
lapse of time or both, would constitute an Event of Default under the Indenture,
then the Guarantor shall not (a) declare or pay dividends on, or make a
distribution with respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than (i) purchases or
acquisitions of shares of common stock in connection with the satisfaction by
the Guarantor of its obligations under any employee benefit plans or the
satisfaction by the Guarantor of its obligations pursuant to any contract or
security requiring the Guarantor to purchase shares of common stock, (ii) as a
result of a reclassification of the Guarantor's capital stock or the exchange or
conversion of one class or series of the Guarantor's capital stock for another
class or series of the Guarantor's capital stock or (iii) the purchase of
fractional interests in shares of the Guarantor's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged), (b) make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem debt securities of the Guarantor
(including guarantees) that rank pari passu with or junior to the Debentures or
(c) make any guarantee payments with respect to the foregoing (other than
pursuant to this Preferred Securities Guarantee and the Common Securities
Guarantee).
SECTION 6.2 Ranking.
(a) This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior to all
other liabilities of the Guarantor except any liabilities that may be pari passu
expressly by their terms, (ii) pari passu with the most senior preferred stock
or preference issued from time to time by the Guarantor and with any guarantee
now or hereafter entered into by the Guarantor in respect of any preferred or
preference stock or
<PAGE> 23
-20-
preferred securities of any Affiliate of the Guarantor, and (iii) senior to the
Guarantor's common stock.
(b) The holders of any obligations of the Guarantor that are senior in
priority to the obligations under this Preferred Securities Guarantee will be
entitled to all of the rights inuring to the holders of "Senior Indebtedness"
under Article 12 of the Indenture, and the Holders of the Preferred Securities
will be subject to all of the terms and conditions of such Article 12 with
respect to any claims or rights hereunder with the same effect as though fully
set forth herein.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination.
This Preferred Securities Guarantee will terminate as to each Holder upon
(i) full payment of the Redemption Price of all Preferred Securities; or (ii)
distribution of the Debentures held by the Trust to the Holders; or (iii)
liquidation of the Trust; or (iv) the distribution of the Guarantor's common
stock to such Holder in respect of conversion of such Holder's Preferred
Securities into common stock of the Guarantor. This Preferred Securities
Guarantee also will terminate completely upon full payment of the amounts
payable in accordance with the Declaration of the Trust. This Preferred
Securities Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder must restore payment of any sums paid
under such Preferred Securities or under this Preferred Securities Guarantee.
VIII
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Preferred Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Preferred Securities Guarantee or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim
<PAGE> 24
-21-
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2 Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with any
permitted merger or consolidation of the Guarantor with or into another entity
or any permitted sale, transfer or lease of the Guarantor's assets to another
entity as described in the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Preferred Securities Guarantee without the
prior approval of the Holders of at least a Majority of the
<PAGE> 25
-22-
aggregate stated liquidation amount of the Preferred Securities then
outstanding.
SECTION 9.2 Amendments.
Except with respect to any changes that do not adversely affect the rights
of Holders (in which case no vote will be required), this Preferred Securities
Guarantee may be amended only with the prior approval of the Holders of at least
a Majority in liquidation amount of all the outstanding Preferred Securities.
The provisions of Section 11.2 of the Declaration with respect to meetings of
Holders of the Preferred Securities apply to the giving of such approval.
SECTION 9.3 Notices.
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
sent by facsimile or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
[
]
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726
Attention: [Secretary]
(c) If given to any Holder at the address set forth on the books and
records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or
<PAGE> 26
-23-
mailed by first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.
SECTION 9.4 Benefit.
This Preferred Securities Guarantee is solely for the benefit
of the Holders of the Preferred Securities and, subject to Section 3.1(a), is
not separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO
ITS PRINCIPLES OF CONFLICTS OF LAWS.
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day
and year first above written.
WALBRO CORPORATION, as Guarantor
By:___________________________________________
Name: Arnold H. Simon
Title: President, Chief
Executive Officer and
Director
[ ],
as Preferred Guarantee Trustee
By:___________________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 5.1
(312) 902-5200
[LETTERHEAD OF KATTEN MUCHIN & ZAVIS]
January 7, 1997
Walbro Capital Trust
Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726
Re: Walbro Corporation; Walbro Capital Trust;
Registration Statement on Form S-3 (Registration No. 333-18317)
Ladies and Gentlemen:
We have acted as special counsel to Walbro Capital Trust, a statutory
business trust created under the Business Trust Act of the State of Delaware
(Del. Code Ann., tit. 12, Section 3810) (the "Trust"), and Walbro Corporation,
a Delaware corporation (the "Company"), in connection with the preparation of
the Registration Statement (as defined below) for the registration under the
Securities Act of 1933, as amended (the "Act"), of (i) 2,300,000 Convertible
Trust Preferred Securities (the "Preferred Securities") (liquidation amount $25
per Convertible Trust Preferred Security) of the Trust, (ii) $57,500,000
aggregate principal amount of % Convertible Subordinated Debentures due
2017 of the Company (the "Debentures"), (iii) shares of Common Stock, par value
$.50 per share (the "Common Stock"), of the Company initially issuable upon
conversion of the Debentures and the Preferred Securities (the "Conversion
Shares") and (iv) the rights of holders of the Preferred Securities under a
guarantee (the "Preferred Securities Guarantee") by the Company.
The Preferred Securities are to be issued pursuant to an Amended and Restated
Declaration of Trust of the Trust (the "Declaration"), among the Company, as
sponsor and as the issuer of the Debentures to be held by the Institutional
Trustee (as defined below) of the Trust, Bankers Trust (Delaware), as Delaware
trustee, Bankers Trust Company, as institutional trustee (the "Institutional
Trustee"), and each of Lambert E. Althaver, Daniel L. Hittler and Michael A.
Shope, as regular trustees. The Preferred Securities Guarantee will be issued
pursuant to a Preferred Securities Guarantee Agreement (the "Guarantee
Agreement") by the Company, as guarantor. In connection with any conversion of
a Preferred Security by the holder thereof, such Preferred Security will be
exchanged for the appropriate principal amount of Debentures held by the Trust,
which will, in turn, be immediately converted into shares of
<PAGE> 2
Walbro Capital Trust
Walbro Corporation
January 7, 1997
Page 2
Common Stock at the then applicable rate, as further described in the
Declaration and the Indenture (as defined below).
This opinion is being delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Act. Capitalized terms used but not
otherwise defined herein have the meanings ascribed to them in the Registration
Statement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-3 (Registration No. 333-18317) filed by the Company and the
Trust with the Securities and Exchange Commission (the "Commission") on
December 20, 1996 under the Act and Amendment No. 1 thereto filed with the
Commission on January 7, 1997 (such Registration Statement, as so amended,
being hereinafter referred to as the "Registration Statement"); (ii) the
Certificate of Trust of the Trust filed with the Secretary of State of the
State of Delaware on December 17, 1996; (iii) the form of the Declaration
(including the designations of the terms of the Preferred Securities annexed
thereto); (iv) the form of the Preferred Securities and specimen certificates
thereof; (v) the form of the Guarantee Agreement; (vi) the form of the
indenture (the "Indenture"), between the Company and Bankers Trust Company, as
indenture trustee, pursuant to which the Debentures will be issued; (vii) a
specimen Debenture; (viii) a specimen certificate representing the Common
Stock; (ix) the form of the Underwriting Agreement (the "Underwriting
Agreement") proposed to be entered into among the Company, the Trust and Smith
Barney Inc. and Interstate/Johnson Lane Corporation (collectively, the
"Underwriters") relating to, among other things, the sale of the Preferred
Securities; (x) the Restated Certificate of Incorporation of the Company, as
presently in effect; (xi) the By-Laws of the Company, as presently in effect;
and (xii) certain resolutions of the Board of Directors of the Company relating
to the issuance and sale of the Debentures and the Preferred Securities and
related matters. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such other documents, certificates
and records as we have deemed necessary or appropriate as a basis for the
opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. In making our examination of
documents executed by parties other than the Company and the Trust, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by
such parties of such documents and that, except to the extent set forth in
paragraphs (2) and (3) below, such documents constitute valid and binding
obligations of such parties. In addition, we have assumed that the
Declaration, the Preferred
<PAGE> 3
Walbro Capital Trust
Walbro Corporation
January 7, 1997
Page 3
Securities, the Guarantee Agreement, the Indenture, the Debenture and the
Underwriting Agreement when executed will be in substantially the forms
reviewed by us. As to any facts material to the opinions expressed herein
which were not independently established or verified, we have relied upon oral
or written statements and representations of officers, trustees and other
representatives of the Company, the Trust and others.
Members of our firm are admitted to the bar in the State of Illinois, and we
do not express any opinion as to the laws of any jurisdiction other than the
laws of the States of Illinois and Delaware and the federal laws of the United
States to the extent set forth herein. To the extent that the opinions set
forth below relate to matters under the laws of the State of Delaware other
than the General Corporation Law of the State of Delaware, we have relied on
the opinion of Richards, Layton & Finger.
Based on and subject to the foregoing and to the other qualifications and
limitations set forth herein, we are of the opinion that when (i) the
Registration Statement becomes effective; (ii) the price at which the Preferred
Securities are to be sold to the Underwriters pursuant to the Underwriting
Agreement and other matters relating to the issuance and sale of the Preferred
Securities and the Debentures have been duly adopted by the Pricing Committee
of the Board of Directors of the Company; (iii) the Declaration, the
Underwriting Agreement, the Guarantee Agreement, the Indenture and a purchase
agreement by and between the Company and the Trust relating to the sale of the
Debentures (the "Debenture Purchase Agreement") have been duly executed and
delivered by the parties thereto; (iv) the Preferred Securities have been duly
executed and authenticated in accordance with the terms of the Declaration and
delivered to and paid for by the Underwriters as contemplated by the
Underwriting Agreement; and (v) the Debentures have been duly executed and
authenticated in accordance with the terms of the Indenture and delivered to
and paid for by the Trust as contemplated by the Debenture Purchase Agreement
and the Declaration:
1. The issuance and sale of the Preferred Securities will have been duly
authorized, and the Preferred Securities will be validly issued, fully paid and
nonassessable, representing undivided beneficial ownership interests in the
assets of the Trust; and the holders of such Preferred Securities will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. We bring to your attention, however, that the
holders of Preferred Securities may be obligated, pursuant to the Declaration
to (i) provide indemnity and/or security in connection with and pay taxes or
governmental charges arising from transfers of Preferred Securities and (ii)
provide security and indemnity in connection with the requests of or directions
to the Institutional Trustee to exercise its rights and powers under the
Declaration.
<PAGE> 4
Walbro Capital Trust
Walbro Corporation
January 7, 1997
Page 4
2. The Guarantee Agreement will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
to the extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general principles
of equity (regardless of whether enforceability is considered in a proceeding
at law or in equity).
3. The issuance and sale of the Debentures will have been duly authorized and
the Debentures will be valid and binding obligations of the Company, entitled
to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and except that the waiver of
stay or extension laws contained in the Indenture may be unenforceable.
4. The Conversion Shares, when certificates representing the Conversion
Shares in the form of the specimen certificates examined by us have been
manually signed by an authorized officer of the transfer agent and registrar
for the Common Stock and registered by such transfer agent and registrar and
delivered to the holders of the Preferred Securities upon conversion thereof in
accordance with the terms of the Declaration and the Indenture, will have been
duly authorized, and the Conversion Shares will be validly issued, fully paid
and nonassessable.
We hereby consent to the use of our name under the heading "Legal Matters" in
the prospectus which forms a part of the Registration Statement. We also
hereby consent to the filing of this opinion with the Commission as an exhibit
to the Registration Statement. In giving this consent, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission promulgated
thereunder. This opinion is expressed as of the date hereof unless otherwise
expressly stated and we disclaim any undertaking to advise you of the facts
stated or assumed herein or any subsequent changes in applicable law.
Very truly yours,
KATTEN MUCHIN & ZAVIS
<PAGE> 1
EXHIBIT 5.2
[Letterhead of Richards, Layton & Finger]
January 7, 1997
Walbro Capital Trust
c/o Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726
Re: Walbro Capital Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel for Walbro Corporation, a
Delaware corporation (the "Company"), and Walbro Capital Trust, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated as of December 17,
1996 (the "Certificate"), as filed in the office of the Secretary of State of
the State of Delaware (the "Secretary of State") on December 17, 1996;
(b) The Declaration of Trust of the Trust, dated as of December 17,
1996, among the Company, as Sponsor, and the trustee of the Trust named therein;
<PAGE> 2
Walbro Capital Trust
January 7, 1997
Page 2
(c) Amendment No. 1 to the Registration Statement (the "Registration
Statement") on Form S-3, including a preliminary prospectus (the "Prospectus"),
relating to the __% Convertible Trust Preferred Securities of the Trust
representing preferred undivided beneficial interests in the assets of the Trust
(each, a "Preferred Security" and collectively, the "Preferred Securities"), as
proposed to be filed by the Company and the Trust with the Securities and
Exchange Commission on or about January 7, 1997;
(d) A form of Amended and Restated Declaration of Trust of the Trust,
to be entered into among the Company, as Sponsor, the trustees of the Trust
named therein, and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust (including Annex I and Exhibits A-1 and A-2
thereto) (the "Declaration"), attached as an exhibit to the Registration
Statement; and
(e) A Certificate of Good Standing for the Trust, dated January 7,
1997, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular,
we have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation, operation and
termination of the Trust, and that the Declaration and the Certificate are in
full force and effect and have not been amended, (ii) except to the extent
provided in paragraph 1 below, the due creation or due
<PAGE> 3
Walbro Capital Trust
January 7, 1997
Page 3
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, organization or formation, (iii) the legal
capacity of natural persons who are signatories to the documents examined by
us, (iv) that each of the parties to the documents examined by us has the power
and authority to execute and deliver, and to perform its obligations under,
such documents, (v) the due authorization, execution and delivery by all
parties thereto of all documents examined by us, (vi) the receipt by each
Person to whom a Preferred Security is to be issued by the Trust (collectively,
the "Preferred Security Holders") of a Preferred Security Certificate for such
Preferred Security and the payment for the Preferred Security acquired by it,
in accordance with the Declaration and the Registration Statement, and (vii)
that the Preferred Securities are issued and sold to the Preferred Security
Holders in accordance with the Declaration and the Registration Statement. We
have not participated in the preparation of the Registration Statement and
assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act.
2. The Preferred Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Declaration.
<PAGE> 4
Walbro Capital Trust
January 7, 1997
Page 4
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition,
we hereby consent to the use of our name under the heading "Legal Matters" in
the Prospectus. In giving the foregoing consents, we do not thereby admit
that we come within the category of Persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
BJK/dgw
<PAGE> 1
EXHIBIT 8.1
(312) 902-5200
[LETTERHEAD OF KATTEN MUCHIN & ZAVIS]
January 7, 1997
Walbro Capital Trust
Walbro Corporation
6242 Garfield Street
Cass City, Michigan 48726
Re: Walbro Corporation; Walbro Capital Trust;
Registration Statement on Form S-3 (Registration No. 333-18317)
Ladies and Gentlemen:
We have acted as special tax counsel for Walbro Corporation, a Delaware
corporation (the "Company"), and Walbro Capital Trust, a statutory business
trust organized under the Business Trust Act of the State of Delaware (Del.
Code Ann., Tit. 12, Section 3810) (the "Trust"), in connection with the
preparation of the Registration Statement (as defined below) for registration
under the Securities Act of 1933, as amended (the "Act") of (i) 2,300,000
Convertible Trust Preferred Securities (the "Preferred Securities")
(liquidation amount of $25 per Preferred Security) of the Trust, (ii)
$57,500,000 aggregate principal amount of Convertible Subordinated Debentures
due 2017 of the Company (the "Debentures"), (iii) shares of Common Stock, par
value $.50 per share (the "Common Stock") of the Company issuable upon
conversion of the Preferred Securities, including such number of additional
shares of Common Stock as may be issuable upon conversion of the Preferred
Securities pursuant to anti-dilution adjustments (collectively, the "Conversion
Shares"), and (iv) the rights of holders of the Preferred Securities under a
guarantee (the "Preferred Securities Guarantee") and certain backup
undertakings consisting of obligations of the Company to provide certain
indemnities in respect of, and to pay and to be responsible for certain
expenses and debts of, the Trust as described in the Registration Statement.
The Preferred Securities are guaranteed (the "Preferred Securities
Guarantee") by the Company with respect to the payment of distributions and
payments upon liquidation, redemption and otherwise pursuant to, and to the
extent set forth in, the Preferred Securities Guarantee Agreement ("Preferred
Securities Guarantee Agreement"), between the Company and Bankers Trust
Company, for the benefit of the holders of the Preferred Securities.
<PAGE> 2
Walbro Capital Trust
Walbro Corporation
January 7, 1997
Page 2
In connection with the issuance of the Preferred Securities, the Trust is
also issuing its convertible common securities (liquidation amount of $25 per
convertible common security) (the "Common Securities"), representing undivided
beneficial interests in the assets of the Trust. The Common Securities are
also guaranteed by the Company with respect to the payment of distributions and
payments upon liquidation, redemption and otherwise pursuant to, and to the
extent set forth in the Common Securities Guarantee Agreement ("Common
Securities Guarantee Agreement"), between the Company and Bankers Trust
Company, for the benefit of the holders of the Common Securities.
The Preferred Securities and the Common Securities are being issued pursuant
to the Amended and Restated Declaration of Trust of the Trust (the
"Declaration"), among the Company, as sponsor and as the issuer of the
Debentures to be held by the Institutional Trustee (as defined below) of the
Trust, Bankers Trust (Delaware), as Delaware trustee, Bankers Trust Company, as
institutional trustee (the "Institutional Trustee"), and Lambert E. Althaver,
Daniel L. Hittler, and Michael A. Shope, as regular trustees.
The entire proceeds from the sale of the Preferred Securities and the Common
Securities are to be used by the Trust to purchase the Debentures. The
Debentures are to be issued pursuant to an Indenture (the "Indenture") between
the Company and Bankers Trust Company, as trustee (the "Indenture Trustee").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction of (i) the Registration
Statement on Form S-3 (Registration No. 333-18317) filed by the Company and the
Trust with the Securities and Exchange Commission (the "Commission") on
December 20, 1996, under the Act, and Amendment No. 1 thereto filed with the
Commission on January 7, 1997 (such Registration Statement, as so amended,
being hereinafter referred to as the "Registration Statement"); (ii) the
certificate of trust of the Trust (the "Certificate of Trust") filed by the
Trust with the Secretary of State of Delaware on December 17, 1996; (iii) the
form of Declaration (including the designations of the terms of the Preferred
Securities annexed thereto); (iv) the form of the Preferred Securities
Guarantee Agreement; (v) the form of the Indenture; (vi) the form of Debentures
and a specimen certificate thereof; (vii) a specimen certificate representing
the Common Stock; (viii) the form of the underwriting agreement proposed to be
entered into among the Company, the Trust, Smith Barney Inc., and
Interstate/Johnson Lane Corporation (the "Underwriting Agreement"); and (ix)
the form of the Preferred Securities and a specimen certificate thereof.
Furthermore, we have relied upon certain statements and representations made by
officers of the Company. We have also examined originals or copies, certified
or otherwise identified to our satisfaction, of such records of the Trust and
the Company and such other documents, certificates and records as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
<PAGE> 3
Walbro Capital Trust
Walbro Corporation
January 7, 1997
Page 3
In rendering our opinion, we have participated in the preparation of the
Registration Statement. Our opinion is conditioned on, among other things, the
initial and continuing accuracy of the facts, information, covenants and
representations set forth in the documents referred to above and the statements
and representations made by the Company and the Trust. In our examination, we
have assumed the genuineness of all signatures, the legal capacity of all
natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies. We also have assumed that the Declaration, the Preferred
Securities, the Guarantee Agreement, the Convertible Debentures, the Indenture
and the Conversion Shares will be executed in substantially the form reviewed
by us and that the transactions related to the issuance of the Preferred
Securities, the Common Securities, the Convertible Debentures, and the
Conversion Shares will be consummated in the manner contemplated by the
Registration Statement.
In rendering our opinion, we have considered the current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
(proposed, temporary and final) promulgated thereunder, judicial decisions and
Internal Revenue Service rulings, all of which are subject to change, which
changes may be retroactively applied. A change in the authorities upon which
our opinion is based could affect our conclusions. Moreover, there can be no
assurances that any of the opinions expressed herein will be accepted by the
Internal Revenue Service or, if challenged, by a court.
Based solely upon the foregoing, we are of the opinion that under current
United States federal income tax law:
(1) The Trust will be classified as a grantor trust and not as an
association taxable as a corporation.
(2) Subject to the qualifications set forth therein, the statements made in
the Registration Statement set forth under the captions "United States
Federal Income Taxation", "Risk Factors -- Company Option to Extend
Interest Payment Periods; OID Risk", "Risk Factors -- Proposed Tax
Legislation", and "Description of the Convertible Debentures -- Proposed
Tax Legislation" fairly present, in all material respects, the principal
United States federal income tax consequences of an investment in the
Convertible Preferred Securities.
Except as set forth above, we express no opinion to any party as to the tax
consequences, whether federal, state, local or foreign, of the issuance of the
Convertible Debentures, the Preferred Securities, the Common Securities or of
any transactions related to or contemplated
<PAGE> 4
Walbro Capital Trust
Walbro Corporation
January 7, 1997
Page 4
by such issuance. This opinion is solely for your benefit in connection with
the filing of the Registration Statement and, except as set forth below, is not
to be used, circulated, quoted or otherwise referred to for any purpose without
our prior written consent. We hereby consent to the use of our name under the
heading "Legal Matters" in the Registration Statement. We also hereby consent
to the filing of this opinion with the Commission as an exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that
we are within the category of persons whose consent is required under Section 7
of the Act or the rules and regulations of the Commission promulgated
thereunder. This opinion is expressed as of the date hereof unless otherwise
expressly stated, and we disclaim any undertaking to advise you of any
subsequent changes of the facts stated or assumed herein or any subsequent
changes in applicable law.
Very truly yours,
KATTEN MUCHIN & ZAVIS
<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 13, 1996 with respect to the consolidated balance sheets
of Walbro Corporation and Subsidiaries as of December 31, 1995, 1994 and 1993
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
January 6, 1997
<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 or incorporated by reference in
this registration statement on Form S-3 of Walbro Corporation.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
January 6, 1997
Stuttgart, Germany
<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 or incorporated by reference in this Registration Statement
on Form S-3 of Walbro Corporation.
DELOITTE & TOUCHE
Oslo, Norway
January 6, 1997
<PAGE> 1
Exhibit 25.1
_____________________________________________________________________________
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 bank) Identification no.)
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)
_________________________________
<TABLE>
<S> <C> <C> <C>
WALBRO CORPORATION WALBRO CAPITAL TRUST
(Exact name of obligor as specified (Exact name of Co-Registrant as
in its charter) specified in its charter)
DELAWARE 36-1358966 DELAWARE 36-6683606
(State or other jurisdiction of (I.R.S. employer (State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.) incorporation or organization) Identification no.)
6242 GARFIELD STREET C/O WALBRO CORPORATION
CASS CITY, MICHIGAN 48726 6242 GARFIELD STREET
(Address, including zip code CASS CITY, MICHIGAN 48726
of principal executive offices) (Address, including zip code of
principal executive offices)
</TABLE>
CONVERTIBLE TRUST PREFERRED SECURITIES OF WALBRO CAPITAL TRUST
CONVERTIBLE SUBORDINATED DEBENTURES OF WALBRO CORPORATION
PREFERRED SECURITIES GUARANTEE
(Title of the indenture securities)
<PAGE> 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, Certificate
of Amendment of the Organization Certificate of
Bankers Trust Company dated June 21, 1995 -
Incorporated herein by reference to Exhibit 1
filed with Form T-1 Statement, Registration No.
33-65171, and Certificate of Amendment of the
Organization Certificate of Bankers Trust Company
dated March 20, 1996, copy attached.
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, as
amended on September 17, 1996 - Incorporated
herein by reference to Exhibit 4 filed with Form
T-1 Statement, Registration No. 333-15263.
-2-
<PAGE> 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 September 30,
1996.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, 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 3rd day of January, 1997.
BANKERS TRUST COMPANY
By: /s/ Kevin Weeks
--------------------------------
Kevin Weeks
Assistant Treasurer
-4-
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 9/30/96 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
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS SEPTEMBER 30, 1996
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
<TABLE>
<S> <C> <C>
_________
| C400 |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
ASSETS | / / / / / / / / / / / |
| |
1. Cash and balances due from depository institutions (from Schedule RC-A): | / / / / / / / / / / | / /
a. Noninterest-bearing balances and currency and coin (1).................. | 0081 809,000 | 1.a.
b. Interest-bearing balances(2) ........................................... | 0071 4,453,000 | 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 4,133,000 | 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 5,933,000 | 3.a.
b. Securities purchased under agreements to resell ....................... | 0277 413,000 | 3.b.
4. Loans and lease financing receivables: | / / / / / / / / / / / |
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 27,239,000| / / / / / / / / / / / | 4.a.
b. LESS: Allowance for loan and lease losses....................RCFD 3123 917,000| / / / / / / / / / / / | 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 26,322,000 | 4.d.
5. Assets held in trading accounts ........................................... | 3545 36,669,000 | 5.
6. Premises and fixed assets (including capitalized leases) .................. | 2145 870,000 | 6.
7. Other real estate owned (from Schedule RC-M) .............................. | 2150 215,000 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)| 2130 212,000 | 8.
9. Customers' liability to this bank on acceptances outstanding .............. | 2155 577,000 | 9.
10. Intangible assets (from Schedule RC-M) .................................... | 2143 18,000 | 10.
11. Other assets (from Schedule RC-F) ......................................... | 2160 8,808,000 | 11.
12. Total assets (sum of items 1 through 11) .................................. | 2170 89,432,000 | 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> 6
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 9/30/96 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
</TABLE>
<TABLE>
<S><C>
SCHEDULE RC--CONTINUED ______________________________
Dollar Amounts in Thousands | / / / / / / / / Bil Mil Thou|
LIABILITIES | / / / / / / / / / / |
13. Deposits: | / / / / / / / / / / |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) | RCON 2200 9,391,000
(1) Noninterest-bearing(1) ........................RCON 6631 2,734,000.......... | / / / / / / / / / / /
(2) Interest-bearing ..............................RCON 6636 6,657,000.......... | / / / / / / / / / / /
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | / / / / / / / / / / / / |
part II) | RCFN 2200 23,385,000|13.b.
(1) Noninterest-bearing .........................RCFN 6631 654,000 | / / / / / / / / / / / / / |13.b.(I)
(2) Interest-bearing ............................RCFN 6636 22,731,000 | / / / / / / / / / / / / |13
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 3,090,000
b. Securities sold under agreements to repurchase ................................. |RCFD 0279 99,000 |14.b.
15. a. Demand notes issued to the U.S. Treasury ....................................... |RCON 2840 0
b. Trading liabilities ............................................................ |RCFD 3548 18,326,000 |15.b.
16. Other borrowed money: | / / / / / / / / / / / |
a. With original maturity of one year or less ..................................... |RCFD 2332 17,476,000 |16.a.
b. With original maturity of more than one year ................................... |RCFD 2333 2,771,000 |16.b.
17. Mortgage indebtedness and obligations under capitalized leases ....................... |RCFD 2910 31,000 |17.
18. Bank's liability on acceptances executed and outstanding ............................. |RCFD 2920 577,000
19. Subordinated notes and debentures .................................................... |RCFD 3200 1,228,000
20. Other liabilities (from Schedule RC-G) ............................................... |RCFD 2930 8,398,000
21. Total liabilities (sum of items 13 through 20) ....................................... |RCFD 2948 84,772,000 |21.
|/ / / / / / / / / / / |
22. Limited-life preferred stock and related surplus ..................................... |RCFD 3282 0
EQUITY CAPITAL |/ / / / / / / / / / / |
23. Perpetual preferred stock and related surplus ........................................ |RCFD 3838 500,000
24. Common stock .......................................................................... |RCFD 3230 1,002,000
25. Surplus (exclude all surplus related to preferred stock) .............................. |RCFD 3839 527,000
26. a. Undivided profits and capital reserves ........................................... |RCFD 3632 3,017,000
b. Net unrealized holding gains (losses) on available-for-sale securities ..........|RCFD 8434 ( 16,000) |26.b.
27. Cumulative foreign currency translation adjustments ...................................|RCFD 3284 ( 370,000) |27.
28. Total equity capital (sum of items 23 through 27) .....................................|RCFD 3210 4,660,000 |28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, | / / / / / / / / / / |
22, and 28) ...........................................................................|RCFD 3300 89,432,000 |29.
</TABLE>
<TABLE>
<S><C>
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 Number
independent external auditors as of any date during 1995................................... | RCFD 6724 N/A | M
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
submits a report on the consolidated holding company external 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)
</TABLE>
- ----------------------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE> 7
State of New York,
Banking Department
I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER
SECTION 8005 OF THE BANKING LAW," dated March 20, 1996, providing for an
increase in authorized capital stock from $1,351,666,670 consisting of
85,166,667 shares with a par value of $10 each designated as Common Stock and
500 shares with a par value of $1,000,000 each designated as Series Preferred
Stock to $1,501,666,670 consisting of 100,166,667 shares with a par value of
$10 each designated as Common Stock and 500 shares with a par value of
$1,000,000 each designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 21ST day of MARCH in the Year of our
Lord one thousand nine hundred and NINETY-SIX.
Peter M. Philbin
------------------------------
Deputy Superintendent of Banks
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
------------------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby
certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock
in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is
hereafter to have is One Billion, Three Hundred Fifty One Million,
Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars
($1,351,666,670), divided into Eighty-Five Million, One Hundred
Sixty-Six Thousand, Six Hundred Sixty-Seven (85,166,667) shares
with a par value of $10 each designated as Common Stock and 500
shares with a par value of One Million Dollars ($1,000,000) each
designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is
hereafter to have is One Billion, Five Hundred One Million, Six
Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars
($1,501,666,670), divided into One Hundred Million, One Hundred
Sixty Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares
with a par value of $10 each designated as Common Stock and 500
shares with a par value of One Million Dollars ($1,000,000) each
designated as Series Preferred Stock."
<PAGE> 9
6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 20th
day of March, 1996.
James T. Byrne, Jr.
-------------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
-------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
Lea Lahtinen
-------------------------------
Lea Lahtinen
Sworn to before me this 20th day
of March, 1996.
Sandra L. West
- -------------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York Counterpart filed in the
No. 31-4942101 Office of the Superintendent of
Qualified in New York County Banks, State of New York,
Commission Expires September 19, 1996 This 21st day of March, 1996
